Market update for 11 Aug 09…

  The markets have played out in the hands of two events for last three days, firstly the bears and secondly the technicals. It is a question of what came earlier – the markets or technicals. At some stage of life they both have intertwined so much with each other that it is frankly extremely difficult to tell. Well – still all the same they have atleast given us the opportunity to see how the markets will shape out. The FIIs at the moment seem to have become a major problem. They are sucking out liquidity out of the system and the DIIs can never catch up. It may so happen that the DIIs also give up and what a day it will be. Hope that it will not come in a hurry. In any case I will stop babbling about all this and get to the task at hand. All the same before I begin with reading of the data – we have at the moment some not so news around us. A semi agrarian society at the best that relies on monsoons have deficit monsoons. A population of a billion plus having less than good health facilities – with Swine flu knocking in the backyard. Enough to give anyone jitters. Add to it a pint of Chinese bubble about to go bust etc. A perfect recipe for disasters on the markets. Not that if all goes well it matters – then a single statement that this has been factored in in the markets will see it through – but unfortunately that is not the case. So except trouble in the short term.

As far as the global cues are concerned – things were poised for a bounce – and a strong one at that. All the same Nikkei ended 1.08% green, Hang Seng 2.72% green and Strait Times was closed. Europe opened red and made a half hearted attempt to recover but apart from FTSE – none did. FTSE closed 0.68% green, DAX red and CAC red 0.75% and 0.47% respectively. US opened red – tried to recover but has since sunk deeper red. DOW is presently 0.48% down, Nasdaq down 0.67% and S&P 0.53%. They do have a lot of time in hand to attempt a recovery – we will have to see it at their close tomorrow.

The candle today was another black one – though it is not a perfect ‘three crows’ bearish pattern – it is very close to it. As far as this pattern is concerned expect some more down turn. We have already violated the middle of the Bollinger bands now all we have to do is to test the bottom of the bands. 3 EMA has crossed below the 15 EMA and has generated a sell signal. Volumes were low – lower than yesterday at 79% of the 50 day average. ADX had already generated a sell signal and remains weak. If it comes above 20 then – at the moment it will give strength to the bears. MACD has generated sell. RSI generated sell signal and Slow stochastic bearish. Only small caution with the Slow Stochastic is that %K line has entered oversold. Does not really matter as of now but will build up in time to come.

Options data now has a good amount of call writing going on so be prepared for a painful recovery if any. The way 4700 calls are being build up – forget reaching above it for this expiry. If meaningfully 4400 is broken tomorrow then a run up (or may I say down) to 4300 is quite possible.

To summarise the global cues have turned weak. Majority of technicals I follow on the charts have generated a sell signal. Would be ideal to sit tight on shorts and till there is some kind of turnaround – no longs. Option data does not suggest extreme of sentiments but call build up is going on. It will be a time before options meaningfully sway the markets. As per the options the levels to watch out for are 4700 on the up side and 4400 and 4300 on the down side. (4400 if breached – likely to force option sellers to cover or hedge positions – helping the market fall)

So to wrap up Ideal strategy is to go and remain short. Stoploss for shorts is 4624 and stoploss for those carrying longs is 4474. For the day go short below 4519 and long above 4519.

MARKET SUMMARY
Indicator	Bullish/Bearish	Sell/Buy Signal	Nifty level at signal	Points gained/lost since	Remarks
				4437
HARAMI	Bearish	Sell / 04 Aug	4681	244
315 STRATEGY	Bearish	Sell / 10 Aug	4437	0
ADX	Bearish	Sell / 07 Aug	4481	44
MACD	Bearish	Sell / 10 Aug	4437	0
RSI	Bearish	Sell /10 Aug	4437	0
Slow Stochastic	Bearish	Sell / 05 Aug	4694	257
Options	Neutral	-	-	-

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

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.

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.

Coming 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.

 Now 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 (4481)	Remarks
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…

Update for 07 Aug 09…

Firstly allow me to apologise for not updating the blog yesterday. Night flying coupled with a killing schedule in the past few days was the culprit. It was a bad day for the markets – but frankly it was not unexpected – after there has been a non stop rally for some time now and there has to be some consolidation. If we do not go into a free fall then this might turn out to be the right dosage of the medicine required by the markets to perform even better in the coming days. Add to it that this is not a local phenomenon – it is global in scale.

The Global cues that panned out and are out there at the moment are really not as encouraging as they should be. Even it is not all honky dory in our home front – all the same – the markets did what they assumed to be the best – if there is a fall one day – take positions to make use of the rise the next day – only that it may not happen so in the coming few days. Take Europe for example. They were trying to reach out for new heights a day after a poor show. FTSE opened green and went on to touch new heights. It was only US that dampened their spirits and finally they did end in green after paring some of their losses. FTSE was up 0.93%, DAX was up 0.32% and CAC was up 0.56%. US had a second day in the red with the fall being more broader than the day before with DOW down 0.27%, Nasdaq down 1% and S&P down 0.56%. Ofcourse the least expected out of this US closing is that Asia too dips red and that is what there is to see at the moment. Nikkei is down 0.55% and Strait Times is down 0.72%.

