Two steps forward .... one step back .... as long as we go ahead

One interesting fact that I came across today. FII registration is on a continuous rise. The reports says - As per data available with SEBI, the number of FIIs who have registered with the regulator has risen to over 1,400 while sub-account registrations have topped the 4,000-mark.Apart from the long term growth story of India, what worked in favour was the easing up of the norms for sub-accounts. Also the closure of the participatory note route helped spur more registrations.

Does this mean that our growth story is still intact? Yes it may remain so. S P Tulsian adds - "Another factor working in favour of India, believe it or not, is the Olympics in China. Yes, China has been on a superfast growth track and has been making development at a harried frenzy, to meet the deadline of the Beijing Olympics. This will flag off in August and once Olympics is over and the euphoria settles down, the Govt would surely sit down and work out the spendings, just as we do after a big party. Surely, after four years of nonstop spending and having more or less developed all that it wanted to, post-Olympics, the Chinese are expected to cut down on their expenses. Just as we do after going over budget. And this has always been the trend, the year after an Olympics, the country which hosted it, goes through an economic slowdown.

Take the case of Greece. It was the host for Olympics in 2004 and after the event, which cost more than 7 billion euros to stage, stretched the finances of the smallest country, widening Greece's deficit to 5.3 percent of output. Government debt grew 112 percent of gross domestic product, its highest in more than a decade. And to overcome this, Greece had to cut about 400 million euros from its planned defense spending by the end of 2005 and had to sell shares of Greece's postal savings bank to the public. Australian taxpayers are still paying off to clear its 2000 Olympic debt, which is costing them $32 million a year and is expected to be cleared off by 2010. Barcelona is still paying back a $1.4 billion Olympic deficit. And even the Salt Lake City Winter Olympics in 2002 left Utah with a $155 million deficit. Hence the logic which FIIs give is that post- Olympics, it best to exit from the hosting country and look for better pastures. In the BRIC countries, surely then India, figures out higher, though Brazil, to some extent might have an edge, as it is a strong exporter of iron ore and ethanol, the oil substitutes".

Okay that's all well - lets get back to the markets and stop day dreaming. When I last saw the european markets they had closed well into green - US too opened in green - then it decided to nose dive down in red and so far shows no signs of changing it sides. I do not take our sell off in the end that happened too in good stead. It just shows that no one trusts carrying the positions overnight. The candle on the other hand has made an inverted hammer - what does it mean - well the opinion is divided but it somehow the verdict goes like this - It indicates that the shorts are being covered. If that is so - then expect the positive sentiment to continue. The other interpretation (though I will not subscribe to it) is that it is a shooting star - see my reasoning is that it is hardly a uptrend to warrant this interpretation.

Other than this Slow Stochastic seems good with the red line remaining above the blue line and inching towards the 50 mark. RSI is good. TRIX is very slowly turning upwards. MACD is not good but my sense is that it will turn positive after another day or so of this up move. I have very little idea about TRIN but it seems to be around 0.8 and that should be good. Please do cross check what Jaggu has to say about this.

At the end if the politics does not make our day bad - then I expect the market to open flat or red taking the global cues and climb up to another day of green closing. If strong political statements float around then a sharp red cut may be seen.

Best of luck - people are advising light trades as the swing can be severe and unpredictable.

Ride the Rally for all its worth..... but which way?

We are in a Bear Market - that is for sure and no one should have any doubt about.... rally or no rally. The moot question is - as put across by Morgan Stanley is "How long will this bear market last?" Eighteen months is one estimate and it is absolutely probable. The report goes on to say that for the market to bottom out, retail investors have to panic, and there has to be a wave of earnings downgrades. This is about the worst performance in more than a decade on a year-on-year basis. However, domestic households still seem convinced that equities have to be bought and not sold. Another interesting fact listed by the report was - “Eventually, long bond yields need to stop rising, or put to put it another way, the market has to get confidence that the medium-term inflation rate is under control. On our residual income model, if the 10-year bond yields rise to 9.5% the Sensex fair value drops to 11380 (13% lower from here) signifying the importance of this indicator of macro fundamentals,”

I was talking to my uncle who has just started investing in equities - he wanted me to tell him when to buy again - crazy - he is sitting on tons of losses - as much as 50% erosion and he wants to buy again. This goes to show that the retail still have faith and will start investing in any rally we have taking it as a bottom. That might get another round of selling - the crude still has upside to it even though in short term there may be a dip down.

