Wednesday, August 27, 2008

Choppy way to go............ no clear trends in sight

It is difficult to see the trends in the present state of the markets. Indecisive, side ways, consolidating, waiting a breakout, choppy... etc are the half a dozen ways to describe the markets. What seems to have happened is that the markets are fed up of the negative news and are not really reacting to them - the way they might have done in the past. On the other hand there seems to be no triggers that can take them out of the bear hug really. A breakout may be good for the bull confidence and for the markets - infact it does try hard to move up and show down bears - but nothing so far is really right for the break through. The problem is the we are now in a tight channel - a break up will take us to new heights - which is a possibility as we are trailing the upper edge of the channel - but there is also a strong possibility that we break lower and go to 4100 levels. The reasoning is that as of now - there are slightly more bearish indications than bullish.

The indications from the international markets are as mixed as ever - only good thing being that the markets everywhere tried to and in some cases recovered from the day lows. In europe FTSE opened red and ended red with a dip in the mid session and a fair recovery from the day lows. It ended 0.63% red. Dax opened red and ended 0.69% green. CAC opened red and ended green 0.29%. US repeated the story with starting flat and ending confused. Dow started flat ended 0.23% green, Nasdaq 0.15% red and S&P 500 0.37% green. See what I mean by confusion? no clear trends but a definable green bias. In Asia as of now Nikkei is mildly red at 0.12% down, Hang Seng 1% green and strait times 0.09% red.

Charts say - a doji yesterday. Meaningless actually - a doji after confusing trend is of no use as it does not indicate anything really. We are near the lower bottom of the bollinger bands - with the width more or less the same. 5 EMA is still below 20 EMA and running parallel, not dropping and increasing the divergence. Volumes were somwhat better than day before but still low. MACD is bearish with the red line below the blue - divergence same as day before. RSI with the bulls, Slow stochastic is in the third day giving buy signals and lastly Mass index says that the uptrend that we saw since 17 Jul is alive and not to be buried yet. If it says that the trend is not dead take it seriously - it is a fairly strong indicator along with other bullish indicators. Unfortunately TRIX (leading indicator) is looking down. The coriander topping is still missing as jaggu is still not back to give me his TRIN.

So as long as we do not have a clear trend in sight it is difficult to try and predict the markets. So I still end my writeup with a word of caution. The markets can actually go anywhere.

As far as the Bongaigaon Ref is concerned - all is against the script except the mass index that has reached the band from where within a day it can give a reversal trend. but the TRIX is still down - so we might wait for some more time before buying more.