Sunday, November 2, 2008

Will we?..... Won't we?.....

02 Nov 08: The moot question now is -- Will we continue on this so called rally or will we visit the lows again. Firstly - is this a rally to begin with? A hammer followed by a white candle, one doji and another white candle. All the same this is the best run for three continuous days that we have had in last 3 months. If we take a period of last six months then we had a better run than this on two occasions. First on starting on Jul 17th and second on Jul 30th. In the first run we ran up from 3800 odd levels to 4500 levels - during the second run we ran up from 4200 levels to 4650 levels. Infact some may be inclined to classify the two weeks period as one run with a minor three-four day aberration. The run up during that time was 700 points on nifty, or 850 odd points if we take the period as one run up. Last time the fall was not as vicious. This time the fall has been much more hurting so frankly to make a recovery to levels above 800-900 points run up is actually possible. So if we take the bottom at 2250 - then we should see a run up anything upto 3200 to 3500 before the serious selling again sets in. See my reading is hypothetical. Jaggu says that the run up should see a height of 3500 - actually he is much more technical/better in his reading of the markets. So frankly - I will just trust him. (You can click his name to reach his blog) So if I was to go short - I will wait for some time and not be in a hurry. Couple this with the plethora of fire fighting steps being taken around the world will help this recovery to remain so - a recovery till some more time. See there are twists and turns at every moment so do take everything I try to put across with a pinch of salt.

Well to the world markets now. Asia was all negative - actually they had already run up quite a bit as we closed for the Dipawali. So some retracement was to be accepted. Nikkei closed 5.01% down, Hang Seng 2.52% down and Strait Times down 0.43%. Europe was all green - and mind you this was after an across the board red/flat opening. FTSE finally closed 2% up, Dax 2.44% up and Cac 2.33%. US too opened flat to red and then recovered to highs by just after mid session, however by the close they were on an average 1.5% green only. All the same - they were all green. Dow up 1.57%, Nasdaq 1.32% and S&P 1.54% up. Well except for our markets the general track record of the markets is that the month of sep is generally the worst, this time Oct would have taken its place had it not been the retracement during the last few days.

On our candles the last candle has been a tall white one with a small wick on top. The candles are heading from the bottom of the Bollinger band to somewhere just below the middle. The Bands too have contracted a bit. 5EMA still is trailing below the 20 EMA but distance for once is reducing. The volumes were good. The divergence in MACD too has reduced and there is an attempt by the red line to move above the blue line. Mass index is below the 26 marker. RSI has come out of oversold zone and gives a bullish signal. On the slow stochastic the red line is above the blue line and is past the 50 marker and seems good. The force with which TRIX was looking down has slowed a bit and seems to be slowing in its fall down. On the momentum indicator the extreme value that we have got three days back (thousand or more) - we have got on only two occasions in past three years - the first one being during Jan this year. On MACD this is the extreme position seen for the first time in last 3 years. The same is the story with TRIX - it has gone below the 0.99 point only this lime in last three years. So we are in the extremes - and the negativity created is phenomenal. The bounce back too may be as bad - trapping a lot of people who went short at low levels or maybe who will short at these levels.

On the pivots for nifty
R3 3146
R2 3059
R1 2972
Pivot 2834
S1 2747
S2 2609
S3 2522

Projected high range 2903 to 3015 and low range from 2826 to 2714
Fib Projected high 2982
Fib projected low 2638

Best of luck for monday.



Uma said...

We will, dude :D But bears will try everything to make us doubt whether we're going to 3000 or 1600 - and plenty idiots will give in to the fear factor. But we won't ;D

Joe tom said...

Hi Cheema,

We are certain to hit 3050 Monday, thereafter it all depends whether the Banks follow up with rate cuts and Other Central Banks too taking earnest interest in improving liquidity in their respective markets.

You have given an excellent logical explanation of possibilities. Great!


S S Cheema said...

Thanks sir
always great to have you visit this blog.