On the charts the Bearish Harami did play out – not the next day as expected but the day after. In the candles you can under some conditions add and subtract the real bodies and that being so – we are can count on this to be the beginning of a downturn. How long it lasts – where it goes – is for other to guess – I will stick too – that if we have other indicators giving a sell then it is time to sit on sidelines with money ready rather than all invested. On the Jul 29th the 15 EMA line was tested by the candles and you can take it that yesterday was the second time it has happened. If we do not fall now then the next time would be the last time the line should be tested. We are close to the middle of the Bollinger Bands so some more down time is left before the support is taken around 4446 levels. The volumes were average (103% of last 50 day average). ADX is still bullish but the ADX line per-se is at 17 and may be pointing towards a change in trend. MACD is still bullish but divergence has reduced a lot since last few days. RSI is bullish with the RSI at 57 and SMA (25) at 54.75. A crossover down will give a sell signal. TRIX still looks up and Slow Stochastic generates a sell signal.

As far as the options data is concerned the open interest remains leading at  4700 call so it will remain a major resistance for a crossover this month or till the options trend changes. Please find the open interest attached as a jpg file. With this also consider that the put call ratio is very near to 1 at 1.1 (up from 1.05 a day before) I still feel that the options will not play an important role in markets except defining the range as 4700 on the up side and 4300 on the bottom with minor support at 4500.

To summarise the Global cues are negative and weak. It is likely that Europe will get slaughtered for standing against the trend yesterday. Candles have Harami confirmed as bearish. ADX weak but bullish so far, Slow Stochastic bearish and rest all bullish. Options are not likely to play a major part except providing support at 4300 and 4500 levels and major resistance at 4700 level. For the day – sell below 4636 and buy if the markets go above this level. Ideal strategy is to go short with a stoploss of 4722 and those holding long should not keep it if closing likely to be below 4611.

Indicator	Bullish/Bearish	Sell/Buy Signal	Nifty level at signal	Points gained/lost since (4585)	Remarks
Harami	Bearish	sell / 04 Aug	4681	+ 95	Not waited for confirmation
ADX	Bullish (weak)	buy / 14 Jul	4111	+ 474
MACD	Bullish (becoming weak)	buy / 16 Jul	4231	+ 354
RSI	Bullish	buy / 16 jul	4231	+ 354
Slow Stochastic	Bearish	Sell / 05 Aug	4694	+ 109

Seeing the above table either I will sit on sidelines or go short as majority is turning the tables for the bulls. Cheers to the Bears.

Update for 05 Aug 09…

Every problem is being brushed aside under the carpet – the bulls seems to be in love with themselves and the bears are too weak to strike. Like I said in an update a few days back – whenever there is a run up we do not know whether the bulls are taking a breather or the bears are polishing their nails for a strike. Yesterday – can be anything – any of the above two choices. The analysts in US and Europe are shouting on top of their voice that the US and European markets are cheaper than the emerging markets – do not disregard it if this idea catches on.

As far as the global cues are concerned they are cautiously mixed. In Asia nikkei was up 0.22%, Hang Seng down 0.05% and Strait Times down 1.23%. Europe was down near the flat line. FTSE was down – 0.24%, DAX down 0.18% and CAC down 0.04%. US started red but after ups and downs ended green. Dow was up 0.36%, Nasdaq up 0.13% and S&P up 0.30%. US is out surprising everyone with a steady recovery in one sector after another – maybe we will not call it recovery but will say that the worse may seem to be over. Asia too is not doing too well today – Nikkei down just 0.08%, Hang Seng up 0.41% and Strait Times up 0.38%.

On the charts we have had a ‘Bearish Harami’ I think for all whose who do not know about it an explanation is necessary. It is a small black candle that is engulfed in a long white candle the previous day. Harami in Japanese is akin to pregnant or so I gather. Please do note that this is a good reversal signal provided the next day ends below the black candle of yesterday. Ideally it should lead to this second black candle today.

Psychology...
A long 1st day with high volume in the existing uptrend brings complacency to the bulls. The next day trades in a small range within the previous day's real body. Light volume on the 2nd day should give rise to concern by the bulls of an impending change of trend. Look for lower prices over the coming days, especially if the next day provides confirmation of a trend change by closing lower.

Beyond that as expected the markets are not really going on to trail the upper Bollinger Band so the middle of the bands should ba the next target. As afar as the EMAs are concerned they still remain bullish and I would have loved to see 4634 broken for a bearish indication. Anyway there is always today for it to happen. The volumes were 94% of last 50 day average. The ADX on iCharts is about to substantiate and give strength to the bulls but on my software the value is 18 so I will stick to this as a weak trend. MACD is bullish and the Divergence was good. RSI is bullish and at 64 – cannot really classify it as overbought. Slow Stochastic is still bullish but overbought and this is almost 14th day it has been overbought. I think if we are not in a classical bull run then we should correct now. TRIX still looks up.

