Sunday, August 9, 2009

Markets, Markets…. crazy markets…. Update for 10 Aug 09

image Actually one does not call them crazy – it is so very understood by everyone who has been in the markets for whatever time that they are crazy and they have a mind of their own. All the same the desire to tame them would be aim of anyone who dreams. See for example the way the markets behaved last two days. they followed the dictum of the candles to the core and then stopped just a needle bit short of turning the indicators bearish. Ofcourse I will be substantiating whatever I say – but for the time being suffice to say – they showed arrogance inspite of being poised for a fall more severe that what we witnessed. We once again stand at crossroads and stare at the way to go. There is a way this side and the other. I have to choose the path of the markets otherwise I will be lost in the forest filled with everyone to take a snipe at what is mine. I have deliberated on what I should put across this weekend. I even thought about skipping this one update and write when there would be more clarity about the direction. It is never easy to say sorry in the hindsight.

daily 07 Aug 09 The markets went the way they were supposed to – fall they did… The Harami played exactly as in a text book – but then why am I afraid? Am I afraid because of the way the US and the European markets fanned out – closing the trades for the weekend? Yes and maybe. Fact remains that they were not supposed to close strong – it could be the head of a snake making one attempt to surprise – the last bit of effort to show that it will dare – or it may be the strike with vengeance that can take us to the new heights. Whatever it would be it is time to be on our toes and keep a watchful eyes – the markets can go either side with strength not giving any time for us to think and act.

imageComing to the global cues the markets started in Asia as flat to green but kept going down to close at – Nikkei – the only oasis of green at 0.23% up, Hang Seng down 2.51% and Strait Times down 2.05%. Europe too opened red but by mid day it was clear that the US cues are overtly positive and that led to a sharp rally with the markets ending comfortably green with FTSE at 0.87%, Fax up 1.66% and Cac up 1.25%. As the two major areas of concern – namely the housing and employment came better than expected the US rallied right from the beginning to close – DOW up 1.23%, Nasdaq up 1.37% and S&P up 1.34%. So it goes without saying that the global cues are looking good.

 put call 07 aug 09Now here is the trouble area – ideally the fallout of a confirmed Harami should be continued selling pressure. Yesterday panned out to be the second day of selling – ideally beginning of many to come. Now the 3 EMA line – it is just shy of crossing below the 15 EMA at 4537. If this crossover does not happen then it will be a signal to build up longs and square off shorts. Volumes again fell to 84% average of last 50 day traded. ADX has just generated a sell signal with a –DI crossover of +DI. MACD is one point short of generating a sell signal. RSI is one point short of generating a sell signal. Slow Stochastic is already in a sell mode.

As far as the options data is concerned the call build up has quickly filled out the available calls with the Put call ratio dropping below 1 to 0.97. remember it was 1.1 on Thursday? The data of the main strike prices is as in the table above. The call build up is at 4700, 4800 and 5000. So basically as per the option data the fight between the bulls and bears is on and no one knows where the market will go. The levels of 4700 on the upside and 4500 & 4300 important levels on the lower side are important. The 4500 level is already in money.

So all in all the global cues are bullish. The technicals that I follow are either already bearish or turning bearish. If these indicators take support at these levels then a strong bounce back can happen – but if they breach these levels then we are on our downward journey. Options are as of now on sidelines only – will give pauses at 4700 levels on the upside and 4300 on the lower side.

Indicator Bullish/Bearish Sell/Buy Signal Nifty level at signal Points gained/lost since
Harami Bearish sell / 04 Aug 4681 + 200 Harami confirmed as bearish
315 Strategy - - - - 20 points short of generating sell signal
ADX Bearish sell / 7 Aug 4481 +/- 0  
MACD - - - - 1 point short of generating sell signal
RSI - - - - 1 point short of generating sell signal
Slow Stochastic Bearish Sell / 05 Aug 4694 +213  
Options Neutral        

One may either sit on the sidelines for a day or be positional short at the moment. For the day sell below 4574 go long above 4574. For those positional short keep stoploss 4676 and if you are long do not hold below 4551. Best of luck to every one. Whish you all make money…



geniusjaggu said...

its great help to analyse the mkt with ur tables :)

shaq said...

looks like we are in for a bear squeeze yet again sir...just one doubt options data can you also include IV since its a important data..and will it be same for all strikes and equal to india vix??..thanks

S S Cheema said...

thanks Jaggu and Shaq. Jaggu I am honored by your comments always and just by the way seen 'My Life'?
Shaq I will take time but try to incorporate your suggestion...