Monday, November 17, 2008

Ready for another Rock and Roll week?

The week that went by saw action in a fairly narrow band - with the overall direction towards the negative zone. Daily volatility for those who could make use of it was good (or bad - depending which side you were on the receiving end). The mutual funds have given a negative growth return since quite some time now. On the brighter side the IIP data was better than expected, Inflation in a surprise dip is in single digit and oil is now at almost one third the cost per barrel - from its highs a couple of months back. Third cut in aviation gasoline prices. And then there was this G-20 Washington summit on dealing with the economic crisis that has spread over the world now with more and more nations joining the crisis. A small run down on my views on these events. The mutual fund redemptions are kicking in now leading to further money being sucked out of the system. The injections of liquidity that are being given are due to work but will certainly take more time as the approach will become more and more cautious - the reason the banks still have not reduced rates? IIP data was a relief but experts on the issue see bad figures for the next quarter. Inflation has come down as the commodity prices continue to fall. Why? in the first stage everyone saw the money shifting from the equity to commodity, the hype of commodity being a better investment was echoing everywhere. Then came the realisation that if we are indeed in a recession then the demand for commodity too will wane and this is what is showing and leading to drop in commodity prices - be it steel, vegetables or crude for that matter. When commodity prices drop the drop in inflation is but just a matter of time - but the fall to single digit was a surprise and a relief all the same. Now it is this same logic that I have listed above - is working against us being happy about the inflation falling and leading to us being stagnated the present levels. A lot was expected from the Washington Summit and I feel it has fallen short of what many were expecting out of it. Bush continues to sing songs of the free economy - Dr Manmohan Singh rightly quoted The General Theory of Employment, Interest, and Money: “Speculators are harmless as bubbles on a steady stream of enterprise. But the position is serious if enterprise becomes a bubble on the whirlpool of speculation. When the capital development of a country becomes the by-product of the activities of a casino, the job is likely to be ill-done.” China did not pledge anything out of its 1.9 trillion dollar reserves for the so called bailout fund aftermath of the Summit. The topping in the summit came as major decisions were rolled over for Obama to take the hot seat and show direction.

Where does it leave us? as deep in Sh*t - as we were a week earlier. As on the last closing Europe opened green and was happy the entire day. It is only towards the end session when signs from US were not good that the markets dipped a little to close below the highs - but green neverthless. FTSE closed up 1.53%, Dax up 1.31% and CAC up 0.67%. US opened red (flat mostly) went deep down red for most of the session and then there was a surprise recovery that took most of the indices to green momentarily and then fell like hot bricks once again to close red. DOw down 3.82%, Nasdaq down 5% and S&P down 4.17%. Asia opening - Nikkei has opened red and almost immediately fallen down - now almost 2.46% down. No bets on it holding these levels for good or bad.

On candles? nothing that seems good. The candle was red with a large upper wick - unfortunately the upper wick too could not test the high of day before. the lower body and the lower wick meanwhile tested and violated the previous days lows. The volumes for the back candles started with lower than average and increased steadily over last three session to come to average. The Bollinger bands are narrowing steadily but they are still too wide by all means to show a sudden and violent change in direction. 5 EMA continues to be below the 20 EMA. On MACD the red line continues to be above the blue line but the divergence is reducing - might go in negative territory soon. All in all MACD is looking up and so is RSI that is bullish. TRIX is contineously looking up - wonder why? On the slow Stochastics the red line is below the blue line that is bad and red line has entered oversold territory - we might have a small relief coming in next week towards the end?

The nifty pivots are...

The Pivot data -
R3 3098
R2 3002
R1 2906
Pivot 2842
S1 2746
S2 2682
S3 2586

Projected High Range 2874 to 2954
Projected Low Range 2922 to 2842
Fib Projected High 2981
Fib Projected Low 2734

So that is all there is to it. The indicators are showing some hope in otherwise hopeless situation.



geniusjaggu said...

where do mkts go from here,
i wanna hear from u!!! :)

S S Cheema said...

Jaggu - I thought that you dictated which side the markets go. RFOL
Jaggu you are a Guru in this field - it would really be belittling me to ask ME (ME) where the markets will go.
But all the same now that you have asked me. I feel that the upside is required before the momentum for the fall builds up.
Now your move - what do you say?