Tuesday, July 7, 2009

Life after the budget…

It was a day I was waiting for – me alone ? No – I believe anyone who has invest a penny worth of money in the Indian markets would have had an ear towards the Budget. I will not go on to discuss whether the Budget was good, bad or ugly… I will not say so because I realised a long time back that the markets have a mind of their own and they never listen to me. It is just worthless to discuss why the markets did not do what we willed them to do – but on the other hand let us see why the markets did what they did and what should be our strategy going forward. I have passed through the stage when I used to fret and fret as to where I am going Will any strategy work at all? yes and may be. But now the mantra that I am following is two pronged – firstly follow the markets for whatever they are worth and secondly read technicals to enter and exit at the right times. imageimage Done correctly this and only this will matter and nothing more or nothing less is required to be successful in the markets. Okay – a word about the budget for whatever it is worth. The budget is fairly forward looking but where is lacked probably was that it was not industry oriented. At the cost of repetition – I am not ready to drag myself in the debate whether the budget was good or bad – that I will leave to the people who are ready to put on the glasses and read the fine print. I will try to gauge the budget at its face value and as the markets saw it. Markets did crack and we will see from the provisional FII data that they sold in hordes. Well we had our institutions buying but the bottom line is that they could not stand in front of the onslaught of the FIIs.

We will try to break the entire exercise to the small bits – chew it and come out with deductions for whatever they are worth. FIIs sold worth 1483 Cr and DIIs bought 815 Cr worth. There was an input earlier that FIIs are already sitting on 700 Cr worth of shorts… Well if that be so then we are in for trouble – What has been happening previously for the last couple of weeks or probably days that we were bullish of our markets and inspite of weak signals from the world over we stood defiant. All that was on the back of the presumption or the assumption that we will have a miracle budget and the hopes suddenly got shattered. Now just a matter of a few days and we will be back to normal – where the technicals will start to play a role in the markets and will not be governed by the mood swings. The markets have been bearish for quite some time as I have been pointing out and there is still some downside to all this.

Firstly the budget – though may have been overall an excellent one – the markets have not agreed. That being so – it is not going to change its mood over tomorrow – so forget it that we will recover from this down turn. Secondly the weak global cues will play havoc with the markets – since we have been standing defying them for some time now. Thirdly I would not doubt it that that the technicals have been weak for some time now. At some stage they would have again played a significant role and I think that the time has come. Fourthly and finally – there is no great shakes input that is coming over the next couple of weeks or probably months to now change the mood of the markets. That being so – then being positionally short may turn out to be the best thing. i forgot to add – remember the options that I last talked about – I am posting a couple of chart – the Put Call ratio – It seems that the whole world is with calls – I don’t think that the markets will go up even a wee bit over this expiry. The charts are at the end of this write up. I have pasted Put call ratio for reliance, ICICI Bank, NTPC, Infosys, IOC… Can you believe it there is only call writing that has happened and we closed our eye to all this – you want recovery in these circumstances? Forget it… I remember someone had asked when I had written about the options and talked about the extremes of public opinion and he said how the hell do we identify it? – well here read the charts and I think all will be clear to anyone who cares.

 

reliance put call ratio 06 jul 09  ICICI bank 06 jul 09 NTPC put call 6 jul 09 infosys put call 6 jul 09 IOC put call ratio 6 jul 09 Talking about the global cues now – I wish there were some to take support from – Nikkei closed 1.38% in red, Hang Seng down 1.23% and Strait TImes down 1.46%. Europe was down – no guesses required – FTSE down 0.98%, DAX and CAC down 1.2% each. US attempted a recovery towards the end of a fairly bad day and was partly successful. Dow was up 0.53%, Nasdaq down 0.51% and S&P up 0.26%.Daily 6 Jul 09

Talking about the technicals – we had a big black candle today. I believe that it will give direction to the markets as the 3 EMA has clearly broken below the 15 EMA and we are near to the bottom Bollinger bands from being in the middle. ADX is down in dumps – but mind you it still shows a range bound markets as the ADX is below 20 but bearish as –DI has crossed above the +DI. MACD is negative with the divergence increasing today. RSI has dropped below 50 in a single sweep and is now at 43. Bearish like in bearish. Slow Stochastic are bearish and the TRIX is looking down.

My guess about where we a re headed to? 3700 minimum – I may be wrong but I really do not think so. I will be updating this blog with a trial figure and see whether I am right or wrong. I will be taking up two positions – one in nifty and other in reliance, both shorts at the best levels today and then keep updating them so that we all can follow. So what I am recommending is naked shorts – in nifty and reliance.

Best of luck to everyone today.


allvoices

6 comments:

geniusjaggu said...

good mrng paaji,
naked shorts after lonnnnggg down day is very risky...beware!

by the way gooooooooodddd write up..keep it up paaji...

S S Cheema said...

Thanks Jaggu. Naked short - after at the best levels for the day is more like it - I am pretty sure that day to day variations not withstanding - we are in for a downward surprise only.

dr.c.m.singh said...

i agree....myself too on naked short in nifty since yesterday when it broke 4200 and added today again when it could not stay above 4210....what will be your stop loss for nifty shorts..??

S S Cheema said...

cm - i am waiting for the market to test 4260 before I short - and I feel that it will do so today.
If it plans to close above 4342 I will let go the shorts and buy long as then the candle will be piercing - and the markets may continue upswing it left back.

Anonymous said...

Practical analysis, good job, was looking forward to it since i started following your blog 20 days ago.

S S Cheema said...

thanks - anonymous - but a name would be welcome