On options data there is no change of significance really. So to summarise. Global cues mixed to mildly bullish. Candle bearish if supported with a black candle today. ADX shows caution for this uptrend and Slow Stochastic overbought. Rest all bullish. Options will give mild resistance for the markets to fall. For past I have been experimenting with how to put across a summary and yesterday I made one table and put it up – today I am trying to put across another table. If you care do let me know which one is better so that we have a reference to the past. All are with reference with Nifty.

Indicator	Bullish/Bearish	Sell/Buy signal generated on	Nifty level at signal	Points gained/lost since (4681)	Remarks
Harami	Bearish	Sell / 04 Aug		--	Will review after seeing the candle today
ADX	Bullish (weak)	Buy / 14 Jul	4111	+ 570
MACD	Bullish	Buy / 16 Jul	4231	+ 450
RSI	Bullish	Buy / 16 Jul	4231	+ 450	crossover 50
MACD	Bullish	Buy / 17 Jul	4375	+ 306	(overbought now)

Sorry Guys just realised that making the above table takes hell lot of a time so might not be able to follow it everyday – all the same the suggestions are welcome. See the above and place the trust on technicals and not your heart. Discipline at the end will matter. Cheers

Update for 04 Aug 09…

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.

  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%.

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.

On 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	-

Update for 03 Aug 09…

Too fast too far may be a way to describe it but then we have had this too fast too too far up and too fast too down before also. The markets are harbinger of things to come and is is only that we do not see it that way. I am – or let my put it this way – was certain that this time the recession was here to stay for a lot longer than even the great depression. I may not have had too many reasons supporting it but that is the way I felt it. but over the last few months the markets are trying to project a different story all together. The markets are saying that we – at this rate may be out of the woods sooner than later. At the end of the day the markets might be right and I may be wrong, but I still have that thing nagging in the back of my mind – how. I still walk around and see that construction activities in most of the housing projects in half a dozen cities I have been is grinding down to a halt. Then I walk around and make a conscious effort to see the lights at night in the newly constructed apartments, I see 50% not occupied. I see aviation on their knees including my wife’s favourite – Vijay Mallya. Then I see reliance fresh locking out half the floor of the shop to reduce their rental burden. I see the shops in the best and biggest malls yet to be out on rent/lease and realise that the India story will be okay but as of now all is not as well as the markets are telling me. All the same as the markets may have discounted my observations already I may be wrong and they may be right. The markets are mockingly bullish to all ‘us’ Bears at the moment atleast.

The Global cues? let us see. The Asian markets ended the week on bullish note. Nikkei was up on Friday by 1.89%, Hang Seng up 1.68% and Strait Times up 0.87%. Europe had started the day fairly well but started fluctuating and then ended the day with red signs. FTSE was down 0.50%, Dax down 0.53% and CAC down 0.27%. The pulls and push in the US continued and they too had a highly volatile session with Down ending 0.19% green, Nasdaq down 0.29% and S&P up 0.07%. All in all – a consolidating move after a fair upswing. Today morning the Asia opened flat and trading mixed. Nikkei is up 0.01% and Strait Times down 0.65%.

The candle on the charts made a fair attempt to reach the upper edge of the Bollinger charts as I had suspected but for some reason was not able to reach there. All the same the Bollinger bands are expanding and 3EMA and 15 EMA lines continue looking up. The volumes were slightly lower on Nifty – 85% of 50 day average. The ADX is bullish with +DI remaining above –DI but the ADX per se does not give strength to this upswing remaining firmly at 17. Below 20 is markets are generally trendless and weak. The real trend to follow would be the one in vogue when ADX line crosses 20. MACD remains bullish with same divergence as day before on Thursday. RSI is rocking and bullish. Slow Stochastic are poised with %K and %D line literally overlapping at 75.4 and 75.25. The indicator is just below the overbought line – it can swing either way. The TRIX is looking up.

I would not use the options data because it has not built up to the level that it dictates the markets as of now - so I will summarise the likely hood today without it. The global cues have turned flat and should give some reason for the bears to cheer. They may try to hammer the bulls who have started basking in their own glory. The Technicals are bullish to say the least and that will give some support as we go down to lower levels. I see us moving to middle of Bollinger bands before going further up. The mid point is at 4339. If it for any reason breaks this level then the lower Bollinger band is at 3911. The support is trailing along at 4462. The markets on  Wednesday took support from this 15 EMA level before bouncing back with vigour.

• For those in positional trade It would be ideal to hold long with a stoploss of 4489.
• Those sticking with shorts should keep 4609 as stoploss.
• For day trading go long above 4583 on nifty and short below this level.

Best of luck to everyone and may the markets do what you want them to do.