Heads Operators win, Tails I loose… Update for 28 Aug 09…

I would like to first get up and salute the perfect manner in which the closing of the markets was planned out that we hit the nail on the head.  It is phenomenal to see the markets singing to the tune of whomsoever the operators are. The markets were supposed to be range bound – basically due to the open interest that was there at the levels of 4600 and 4700. You can see it from the option pain chart – the markets closed to the perfection. What happened today is not important – what will happen tomorrow is extremely important. The possibilities are of breaking the range upwards or downwards and remaining range bound does not seem to be an option as of now – all the same it will be the way the markets want. The opening may be dictated by the Global cues but thereafter we should get on with the business of ‘doing something’. The verdict is ofcourse divided as I have called out so many times before so it remains to be seen where we are off too.

Now as far as the global cues are concerned – heading south seems to be the natural place to be. Asia traded fairly negative with only Strait Times ending in green. Infact Strait Times too started in red but steadily recovered to close 0.53% in green. Nikkei ended 1.56% red, and Hang Seng ended 1.04% in red. Europe spent the entire day round the flat line as there was no trigger – either good or bad. As the US opened Europe saw red and closed down FTSE down 0.43%, Dax down 0.94% and CAC down 0.54%. US had economic data where in GDP declined by 1% (better than expected), consumer spending contracted by 1% against 1.2% and jobless claims were down by 10,000. All this news dropped the US indices – but later due to drop in US dollar – led to better energy performance and that led to recovery among US – Dow ened up 0.39%, Nasdaq up 0.16% and S&P up 0.28%. Mind you there is still no good news out of US – GDP is still contracting. Though the Nikkei has opened green – the Japan’s unemployment rate has hit record high this July and the prices fell at a record pace. So all may not be good.

As far as the charts are concerned – though it was manipulated perhaps – the fact is that the markets are not touching the upper Bollinger Band. As of now the markets seem to be topping out – but like I said earlier – today will be the day that will show the correct direction. 315 remains bullish and all the EMA lines are facing up. Volumes too have been shade better. The candle was very near to a Doji but not a classical one. Volumes were shade higher than average. ADX still is trailing at 14 and mind you I went through all the charts of Nifty stocks – except for some IT stocks – the ADX is below 20 – giving indication of non trending markets. MACD has a bullish indication and a negative (read bearish) divergence. RSI is the same – Bullish with negative divergence. Slow Stochastic are overbought and one can expect a correction of sorts soon. TRIX is looking up. We have hit a roof for the third time now – if we do not push our way through it then expect a substantial drop down.

Though it may be too early to play out the Options data – but all the same – I will give out nifty pain and open interest. I saw someone giving out PCR for all individual strike prices on to read the greed and fear at those levels but am not sure if it works well – I would request anyone who has worked on that system to educate me if possible. The Nifty Put call ratio is 1.5 as of now with major call build up at 4900 level and Put build up at 4500 levels.

To summarise the Global cues may not be good today. Most of the indicators are bullish be with negative undertones/divergences. I would be extremely cautious in this month as I believe historically this has not been a good month for markets. Options are frankly giving a wide room to the markets to manoeuvre as of now with call build up at 4900 level and put build up at 4500. But I will say again that it is too early to read the option data for market manoeuvres as of now. Ideal strategy still would be cautions long with stop loss of closing below 4629. For those who are carrying on with shorts do not hold shorts if the markets are likely to close above 4693. For the day be long above 4651 and short below it.

Best of luck to everyone for today.

Expiry! Update for 27 Aug 09…

So finally the month will end and this uncertainty will die with it – where do we go now? There are two equally convincing proposals that are being projected as what will be – for the next month. One say that the markets will breakout on the upside and go on to test atleast 4850 level at the very least and the second say that the markets will correct sharply and we will see levels much lower than we have imagined. As I see it the bullish version is the one that is buying more credibility with more and more people convinced that the markets are getting into the safe zone. How safe? – only time will tell. The factors favouring the upswing are – rising wedge, closing above the Psychological barrier of 4650, inverse head and shoulders, majority of the indicators that I follow. And that in favour of the bears are – no meaningful correction for a long time, China factor, ADX and Triple Swing(explanation is there on Jaggu’s Blog). Now you can have your pick.

