Sunday, September 14, 2008

Goro ki na kalo ki...... yeh duniya hai dill walo ki...

2331hrs: Oil below 100$

14 Sep 08 Jaggu too has joined the bear gang and I am alone now. He says that TRIN is Bearish.

13 Sep 08: Where do we go wrong every time we do go wrong? I peered over the data I used for making the assessment and got the same answers I got earlier. I know that the markets have a mind of their own - and they do not like surprises - and that IIP data was an unexpected that would have made them jittery - but after the data came out - then what? Is Lehman brother contributing to our economy in such a big way that their crash will leave us with no money whatsoever to survive and poverty will become rampant - the government here will become unstable and we will go to a war with all our neighbors? If no then why are we falling - agreed that the indicators are not particularly bullish - but then they were not particularly bearish either. Every time my assessment goes wrong it takes me to read and read and try getting answers as to where I went wrong and usually I have to lump it as by saying that the market decided to do what it wanted to. Yeah I am aware of that theory that you have to be right only more than 50% of time - but then where is the difference between flicking a coin everyday morning and working towards reading the markets? One of those sentimental times I guess..... any way I am not deterred so far.... are you?

Let's get on with my assessment for tomorrow. There have been a series of blasts across New Delhi claiming 20 lives and injuring 90. This increasing wave of terror moving from one city to another does not bear well with the country/security for a stable economy. For a long time now we have taken terror in our stride and moved ahead but at some stage such actions will get noticed and will be detrimental to our progress. Anyway for the short-term it might not matter as of now.

It was the data on the index of industrial production (IIP) that everyone was eagerly waiting for on Friday. When it came - it was a pleasant surprise but when it came to the markets discounting it in the trading for the day it had no effect at all. IIP figures revealed that the overall growth was 7.1% -- lower as compared to 8.3% witnessed in July 2007. However even at this level the heartening signal was that industrial production, at slightly above the 7% increase, notched up in April and appeared to be back on the recovery path from the low growth of 3.8% in May and 5.4% in June. Eating the industrial recovery was the huge growth in capital goods production which surged by a steep 21.9% from 12.3% in July last year. The consumer durable segment which witnessed a downturn in production a few months ago also grew by a healthy 11.2% in July this year. This was -2.7% during the same month last year. Also the point to remember is that before the figures came out average expectations of the market were hovering around 6% in July. These numbers that is why were supposed to be a positive surprise. in terms of user-based classification of in 10/17 groups witnessed positive growth in July this year. that is as far as the industry goes -- however as far as the real estate goes the woes are are nowhere near over. Every new news coming out regarding the real estate is purely bad with no respite in sight.

On Friday the Asia was mixed and if it all on the positive side expect for us and Hang Seng. Nikkei ended up 0.93%, Straits Times up 1.16% and it was the Hang Seng that was down 0.18% red and of course BSE down 2.26%, and see down 1.44%. Europe opened positive dipped down near the flat line and again climbed well into the positive territory. FTSE closed 1.85% green, Dax 0.91% up and Cac 1.97% up. the US over has still not been able to decide what the Lehman Bros mean for them. Dow closed 0.1% in red, NASDAQ 0.14% green and S&P 500 0.21% up.

On the charts now there is not even a single positive indicator that I see. The Bollinger bands have narrowed further with the candles now near the bottom edge. The 5 EMA is below 20 EMA. The volumes have risen. The MA CD diverges to the negative has increased. RSI is bearish, TRIX is looking down and maybe start indicating a bearish phase. Slow Stochastic deadline is below the blue line and has moved into the oversold territory. The Maas index continues to rise and is way above 24. So like I said earlier all in all there is no indicator that is sporting the Bulls. The only respite -- if it all is that we did not close below 4214 nifty. for those who are interested in the pivot points and the resistances the data is as under:-

R3 4423
R2 4373
R1 4300
Pivot 4250
S1 4177
S2 4127
S3 4054

Markets may recover on monday. I can post Credit Sussie report on india to whoever wishes it. Please leave your mail ID in the comments.



