Sunday, January 11, 2009

One step at a time….

One small step at a time the market recovery was being built up and suddenly it goes up in smoke – poof… and why? One corporate house of the country that did the vanishing trick with the name they built – Satyam. So much has been said about them that I will try not to mention any more. Our markets were not doing bad – we were building the house brick by brick – as put across by IndiaBulls in their monthly report. The stimulus package here and the actions by the US govt there alongwith the rest of the world was being slowly digested by the world and there was a recovery here – volatility – and recovery there – basically we were climbing up one small step at  a time. And then came the Indian home brewed story of mega corruption and we all fall down. We have basically have had two days of the fall – two big black candles to speak of. Frankly there are now indications that we have had enough of fall already. The second candle made on the Nifty and so many other important stocks is of a hammer. Technically many may brush aside such a formation as it came after a doji and a black candle – such a signal to be meaningful should have come after a trend – downtrend to be precise – but I could not help and observe – the markets did try to recover on friday. Was that my imagination or there was something else to it. Perhaps the traders did not want to carry their positions of profit over the weekend – or perhaps there is a feeling that the news driving the markets did not deserve the kind of attention it really got – they are debatable and I am not going into a debate at all. But I do feel that the shorters’ can get trapped if they are not careful as there is a chance that the markets will bounce back for whatever it is worth.

We are expecting our GDP to settle around 7% – give or take some. the IIP data is bad and exports are likely to remain bad for some months to come. The next sectors to hit might be the service sector – because of the reduced consumer spending. But all is not bad – the inflation is on its way to touch 3-4% by march and that by itself is no small feat. The crude that had a spike recently was more due to the middle east tensions and Russia cutting off gas in Europe. It will get resolved and the prices should stabilise. The banks will finally come on to the rate cuts – that they have been resisting so far and have offered half hearted cuts only. There should be another fuel price cut and that should make the things easier soon. The soft monetary policy pursued by RBI will continue and we may have some more stimulus package even though denied at the moment by the govt. The FII money inflow should remain positive in the coming months. All in all – I strongly believe that the last two black candles were an aberration and the up swing should continue – albeit at a more careful pace perhaps.

If that be so I still do not feel that everyone will do well…

Real Estate – no go – the worst is yet to come. The valuations are not related to the ground realities. The markets have not crashed but I am sure that big names should be in trouble in times to come.

IT – should survive – but will be under pressure. The rupee as I see it will definitely strengthen, and the pricing will be more competitive… growth will be hit. Infosys results are around the corner and they are likely to beat expectations as the rupee has been weak – and then the ball will roll down.

Banking – Will do better than expected. Indian banking – especially the govt owned banks are the place to be.

Auto – less said the better at the moment.

Gas – don’t miss the bus – if you have believe me this is the place to be. blindly trust me and park a percentage of your money here. There may not be any great positive news in near future – but neither will be any negative news and the demand is going to grow exponentially.

FMCG is also likely to do good in near future.


I have left out some sectors – will talk about them some other time. Now what you read on top was what I felt – but the candles tell a different story altogether and I have been pondering hard. The story they tell is bad and bad – Firstly the Bollinger bands have expanded, 5 EMA has almost dropped below the 20 EMA, the candles have come to the lower band from trailing the upper band in a jiffy. The volumes accompanying were quite high. MACD has had a bearish crossover and says – sell. RSI is bearish, Slow Stochastic is bearish. Reading the ADX is an art so do not blame me if I get it wrong – I feel the down trend is loosing steam – Jaggu says that it is bearish – take your pick. TRIN as said by Jaggu is bearish – you can and should visit his blog to get an idea. TRIX has started looking down again. We have some lower targets now.


Time to see the magic of the Pivots – the markets did not see the pivot levels on Friday. They went down to the Fib lower expected band and definitely recovered but nowhere where we would have wanted it to be.Any ways – it could have been worse – seen the S2 and S3 levels as per – had the S1 broken – but then that’s the magic of Fibonacci.



R3 3048 against 3406 on Friday09 Jan 09
R2 2989
R1 2931
Pivot 2870 against 2985 on Friday
S1 2812
S2 2751
S3 2693 against 2564 on Friday
Projected High Range 2901 to 2960
Projected Low Range 2897 to 2838
Fib Projected High 2961
Fib Projected Low 2777


Best of luck everyone… Hope you make money