The global cues are mixed to say the least – In Asia Nikkei closed 1.36%up, Hang Seng up 0.1% and Strait Times up 0.37%. Europe was not so lucky and it opened red – made a couple of sincere efforts to go green – failed and ended red.FTSE down 0.53%, Dax down 0.63% and CAC 0.33%. US started the session red but soon went green only to oscillate the entire time between green and red finally closing green – just above the flat line. Dow was up 0.04% up, Nasdaq up 0.01% and S&P up 0.01%.

  As far as the candles are concerned – I have an observation – firstly the candles are not trailing the upper edge as I had expected – the most plausible reason is the cal writers do not want the expiry above the 4700 levels. So like I said earlier – the move will happen starting tomorrow onwards. The 315 generated a buy three days back and that has been good so far.All lower EMAs are above the higher EMAs so bullish run continues. Volumes have picked up but that could be due to the rollovers/expiry. ADX is just in no mood to move a bit whatsoever – I have infact tapped my screen as to whether the ADX has not got struck there only – The reading is 14 so this upmove has less meaning to it and there is no trend in place. MACD is bullish. RSI is bullish and Slow Stochastic inspite of being in bullish mode – are overbought. TRIX has also started looking up.

As far as the options data is concerned the 4700 call for this month has the maximum open interest. What should be important to us now is the Sep open interest – but I should tell to that to read the data – of next month is not all that beneficial so early in the next expiry. All the same the build up of open interest for next month is (from high to low) Almost 25 lacs plus In 4500 Put> 4000 Put > 4300 Put. As far as the calls are concerned 21 lacs in 5000 call and 20.5 lakh in 4900 call. Put call ratio is terribly in favour of the bull with the ratio 1.48. So much negativity – I am bullish for the time being whatever be the outcome. Also see the option pain chart – we are ending the month at the point of minimum option pain.

Okay ideal strategy on all counts (baring ADX and overbought Stochastic) is bullish. If I read it correctly 4700 may be taken after expiry. So ideally you should have already been long with stoploss of close below 4593 and if still short for whatever reason keep stoploss of 4676 on closing basis. For the day safe to be long above 4627 and short below it. Just a word – Asia has opened weak…

Best of luck to everyone – have a ball making money today…

Hangman Candlestick! – so what?? Update for 26 Aug 09…

I personally feel that we are now bullish to the point of being stupid – but then what? The markets never listened to me. The day will come when retail will be caught up in a web of self induced enthusiasm – the enthusiasm that will blind them and they will then grope in the dark while the markets will play out something unexpected. All the same till the time the party is on – remain on a edge and play out. The candle stick made yesterday was a Hangman Candlestick. Basically it comes after a trend up and has a potential to change the trend. It is perhaps not correct to use this as we are not in a typical trend and upswing (or for that matter of downswing) is of 3 or 4 candles. But all the same it can signal a reversal.

The Global cues are mixed at the best with positive vibes and some caution. The Asia had closed in the red after making attempts to go green. Nikkei was 0.79% down, Hang Seng down 0.49% and Strait Times was up 0.25%. Europe took cues from Asia and opened in red then sensing good day in US closed in green – almost at the days highest. FTSE was up 0.42%, DAX up 0.68% and CAC up 0.78%. The US opened in green and then quickly went up almost a percent plus. Thereafter it dropped to close at the levels of opening – not really flat but somewhere there. Dow was up 0.32%, Nasdaq was up 0.31% and S&P up 0.24%.