Okay to candles now - What I would wish is that 5 EMA crosses over 200 EMA - but the distance is so so high up that it seems impossible as of now. On a shorter target -- 20 EMA being crossed over by 5 EMA - That too is some time away.

As of now the MACD red Line has turned upwards and with a good session or sessions will crossover the blue line making it bullish. RSI and SlowStochastic is looking good. The only problem I see is that the TRIX is still facing down. StochRSI has given its divergence from the general trend and that too may be good. TRIN is what I am missing for an otherwise perfect green opening.

The politics will continue to rule the roost and whichever way the market goes on Monday - I expect the volatility to be very high. If you do feel like ideally you should have very very strict stoplosses lest the market does the unexpected.

I will end with some personal mesages - I will be extremely busy next week and may be off and on the blog. I have tried to put up a RSS feed on the site for whatever it is worth.

Best of luck for the week (hey this does not mean I will be unavailable)

Round two........ go to Reliance Bears?

Despite yesterday's strong pull-back, the Sensex today opened with a negative gap of 134 points at 13,531 owing to weak cues from the global markets. Fresh selling pressure in the markets forced the index drop to a low of 12,935. Some buying in late trades saw the index recover a bit, but eventually end with a loss of 571 points at 13,094. The BSE Realty index plunged over 9% to 4,295, and the Metal index shed 8.5% at 12,114. The market breadth was fairly negative - out of 2,684 stocks traded, 1,875 declined and 750 advanced today. The Nifty dropped 168 points to settle at 3,926.

Was it expected? Not really - atleast the kind of drop we saw today. I was dumb struck - I talked to one of a trader and the word around was that if the market gaps down - it is likely to recover during the day, on the other hand if it gaps up there may be strong selling pressure. What happened is in front of us but why it happened - atleast I will be honest - I do not know. I went to dozen sites to look for possible explanation but that eludes me still. It also happens one of those rare days when TRIN said bullish but the market crashed. The StochRSI too is moving from overbought to oversold in two bloody session and the market does not follow it still. I would love if someone can make anything out of these technicals for whatever they are worth and tell me. Because I can't.

Okay to the commingday now. Europe ended green and US - DOW was up .65%, S&P 500 up .11% but Nasdaq down .27%. Asia - Nikkei is down but not much at .11% and Strait times in green .38%. The charts today are all mixed up like rubbish. One indication is saying oversold the other is near the overbought line. Anyway I will list out the indications for all they are worth. The Nifty candles made tweezers the closing daybefore being just two points short of the opening yesterday. RSI trying to go back to oversold region below 30 marker, Slow Stochastic redline is still above the blue and is above 20 marker and many would have bought into this indication. StochRSI that had gone from zero to just short of being overbought has turned down is just above the 50 marker now. MACD indication remain bearish with the redline below the blue and divergence increasing. The line from May 2nd to day before's low has a retractment (38.2%) at 4400. will we ever reach there? Lets just wait and see.

As I finish and push the publish button - Nikkei is trying to recover and will hopefully be in green by the time we open and will give us some courage to go up.

Round One to Reliance bulls....... Many more to go.

The battle lines which were drawn yesterday saw action today. The bulls -- after having been beaten so badly for the last few days decided that enough is enough, especially when the Bearstry to hammer down the all-time favourites --the reliance pack. the bears should have known better than to finger the already cornered bulls. My eyes had been longing for a long time to see a tall white candle -- and I wish were granted.

