Sunday, January 4, 2009

A real uptrend?… For the time-being Yes…

Okay – I have had a good amount of holidays – a wonderful New-Year’s eve and I think it is time that I come back to the real world of bulls and bears before I start acquiring a house in fairyland. The past few days have been wonderful.

The second stimulus package has come and it has been in some ways better than that was expected by the markets really and it is for this reason I see a wonderful opening on Monday. This is as far as the fundamental story is concerned. On the technical side the markets are in overbought zone so the sell off that would come should be severe. I do not have the patience to see or trade the DOW but take a look at Jaggu’s blog. He says the DOW is in for a big time trouble. – dangerous waters –Uh! ? It becomes a fighting times when we have such a situation with the battleground ready for a intense fight. The story of bulls and bears and the breakouts form the tightly traded range we saw for past so many weeks ~ Well let me take the things one at a time and see where we are heading to really. Okay starting with the second set of stimulus that has been announced. To start with as far as the economy goes it is difficult to match the doings of Congress Govt here. See whatever they do within the context of Political pressures – Communists then and elections now. We cannot expect any action in isolations for the economy alone – afterall we have the compulsions of the democracy. Mr Montek Singh Ahluwalia expects these actions to propel the economy forward at 7 percent – that would be a WOW! Firstly the benchmark repo rate has been cut from 6.5 to 5.5% – a full 100 basis point cut. Reverse repurchase rate has been cut from 5 to 4 percent – this is likely to boost the banks to lend more to the consumers. The focus of the second stimulus package is clearly the infrastrucuture sector but the measures also included easier financing for commercial vehicles, allowing state governments to borrow more for spending and simplified lending norms for exporters. The government allowed infrastructure firm IIFCL to raise Rs 30,000 crore as tax free bonds and removed the interest rate ceiling on overseas borrowings. It announced accelerated depreciation at 50% for commercial vehicles bought between now and March 31. FIIs have been allowed to invest up to $15 billion in corporate bonds as against $6 billion so far. The government has also restored duty drawbacks to exporters and easier lending through the EXIM Bank. The government was candid enough to admit this was the last of measures as it had little fiscal headroom. So what all should affect the markets tomorrow as far as the fundamentals are concerned? – Well Firstly, The stimulus packet is good, positive for the market. But this is the last of the packet – so this is it for the time being – if the markets do not take it in good stead then – well that is that then. Finally the expectations are now finished with the announcement of the final package – so no more anxiety and unknown factor to drive the markets up anymore – will affect it negatively.getImageFromSession.php

The Global cues are good. Asia was all green on 2nd Jan with Nikkei up 1.28%, Hang Seng up 4.55% and Strait Times up 2.17%. Europe too was good with FTSE up 2.88%, DAX up 3.39% and CAC up 4.09%. US too ended on the green note with the DOW closing 2.94% up, Nasdaq up 3.5% and S&P up 3.16%. So I do expect a good opening of Asia tomorrow and also ours.

Let us go on to the technicals now - well the markets touched the middle of the Bollinger bands and bounced back – I had infact thought that they will go and touch the bottom of the bands – glad to be wrong. The bands themselves are fairly narrow so – till the breakout happens just wait and watch. 20 EMA line is inching and itching to cross the 50 EMA line – the real bullish season will start after this crossover. The volumes came back to the averages. The volume on the friday trading was 139% of previous averages. The candle in isolation is a doji and if it is what it says then short term correction is almost imminent. Second way to look at the candle is that it is a shooting star and that too is not a good indication. RSI  remains good and positive. Slow Stochastics show the makets in the overbought territory so tells us to be cautious – TRIX is at its peak – depends how long it remains there and whether the 3200 to 3500 band is reached. ADX is just above the 20 marker saying that the overall uptrend that was there has run into trouble and this trend is weak. Though the +DI says it is positive about the markets. MACD divergence is still positive – but just so. So here we are still at crossroads wherein the markets can open positive and at the most remain in green territory for only near future.

Pivot data… Notice the pivot at the same place as before.
R3 3137
R2 3107
R1 3077
Pivot 3049
S1 3019
S2 2991
S3 2961
Projected High Range 3063 to 3092
Projected Low Range 3067 to 3038
Fib Projected High 3095
Fib Projected Low 3006

Picture1 Before I end I wanted to post this trading day of 2nd.  I have doubt if I have my data accurate but according to what I have the entire trading was around the R1 levels with R2 way above at 3087 and Pivot way below at 3011. Since I was not trading I cannot really vouch for the accuracy of the data ;-) Sorry.

Okay I almost forgot – I started my search to look around for some technical analysis software and I cam across a lot of suggestions to include MetaStocks, AmbiBroker and all – I also stumbled upon InvestarIndia that is a software fairly recently launched. It has a lot of scope in helping you to do fundamental/technical analysis. Ofcourse it costs money but I really feel that if you are seriously into stocks and technicals then it is worth a look. I am posting a link for those interested to see it.