Neither a bull – nor a bear… Update for 17 Aug 09…

… sometimes I seem more like an a**. Well then I suppose that this is the way of the markets. If the 80% will not loose then the 20% will not make a killing and the markets will not be exciting for people like me to sit and stare. Are markets bullish? are they bearish?… A lifetime goes by learning the answers and the markets change with a flick of a switch. But then this is what I suppose the markets are supposed to do in the first place – fox us. In any case if it continues this way – so will I !!. The markets are really caught up in a range and the breakout will ideally give a good opportunity to make money. Now the next question is when will this breakout take place and what direction it will be. Afterall if we do not have these answers in our hand then we will loose out big time. It may be a good idea to sit on sidelines – but then tell me – what man with the right amount of Adrenaline pumped up in his veins will sit ideally on the side lines? Not me – though my heart does skip a beat every now and then. If however the trend is caught right then it is a big achievement. So we need to first break up the question in two parts and then try to see how we can answer both the parts. Also what ever knowledge of technicals I have I will throw them into a box and see the historical data to pick up signals as to when and which side will we have a breakout.

The best indicator as I see it – that indicates the range and when we will get out of the range is ADX. (I am talking about only the indicators I follow – and if there is some other then telling me would be great.) ADX ideally – if it under 20 then it is signalling no trend either side. The Upswing lost its momentum of the upswing on 5 Jun 09 and then around 7 Jul 09 it got caught in a trap of no particular trend. Historically the ADX has not been keeping below 20 for too long periods of time – so one can expect a trend moving in a definite direction soon. The lowest was seen in the recent times on 11 Sep 08 at 10. We are presently at 14 and to take directional call now is not the right thing to do. There is no trend – there is just bullish and bearish pulls and pressures and that is all. It is because of this reason really that it is extremely difficult to take a directional call on the market right now. Now something I have not researched my self but ripped off the other blogs. – there is a Head and Shoulders (inverse) that is made and a breakout above 4700 with volumes will carry it higher. Others say that it is a bull trap in making with attempts of the movers and shakers to get retail on the train before pushing it in deep sea. You can pick up any line and tow it and chances are that you have 50% chance to win the prize being right. But also consider the H1N1 and the monsoons. These are two things that cannot be wished away. You can click both the maps to get an idea and sense as to where are we headed too. In any case if we go upwards then this was negativity was compensated for and if we don’t then it justifies the downtrend. Two more information pieces that one can consider… the valuations now as compared to the forward projections of 2010 are stretched and FIIs do not seem to be in too much of a rush to put in money in India. Well the last point can be contested and I would welcome it.

Coming to the global cues – the day of upswing has died down fairly fast. Asia was still reeling from the upswing so closed green – Nikkei up 0.76%, Hang Seng up 0.15% and Strait Times up 0.66%. China has had a bad sell of sessions previously and it is just a matter of time we catch up. Europe was flat to green for most of the session but ended definitely red. FTSE was down 0.87%, Dax down 1.7% and CAC down 0.83%. Of course it was US that had dragged the Europe down and US by itself ended – DOW down 0.82%, Nasdaq down 1.19% and S&P down 0.85% down.

As far as the Charts are concerned – there was a black candle. that could not pierce the white candle. Previously – many a sell off have started after a this black candle coming after a tall white candle. The 3 EMA is comfortably above the 15EMA line and we are in the middle of the constricted Bollinger bands. The bands will expand with a break out now. Volumes are again low. I have already discussed ADX in detail and it remains to be Bullish but trendless.(I repeat that the ADX data as represented in the chart pasted is incorrect.) The value of ADX is 14. MACD remains to be bearish. RSI is bullish but looks down. Slow Stochastic is Bullish. TRIX is looking down. So all in all you can see the amount of confusion that the signals are generating. One can safely wait on the sidelines for the indicators to be in consonance with each other.

The way the Put call ratio is swinging above and below one – it seems that it is in the best interests of the operators to keep the markets range bound between 4700 and 4500/4300. A break beyond these levels will only make a trend and that would be interesting. All the same I would like to add that 4700 on the upside may turn out to be a tough nut to crack by the bulls.

So to summarise the Global cues are once again bearish. Technicals are mixed at the best and options data too show call and put writing changing every day – either we remain range bound till there is a definite thrust in one of the direction. The best strategy would be to sit on the sidelines. However if you are upto it then for longs keep stoploss 4459 and for shorts keep a stoploss of 4569. For day trading – buy above 4551 and sell below this level. Best of luck to everyone. May you all make money.

Update...

Sorry I will not be able to update today due to my schedule...

Update for 13 Aug 09…

Hey guys am I missing something or there is some error in the FII and DII data? It has been ripped out from directly from the NSE site so I presume that the data presented is correct and the FIIs continue to be net sellers. Did it mean that after the FIIs had done with their selling the DIIs threw in whatever they could to save the markets from the massacre? I really do not have answers for this and neither did I find any solutions. In any case it has been my experience that not all share their experience or let us say knowledge – may be they are more busy making money. 

The global cues are against the markets at the moment – let us start from one side. Asia was what we saw and reacted to – it was the colour of blood. Nikkei down 1.42%, Hang Seng Down 3.03% and Strait Times down 1%. Europe took cues from that and opened flat and fell, soon the markets there however started to improve and continued to go higher finishing at the highest for the day. Of course the US trend laid the path for the upswing. The US too started flat but soon went on to touch new highs – now in md session trading flat at around their best levels. Dow as of now is 1.25% up, Nasdaq up 1.64% and S&P up 1.21%. I am enclosing the write up from the Yahoo finance that I find it important that you go through and know what is happening.