As far as the candles are concerned – the markets are now pushing the bullish envelope. We are just a tick short of upper Bollinger band. On 315 we are comfortably on a – buy. But the markets have crisscrossed this lines four times earlier so a typical breakout has not happened. Like I said yesterday we can test the upper Bollinger band limit at 4747 and for the time being that should be it. The volumes increased somewhat with nifty logging average 50 day volumes. Ofcourse this is expiry week so activity increases as there are rollovers to consider, new positions to open or old ones to close. Absolutely surprisingly – ADX does not budge a bit – trailing at 14 (I hope my software is not struck) Weak – it shouts on top of its voice. Typical divergence with markets going to new highs without support of ADX. RSI is rocking and bullish at 58. Slow Stochastic is bullish  but with %k line in overbought territory. MACD has given its first bullish tick. I do have to agree that most of the indications are bullish.

The Broadband is not playing up so the options data is not loading. Pardon me for that so we go on without the options data. The global cues are still bullish and so are most of the indications on the candlesticks. Only words of caution in the winds are the candle itself – the Hangman and ADX that is not showing this upswing as a trend. The ideal strategy is to remain long with a stoploss of 4507 on closing and if short a strict stoploss of closing above 4623. For the day be long above 4591 and short below this.

Best of luck to everyone for the trades today.

Update for 25 Aug 09…

 So we have the same situation wherein the FIIs are having a ball of the time purchasing and the DIIs seem to have resigned to the idea that the upswing is here to stay and it is best to board the bus. The run up seems to be here to stay for the time being atleast. The entire world is getting convinced that the upswing is there to stay. Mind you that if we do test 4700 this time around then it would be the third time this level will be tested and if it breaks – which is likely – then the upper limit is way up.

Let me not waste any more time and start with the global cues. It should be left to no doubt that the global cues have had a big hand in propelling our markets ahead in a big way. The Asia today closed strong with Nikkei gaining 3.35%, Hang Seng closing 1.67% up and Strait Times up 2.65%. The Europe too opened strong – traded the day in a fairly narrow band (not unlike what is happening in our markets now a days) and closed fairly strong. FTSE was up 0.93%, DAX up 1.04% and CAC seemed to be closed – as there is no update on Yahoooooo. The US opened in green but around the flat line – went on to good highs but does not seem to be sustaining there – it is back to the flat line and if it does close red then it will be a red closing after going green after a long long time. As I write the blog the US is just past its mid session and Dow is down 0.02% in red, Nasdaq 0.25% in red and S&P down 0.13% in red. Mind you the markets touched the highest for the 2009 year before retracting.

As far as our charts are concerned the third with candle signifies thee soldiers and is generally a signal for a good time to come. The candles went past the middle of the Bollinger bands and may test the highs(upper band) at around 4736 – of course that is conditional to good global cues. otherwise we remain range bound. On 315 the 3EMA line is above the 15 EMA line so the trend is up as per that.20 and 15 EMA lines are also criss crossing each other and as of now the 13 EMA has closed above the 20 EMA line supporting the present uptrend. The volumes were a shade better than what we have seen past few days. It was 82% of the past 50 day average. Gentlemen – here lies my concern – the ADX is still trailing at 14 – and this is the reason inspite of seeing this upswing and my desire to catch it before it runs up – I exercise restraint. There is no strength whatsoever in this upmove as per ADX and mind you there are people who may swear by ADX. The MACD is showing all the signs of a bullish crossover and by my experience now – the MACD does not do such frequent crossovers in trending markets so this may be another false move. The crossover did not happen and MACD is still bearish. Those who do swing trading in such tight times also – for them RSI is bullish. TRIX seems neutral and Slow Stochastic are bullish and not yet near the overbought territory so bulls can breath with ease as far as this is concerned.

As far as the options data is concerned – have a look at the put build up and the call disappearing in thin air. Though we can still not call it extreme – but this level of put build up can certainly resist the markets going down – at least in this expiry. The Open interest (high to low) is as follows for the nifty contracts. Put 4400>Put4300>call 4700>put 4500>put 4600>put 4200.