The white candle as fully engulfed the Black candle made yesterday -- meaning that it signals a bullish engulfing pattern. This should provide a relief rally that may in its best take us up by 15 to 20 per cent. In just today one days rally the Slow Stochastics red line has crossed over the blue line and started looking good. It has also crossed over the 20 marker. RSI has moved up from the oversold zone. The MACD red and blue line divergence has reduced. The StochRSI however has moved from near Zero (oversold) to near 80 - though is in overbought zone - but what a move. If we move this way today too, we will definitely hit the overbought zone in StochRSI.

In yesterday's euphoria and one bullish candle let us not forget all the other things that will affect us. Oil has made another record high and US fell like sh#tting bricks. DOW down 1.46%, Nasdaq down 2.32% and S&P500 down 1.82%. Asia took the que and has opened in red. Nikkei down .97% but if I see it correctly - seems to recover -but opened too low. Just by the way - Japan's main stock index fell for the 10th straight day — its longest slide since 1965. Strait Times too is 1% red on opening.

On the other hand DLF buy back will instil hope in the market. At a time when the CPM top brass in Delhi are preparing to withdraw support to the Manmohan Singh government, the CPM in West Bengal has suffered yet another electoral defeat on Wednesday after it lost as many as eight of the 13 municipalities to opposition parties — Trinamool Congress and Congress. Elections to these civic bodies were held on Sunday and results were declared on Wednesday. This should go well with the markets as CPM may think a bit longer to pull the carpet. The indications by other parties to support the Congress in event of CPM ditching the ship too brings hope to the political stability in the country. I am not sure how Mr Reddy's statement made yesterday will affect the market.

So the indication though bullish and has all going well - has to end with a watered down tone because of the Asia opening and the fact that the US will be closed on 4th July and the week will be cut short - I am not sure how many would like to take the longs over the weekend tomorrow. In any case there are those that make hay whether the sun shines or not. But remain careful.

Best of luck to all and take positions deliberately. either way the rewards can be phenomenal and the pain too may be as much.

Loss of faith..... V Vmbani

It is a day that would be remembered as one of the worst days in the history of the stock market. Not because the Sensex fell by 500 points (3.71%) or Midcap Sensex fell by 245 points (4.54%) or small cap Sensex fell by 317 points (4.73%) or BSE 500 fell by 213 points (4.08%). Above all this, it would be remembered as the day when all the six stocks of the Reliance ADAG fell across the board, falling between 3% to 14%.

Though the whole market has been in a tailspin, the disappointment from the ADAG stocks is more painful. Investors have always looked up the Reliance group with a lot of faith and consider it to be investor friendly but this free fall of the ADAG stocks, has today shattered this belief also. More than the market crash, it has actually been a day when faith got crushed.

Too much of manipulations -- cannot do any good and I do not see the market from Uma's eyes or for that matter anyone else's -- bulls or no bulls -- be ready for some bad times in reliance counters. Today’s fall in share price of all ADAG stocks, which has been supported with huge volumes, actually signals confidence crisis of institutional and high net worth investors. Are they sensing something which we are presently not able to? It is also said that market has stopped factoring futuristic announcements like early commencement of Sasan Power Project, procurement of EPC contracts by Reliance Infra, signing mega deal with Big B by Reliance Big Entertainment or setting up cement plants of Rs.10,000 crores by RNRL.

If the share price of the ADAG keeps falling like this, it will betray confidence of over 4 million investors of the group and hence would also damage the age old investor friendly image of the RELIANCE Group. Reliance becoming unreliable? Never thought a day like this would also come!

