Monday, May 18, 2009

Where are we heading too? Update for 18 May 09

About a month back Jaggu made a mention to me about a phrase - ‘The Black Swan’ effect. I did a google and realised that it is one of the theories that is there on the unexpected. Anyway – later when I was in Mumbai I saw the book  written by Nassim Nicholas Taleb – The Black Swan. Going through it – it does has a point of view that is difficult to ignore – and then I see our markets and how we (the retail) behave – I see the book in the different light. We – the retail are always behind times to see the truth or the untruth. We are in a state of denial till the time it is already too late. Then too we really do not know how to react when the situation is there in front of us. Then our other habits or lack of the same always is against us – working to eat us slowly making us hollow. No – don’t get me wrong. I know of people who had a strategy which has worked – but it has worked not because it was foolproof – but it worked because the courage of conviction was just too much for it not to do otherwise.

Daily 15 May 09After the elections are over and there is a verdict that the Congress will make the next govt at the centre – that factor of uncertainty is out of our lives – even if temporarily. Now inspite of the result and all well on this front – the mind refuses to see this blindly and options stare us – the options that may or may not to be our liking.

 manmohan Frankly the present situation is the best anyone would have hoped for. A stable UPA with minimal outside support. So much so that even people like ‘Lalu’ have admitted that they have lost out by not supporting Congress and trying to break away. Now as far as the reaction in the markets is concerned there are two schools of thought. One says that the worst – atleast as far as India is concerned is over and now we should loo forward to a bull market. The second says that the worst is not over yet and we are still to see the worst.

Now where do I fit in all this? Well I frankly feel that we have a situation were we can see the mix of both the theories. We have a good upswing in the short term followed by a decent downturn. Well why do I feel like this? For one – there are a lot of people that were sitting on sidelines – the retail and likewise who can now see that a stable govt is it and start investing. That should help us a good 10-15% upswing – or the continuation of the rally upside. But then at the end of the day someone has to realise that there is now no uncertainty – where good news is one of the option. To say that the worst is over may be too premature. The jobless data, housing, projected global growth or what ever – they say that we have hit the bottom of the bad news – but that does not in any way mean that the good news is on its way. It will take a long time for the markets to recover to make any substantial highs – and we may enter a real consolidation phase where we remain in a narrow band for some time to come. All the same the Indian markets should ideally outperform and we should see good money flowing in now.

As far as the candles are concerned – we are firmly above all the EMAs and above the trend line that most of us would have drawn starting march 12th. We have not so far dropped below the middle of the Bollinger bands. The volumes seems to be okay. ADX is bullish but the ADX line as such continues to show negative divergence. MACD is still showing a beginning of a bearish mood. RSI is bullish with negative divergence. The TRIX is looking down. Slow stochastic was on its way down but has turned back and become bullish around the 50 marker.

Today’s trading – as far as input is concerned – everyone is expecting a 200+ opening on Nifty. I am at a loss of words and will not join the crowd even though it can be a reality as I feel the retail will be led to be bullish. Afterall someone has to be culled at the end of the day. The Pivot data goes something like this: -

R3 3775
R2 3740
R1 3705
Pivot 3651
S1 3616
S2 3562
S3 3527
Projected High Range 3678 to 3723
Projected Low Range 3649 to 3604

Fib Projected high 3710

Fib Projected low 3572

I will skip option data since it is today and subsequently that I am expecting to see a sea change so will see what happens today. Best of luck and May you make a lots of money.



Chirag said...

Yes Election 2009 results test positive and surely is a reason for the markets to cheer.

S S Cheema said...

Chirag - yes for the short term - but don't be surprised that after a few days you start hearing - Markets had discounted the good news earlier

S S Cheema said...

SGX 11% up?

r m said...


Like everything in the market this run will also be overdone. Now the challenge is in recognizing when to start buying puts. I guess nobody (except for those who crave bankruptcies or those who have got close relatives working in nasik mint) will dare to short now and put-writers will suddenly spring out of every nook and cranny. Who knows market may teach them a lesson for a change!

S S Cheema said...

I know - times are just plain unpredictable.

Anonymous said...

Dear Cheema,

Pls continue your Option Class.



S S Cheema said...

I am online today.