Amitbhai Shah said...

The stock market discounts all news
Stock prices quickly incorporate new information as soon as it becomes available. Once news is released, stock prices will change to reflect this new information. On this point, Dow Theory agrees with one of the premises of the efficient market hypothesis.

The idea that the market discounts everything is not new to technical traders, as this is a major premise of many of the tools used in this field of study. Accordingly, in technical analysis one need only look at price movements, and not at other factors such as the balance sheet

Like mainstream technical analysis, Dow theory is mainly focused on price. However, the two differ in that Dow theory is concerned with the movements of the broad markets, rather than specific securities.

For example, a follower of Dow theory will look at the price movement of the major market indexes. Once they have an idea of the prevailing trend in the market, they will make an investment decision. If the prevailing trend is upward, it follows that an investor would buy individual stocks trading at a fair valuation. This is where a broad understanding of the fundamental factors that affect a company can be helpful.

It's important to note that while Dow theory itself is focused on price movements and index trends, implementation can also incorporate elements of fundamental analysis, including value- and fundamental-oriented strategies.

S S Cheema said...

I agree with you entirely - but the fact remains that inspite of all the indications being negative we may have an upswing - where does that leave us? Technicals or fundamentals? Please do tell me what is it that is driving the markets down? Economy is not doing bad (if we do not call it good under the circumstances) Oil is down (it may rise at some point in future but now it is down) Politically we are stable. Except for the real estate there is no sector that is in DollDrums. I am sure blast were not the reason. IIP was better than expected. and before today atleast fair amount of indicators were pointing up.
Where then.... are the markets wrong? Or where are we wrong?
Like I have written in the markets there are negative reports in the environment - but they based are on a theory...

And amitbhai - nice logo

Anonymous said...

Hello S S Cheema,
First of all,let me congratulate you on a fantastic analysis of the marets given by you. I come to your blog religously everyday and have even told all my friends to come to your blog for correct analysis. I also make my own charts and trade according to them and yes it really looks very bearish now as we sit at 4228, exact on the neckline of the Head and shoulders pattern thus formed.I would suggest you to keep an eye on Reliance, coz if it starts to break down more from here, we can be sure of bigger downsides coming up. In the past three days, Ril has fallen with huge volumes, something like post jan 21. So please be careful with your longs. Anyway, thanks for the updates, do keep them up.

S S Cheema said...

Thanks for these wonderful words of appreciation.
I have a point sunil - it might just be time when we start looking for some new leadership and reliance becomes part of history.
The changeover and the turmoil associated is but natural to be expected. The changes are always painful in nature and we might be going through one of those.

Uma said...

interesting discussion!

Uma said...

cheema: Yea, you're right there, who expected us to hit 4500 within barely a week of making 3790?!

Anonymous said...


let us not be pre occupied with technicals....fundamentals too are o.k...compared to july..inflation,crude,political stability,nuclear deal etc.........but what had been driving our markets in last 4 years is liquidity....we must pay attention to that and exit or create short positions ......just based on lehman already discussed on uma s board......too dangerous....downside unlimited ..if these bleady firangis liquidate....


S S Cheema said...

I have been hearing a report that the money required to take most of the financial companies of the credit mess they require tons and tons of money so - they will sell at the first opportunity where they find some position worth its while. Yes - I do agree with it. They have a phenomenal exposure to the markets and whenever they find that they are in a position to exit to save their assets elsewhere (read their homeland) they (read FIIs) would like to save their skin abroad.

Anonymous said...

SGX has opened with 160 pts down. We are heading to 3900 tdy itself and possible 2800 before expiry. RIL might see 1700 in 2 sessions

S S Cheema said...

yeah - we have a special relationship with SGX. Our openings are generally their trading at that moment.