So to summarise – if the global cues remain what they are – then ideal strategy should be to remain long. The stoploss for the longs should be closing below 4444 and if someone is holding shorts then stoploss should be close above 4563. For intraday go long above 4545 and short below this level. Before I pen off for the night – some food for thought. The Baltic index can shed light as to what lies in store for us. It would be prudent that everyone reads the article by clicking the Index chart and get grip of what it means.

Update for 24 Aug 09…

You want me to place my bets in this upmove? See the FII/DII data – the purchasing by the FIIs does not at the moment show too much of enthusiasm. The markets are perhaps  being forced to be kept range bound – and that may remains so till the expiry. On Friday the markets moved up with a sudden drop in open interest in 4500 Calls. Now the range may be dictated by a different level in Nifty but all the same the range is likely to remain till such manipulations disappear. The second factor working in favour of the markets at the moment (negate the China factor) is the fact the globally there is a talk of being high and dry out of recession. The results coming out an the various forecasts may be pointing towards that. Finally all the world markets are waiting for me to become bullish – it is only then the bears will get a signal to strike. It will be when you me and the tom around the corner  is convinced that we are out of the woods and when we reach the other bank – we will stare with complete disbelief and the markets will fall. That they are not falling means that everyone is still not board the bull bus.

As far as the Global cues are concerned – Asia had ended down in red on Friday  inspite of an effort to recover from the lows of the day. Nikkei was down 1.4% down, Hang Seng down 0.64% and Strait Times down 0.58%. Ofcourse – Asia should open and try to recover some lost ground when it opens on Monday. Europe opened red and then steadily climbed to end at almost the highest – FTSE up 1.98%, DAX up 2.86% and CAC up 3.15%. The US too – after opening on a positive note went on to climb and end at almost the highest – Dow was up 1.67%, Nasdaq up 1.59% and S&P up 1.86%. As expected the Asia has opened with a bang – as I write Nikkei is up 3% and Strait Times up 1.44%.

As far as the charts are concerned – they display the typical confusion associated with range bound markets unable to breakout in any direction clearly. We have had two white candles and we have moved from the bottom of the fairly constricted Bollinger Band to the middle. Now either we come down – to once again test the bottom of the Bollinger band or move on to pierce the middle to go on to the upper edge. The 3 EMA line is just about 7 points below the 15 EMA line and if we have a good day then a buy signal may be generated today on 315. If we have a break up then those pacing their bets on inverted head and shoulders may be the ones cheering. Volumes are low – just 78% of the last 50 day average. Even in this upmove the ADX has not even budged an inch. RSI and Slow Stochastic have generated a buy signal and MACD is still in favour of the bears. TRIX is still looking down. So all in all you can take any stance but like bears earlier – I would be vary of the bulls too. (The ADX as shown in the iCharts is incorrect)

The Put call ratio has moved in favour of the puts. The highest Open interest in the order of high to low is 4300 Put, 4400 Put, 4600 Call, 4700 Call, 4500 Put and 4200 Put. If you observe carefully you will realise that 4500 Call has conveniently disappeared from the scene. So next level to watch out is 4600 and if we do go there then we should ideally have a Put build up at 4500 that would define the range of 4500 to 4600 till expiry.

So all in all to summarise – Global cues are rocking for bulls. Indicators on the charts started favouring bulls – Option data defined a new range – above the earlier range as the favoured range for expiry. So all in all we can test the upper Bollinger Bands. Best of luck to everyone for the today.

