Tuesday, August 4, 2009

Update for 04 Aug 09…

image The markets are in a frenzy to touch new heights – the problem is that the volumes are not keeping up the convincing company. That may be kept aside as nothing really is mattering and the markets are on a self induced high. The pattern is being harmonically repeated everyday. The markets open flat – give a signal of selloff and the moment shorts are build up – they go higher to touch new heights. The volumes are not mattering as after a steep climb – the prices touch the stoploss triggers and the short covering push them a bit higher to safer limits. What I suppose is going to happen one of these days is that the markets will drop – there will be buying by retail and the markets will never recover – then it will never give chance to the retail to come out – let alone come out a bit bruised. Till then ride the upswing.

 image As far as the global news is concerned the markets are in a frenzy to reach higher tops. What I said above is not only true for us only but all over – all the markets are generally starting the day almost at the flat levels and then end up at the highest. Take Europe yesterday for example. FTSE started absolutely flat and so did DAX and CAC then went on to end at 1.61%, DAX up 1.78% and CAC 1.5% up. Ofcourse the Europe closing mirrors US but all the same… US had better than expected economic data and that helped S&P to cross and close above the 1000 mark at 1002.63. The us at the end was up – Dow up 1.25%, Nasdaq up 1.52% and S&P up 1.53%. Asia too has opened green with Nikkei trading at 1.02% green, Strait Times up 0.58%.

chart The technicals are rocking ofcourse. The candle was white and strong with a large white body. It has moved up to the upper Bollinger Band. The Bollinger band has expanded to 4800 levels and surprisingly the Bollinger band is expanding at a a rate higher than the white candles otherwise ideally the bands would have been trailing the upper edge already. All indicators as per the EMAs that I follow are bullish. The candle also was above the 12 Jun high. The only problem in this part as I see it is that the markets are going higher on low volumes and generally it is not a good trend and sell off can be sharp. All the same till the time the markets are going up – there is no questioning. This info should be used for trailing the stoplosses if you are long or remain hedged at this point to ensure that the profits are not eaten away. The ADX is bullish with the +DI above the –DI but again the second caution that we see here – the ADX has not changed a bit more than 17. This indicates no strength to the trend that is going on – ADX has been at this level on my software for past three days. On iCharts however the ADX is at 36 and above 40 will indicate a strong trend continuation. Take the ADX pick that you feel is right. MACD is bullish with increasing divergence. RSI is rocking at 66.79 and the 25 day SMA of RSI is at 53.8 – so a lot of bullishness with this indicator. TRIX is looking up. Slow Stochastic is bullish but overbought.

put call 03 Aug 09 reliance put call 03 Aug 09On the options front as we step higher the put build up is increasing. The ratio is 1.15. It may still not be enough to sway the markets but the fact remains that if is add up at this rate then the markets will again face a hurdle coming down.  reliance on the other hand has the same kind of call build up that we saw last month and to buy reliance may turn out to be a trap – best would be to avoid.

To summarise – FIIs are out buying and DIIs at the best are confused. All technicals are bullish except volumes that are not justifying the upswing and the ADX. Only one indicator is overbought – but mind you it can remain so for a long periods of time. Options still might not be able to dictate the direction but will give some resistance to markets coming down. Ideal strategy is to hold long. Stoploss for longs is 4555. For those sticking with shorts stoploss is 4659. For intraday hold long above 4634 and short below 4634.

Indicator Bullish Bearish Remarks
ADX Bullish - Bullish with caution
MACD Bullish -  
RSI Bullish -  
TRIX Bullish -  
Stochastic Bullish - Overbought
Options - - Index options build up mildly bullish
Global Cues Bullish -  



dr.c.m.singh said...

excellent analysis...bullish veiw filled with lot of caution...any level where you would be comfortable shorting for a minor gain...keeping in veiw the overbaught state though you have mentioned it can remain for long. congrats once again.


S S Cheema said...

cm - my personal opinion (that markets do not seem to take notice of) is that we might close red today.