Anyway let me dissect what I should. I wanted not to wait for the morning for posting this I pulled up US and it was down to 1.5% -- just left it at that and had my dinner - by the time i came back there was a small recovery -- but that does not seem to be taking us anywhere. So most likely US will close red. Asia will open red and we will see another day with lower bottoms? Frankly the kind of fall we had today -- I did not foresee it and am sure that a lot others too did not see it coming. Any way the third candle of the three black crows has formed and it signifies more downside. Any rally or an attempt to do so will be killed in the bud by these crows. I was trying to see the effect of these crows and could not come up with any example where i could say that they lied. They ominous to bad times and forming second time -- the effect of first had not washed away so far.

That besides - the bollinger bands have widened once again and the candles are now violating the boundaries on daily basis. MACD negative widening continues. StochRSI, SlowStochastic and RSI are oversold but to what affect - no one can be sure. TRIX continues to face down. I could not get and accurate reading of TRIN but it seems to have dropped below 0.6 in probably .55 region. I will not touch it or what it means and leave it to Jaggu. Please click the link and see his page for TRIN.

Sorry to be gloomy -- but that is all that I have for now. GOD Bless.

Nikkei green............ for all its worth

Its good to see green - even if it is Nikkei. After all there is where our spirits rise from every morning. One thing for sure - there is hope today seeing Nikkei green. Strait times too getting a que perhaps has started the day green. Only reds yesterday were DAX down .06% and Nasdaq down .98%. Asia does have relief and and atleast looking at the charts will not stress our eyes as much as last few days -- you see -- green is good for health of eyes ;-)

That apart there is no good news from any front that should actually make the markets go up - every thing remains the same as before. Political uncertainty, Hike in the bank rates, slowdown in economy and down forecasts of revenue earnings. It is just a matter of time that big big names in reality, banking and auto in india say so. Everyone is busy revising the targets for Nifty and Sensex downwards. Infact the news now is that the selloff now is not speculative in Options segment but led by the nose by selloff in the cash segment. Nifty, said on 30th that this is happening because a greater downside is expected by the masses. The cash volumes are four times the average.

I will work on three likely scenarios today and start with gauging their probabilities. The most unlikely scenario today is that we open above the half body of yesterday's black candle and make it the lowest point of the day and continue upwards. This would mean opening above 4100 levels. Though this is the most unlikely scenario -- it would spell a brief relief for a lot people and give hope -- however momentary.

The second scenario would be that we open green below 4155 - touch an intraday high and then drop to another low - below yesterday's candle. That might be the next probable on candles and will spell doom as this would be the third crow of the dreaded three crow pattern - that we are seeing a little too often for everybody's liking.

The last - probably the most likely is that we open flat, green or just red and close above 4055. Well this would make white candle that pierces the yesterday candle - this would give a weaker reversal signal than the option one, but would be better than nothing.

In army we are often told that if you plan an operation and think of five possibilities then the enemy will surely surprise you with a sixth option. The markets are behaving like a good enemy. That aside - I do expect a white candle today. I am basing my assumptions not only on a odd oversold indication of nifty but oversold indication in the frontrunner index heavy stocks. As far as the candles are concerned TRIX is facing down and being a leading indicator - gives no relief in short/medium term. RSI is over sold but not giving a buy signal. MACD is bad with the red - blue divergence on the increase. Stochastics (Slow) the red is below the blue line and none in the oversold territory. Like I said a few days back the StochRSI was overbought when all else seemed to be near oversold. Now the StochRSI is approaching 50 marker and the divergence and the conflict between indicators should finish. Then we may atleast have some worthwhile trends on technicals - till then the confusion will continue.

Well people on an average I am having 35-45 visitors everyday on this blog and it is unfortunate that expect Uma and Jaggu and perhaps rajandran there is no contribution by the way of a meaningful exchange of ideas. Could you please post comments so that I get some encouragement and we use this forum to learn and teach? Pen down your thoughts whatever they might be. I am sure that no one can be a worse writer than I am.

Psst.... Jaggu still sleeping so I am not sure of the TRIN - but I expect it to remain around yesterday's levels only. Cheers