Sunday, August 17, 2008

Another week for a good fight.......... Bears Red corner -- Bulls Blue corner

So it ultimately took some time but the fall as expected did happen and now builds up into 'Three Black Crow candle Formation'. Further fall expected? The life has become more complicated than ever. There is good news and the bad news all in one big bundle. Well firstly, over last week we saw the Georgia hammered by Russia and Crude prices falling. The Georgia now seems to have reached somewhere as the conflict for the time being has been halted but the crude has decided to climb somewhat.
Secondly, Indian Stock markets lost 2.92% in sensex and 2.18% in Nifty - and that is for the week that started on strong positive note on account of Global cues and crude price drop.
Then came the miracle inflation figures - touching 12.44% as against 12.01% earlier and probably will become a factor to consider hereafter as the announcement came on Thursday after the market closed for a long weekend.
The last news that will has been debated and will continue to be debated is The Sixth Pay Commission that has been through the cabinet. Call it Good, bad or ugly it will go a long way to overall boost the economy especially in some consumer sectors. This debate is too long to fit this blog of mine with everyone having his own opinion.

So if the above factors were to affect our markets in the comming few days then I would like to make my assessment and put it across in the following manner: As I have said earlier - the world cannot brush the Georgia conflict under the carpet and now with the US missile presence in Poland and Russia getting aggressive this will complicate the scene. Any way - the earlier it gets resolved - the better as it will affect the Black sea and the Caspian sea oil flowing out. Oil going up suits no one expect the oil producing countries. Infact they too have realised that it may not be in their best interests too to have oil too high in long term. High oil does no good to us especially as all the efforts go down the drain as far as inflation control is concerned. The money flow due to pay commission is being talked about as inflation creator but will certainly be beneficial to a lot of white goods manufacturers, telecom penetration and veh sales. There will be a large portion of this money flowing back to the govt as taxes (20-30%) depending on who is making the estimates. So all in all if we go purely by the news then we have a reason to go down a little bit further. Till where? let us try and see -

Well the Europe closing last was confused with an index red and two green but with probably a green bias. FTSE was 0.77% red, DAX was 0.06% green and CAC 0.74% green. The US too could not make up its mind which way to go but had probably had a green bias. Dow closed 0.38% green, NASDAQ 0.05% red and S&P 500 0.41% green. For the rest the opening in Asia will dictate how we begin.

Going now by the candlesticks -- firstly, it has made the three black crow pattern. And that spells out some more downside to come. On the positive note remember when I talked about the resistance at 4425 levels? well the last Black candle has failed to close below that level so unless we break it cleanly we might have some respite here. another good thing that I see in the charts is that the fall for the last three days has been on relatively lower volumes. The MACD red line is still managing to keep itself above the blue line and remains bullish. The RSI has still not crossed over to give bearish signal - so so far it remains bullish. The slow stochastic red line remains trailing under the blue line and gives bearish signals. It may be a few more days before the lines go to the oversold territory.the TRIX has certainly stopped looking up and may face down in the coming few days. The mass index does not give a trend reversal still but has stopped showing the continuation of the uptrend. The much feared narrowing of the Bollinger bands has started taking place and this may not go well for an uptrend. Jaggus's TRIN says bearish. So overall-- there may be some bullish indicators but the majority is showing the bearish trend -- at least for the time being.

In spite of what I said above -- I would like to strongly put forward to those who do not traded daily and are not into futures and options to start building up a good portfolio. In our journey during the last few months we have seen one blow after another. Journey on the downside may take us anywhere -- in fact there are a few but faint voices that have started gathering momentum to say that 2500 is a possibility. They may be right -- there may be wrong! I really don't care but what I know for sure is that all those who pick up stocks at these levels will make good money in the times to come. India is not in a recession and come to think about it OUR time is it yet to begin. The developed economies will stagnate -- whether the call at stagnation or recession or stagflation -- it really doesn't matter. We may be effected for some time by them but then in the end we have our own momentum that will carry us to higher highs. So do not bother about this trend take sides now and take positions to a great future.

Best of luck. I am keeping extremely busy and that is the reason I missed on 14th. this may continue as this is just a hobby. However if I do have time I will look up charts and start discussing some good stocks with a future.