Update for 18 Aug 09…

We seem to have come made a violent attempt to make a breakout. This has been on the lower side that has been expected by me and my bear fraternity for a long time. So many reasons that the markets were just sweeping below the carpet – and well I think the time has come for the markets to see what the lower side of the life seems like. There has been a Chinese angle to  this meltdown and I think that this was about the time that it happened. In any case if this was to happen then either this or that would have been reason enough. No justifications either side. The markets opened gap down and then the sell off just gathered strength without a respite. Look at the FII data – like I had mentioned yesterday that the FIIs do not seem in any mood to buy into our markets any longer. Now there is another thing that we are perhaps are not considering – and that is that though the DIIs are merrily pumping in money at each level – where do they have their stop losses? (If any – I am certain that since they are playing with my and your money – the stop losses are far away) And that they will start selling at much lower levels. I pray for my mutual funds. For all those who think that the market has already dropped so much and would not like to jump on the shorts – then think again – the fall has just started and it is of global scale – if what I see purely on the charts alone then there is along way to go and that way is just pointing downwards. The markets should give a confirmation that he trend is down and down only. Okay – now I will try not to get carried away and come to the Brass tracks…

The Global cues are bearish and actually saying bearish without throwing a bucket of red paint on top of it would perhaps convey the situation a bit better. After burning every index and stock in Asia the fire went on to Europe with FTSE down 1.48%, Dax down 2.02% and CAC down 2.16%. US opened well in red and then traded in fairly narrow band to close at the lowest for the day. Dow was down 2%, Nasdaq down 2.75% and S&P down 2.43%. The Asia once again started the day in red but Nikkei is now green up 0.2% – the strait Times – now in early trades is just 0.16% down. The meltdown yesterday was supposedly due to profit taking in the wake of slower-than-expected economic growth in Japan. It has been described as one of the worst single day percentage loss in last six odd weeks.

Next I come to the Candle sticks. Frankly what I had expected yesterday was a piercing candle – that would go more than two third down the white candle we had on last Friday and that would ideally had been enough to signal a good reversal – but the markets just did not stop there and continued the journey till they took support at the 50 EMA. I have magnified and put the candles up for all to see. The candle had taken a support on 12 Aug and now 17 Aug. 3 EMA has definitely fallen below the 15 EMA and 15 EMA is just 14 points above the 20 EMA – actually poised for a fall below. Already the 315 has generated a sell – second time in last ten days. – now it has to be seen whether we bounce back vigoursly to show that we are range bound or continue down. The ADX gave a sell yesterday and today too the value is 14 – so it will only be in these coming few days that we will know whether this downtrend has enough strength to sustain. MACD remains bearish. RSI generated sell and TRIX is looking down. Slow Stochastic too has turned around but not really given a sell. All in all – majority are either generating sell or justifying a greater downfall of indexes.

As far as the option data is concerned the Put call ratio has reached 0.8866 and open interest is maximum in 4700 call and 4300 put. So on the down side the 4300 may be a difficult nut to crack. Besides this there is a build up in 4600 and 4500 call so upward journey may be as painful with 4700 being the absolute max. The option pain is minimum at 4500 – 4400 range at the moment. Inspite of reliance defying the general bearishness of the markets I was certain that it will never cross 2100 because of the highest call buildup there and now I am even more certain as basically there is only call buildup with very less put writing – so the downside in reliance may be expected more than the yesterday’s 94 Rs odd fall.

To summarise global cues remain to be bearish. On charts all seems favouring the bears though a small bounce cannot be ruled out due to the ferocity of the fall yesterday. The options are still not showing the extreme of sentiments but still favours the bears. Ideal strategy is to remain short – do not hold shorts if likely to close above 4604, If holding log best would be get off the bus at the best levels today – and do not hold longs in any case if closing below 4464. For intraday go short below 4486 and long above it.

Indicator	Bullish/Bearish	Sell/Buy Signal	Nifty at signal	Points gained/lost since (4387)	Remarks
315 Strategy	Bearish	Sell/17 Aug	4387	-
ADX	Bearish	Sell/17 Aug	4387	-
MACD	Bearish	Sell/06 Aug	4586	+ 199
RSI	Bearish	Sell/07 Aug	4387	-
Slow Stochastic	--	--	--	--	No signal
Options	Neutral / bearish	--	--	--