I quote…

Stocks jumped in light trading Wednesday as investors awaited the Federal Reserve's interest rate announcement. Major stock market indicators rose more than 1 percent, including the Dow Jones industrial average, which gained 120 points to reverse a sharp slide Tuesday.

For months, investors have been looking for evidence that the economy is strengthening and pulling out of recession. Traders pay particular attention to the Fed's assessments of the economy. The latest is due at 2:15 Eastern when the central bank concludes a two-day meeting on interest rates.

It is widely expected that the central bank will hold the federal funds rate near zero. What investors are uncertain about it how the Fed will size up the economy -- whether it sees further signs of strengthening that would justify the gains in stocks since the spring.About four stocks rose for every one that fell on the New York Stock Exchange, where volume came to 439.1 million shares, compared with 503.4 million shares traded Tuesday. Light volume price moves and could be overstating investors' enthusiasm ahead of the Fed decision.The market is bouncing back a day after posting its biggest loss in five weeks. The Dow slid 1 percent and the S&P 500 index lost 1.3 percent. (Source: Click Here)

Coming to my favourite – the technicals. The candle was a hammer and purely from the candles point of view it can signal a reversal – reversal from the present downtrend. But also importantly it the candle just shied a dot short of hitting 50 EMA running at 4342. The 3 EMA remains firmly below the 15 EMA and as of today also crashed below the 20 EMA standing on top of 25 EMA exactly at 4471. SO on that account the bears should not really loose their sleep. The volumes were still low. The ADX has improved by a point to be at 17 – but that too is weak still. MACD is still bearish and the divergence has increased – mind you. RSI is at 49.7 and today too I will disregard it as a bearish crossover. We will give it another day. TRIX is looking down and Slow Stochastic while still remaining in oversold territory has generated a buy signal. Very fairly and squarely we remain bearish as far as the technicals are concerned. What you also see in this chart on the left is the dots of the Parabolic SAR (10, 2 , 20). They too are red as of now.

The options data has no change so the Put call remains a shade below 1. So all in all the Global cues are likely to remain strong in view of the Fed meet outcome. The Hammer and Slow Stochastic can signal bullish run whereas ADX, MACD, TRIX continue to signal bearish undertones. Options are not likely to play a role except the 4700 being a strong reistance upwards.

Indicator	Bullish/Bearish	Sell/Buy Signal	Nifty Level at signal	Points gained / lost since (4457)	Remarks
Harami	-	-	-	-	Signal has played it part and buried
Hammer	Bullish (reversal)	-	-	-
315 Strategy	Bearish	Sell / 10 Aug	4437	(-) 20
ADX	Bearish	Sell / 07 Aug	4481	+ 24
MACD	Bearish	Sell / 10 Aug	4437	(-) 20
RSI	-	-	-	-	Disregarding – waiting for a clearer indication
Slow Stochastic	Bullish	Buy / 12 Aug	4457	0
Options	Neutral	-	-	-

So we might be reaching the stage where it might be wise to sit on sidelines especially if the market close in green. All the same the best strategy as of now would be to remain short. Do keep a stoploss for the shorts at 4516 on closing and if you are long then do not hold if the market closes below 4386. For the day – if market is above 4483 – go long and below it go short. Best of luck to everyone for tomorrow.

Explanation given by ID Stockstar for my first Paragraph on ‘Stockezy’ on 12 Aug:

Well cash selling many times used just as one way of doing cross arbitrage!

Like when nf shorted at 4700 level with call writing done and put buying done....also stock future shorting done.......so only thing that remains is using cash stocks to bring it down....so cash basket selling used to help make all 3 trades in profit. now question remains what happens to cash stocks......if they want to keep trend up they just buy more stock futures at bottom and reverse nf future and option positions.....and now how to take nifty uppppppp take it up with spot cash buying in nifty stocks and nifty future buying!

If u see all data in toto for last 10 days u can make out!

TO highlight more.....when nf was at 4700 for three days nf was rising with lower nf future volume and stock future short positions were added up and call writing was on.....more so in medium term nifty calls like sept and nf was waiting to dip yesterday nearly all positions started reversing hence thats reason for strong pullback today as they defend lower put writing very well in closing!

Hence now swing trade wise unless 4350 breaks in closing basis trend is up!

Update for 12 Aug 09…

I have searched high and low for the answers to the questions that have been hounding my mind seeing the markets today. They opened as per the expectations… so far so good – then went on to show strength – suddenly sold off with a bounce again. I wonder those sitting with tons of certificates in finance and economics are not the ones jittering like this. But then what the hell – it happens every second day. The moves were extremely sharp and am sure that only the fast fingers would have got anything worthwhile fishing in these waters. The FII data streaming in is not really bright from any angle except that they have not sold the whole lot like they did yesterday and day before. The DII seems to have become pretty active – the moot point will be to see how long FII withdraw and DII keep pumping in money. There is tons of money in our country that sits in the side lines. That is okay but historically a vast majority will never flow into the markets at any rate. Another angle is the money being sucked out due to the IPOs that have been open and are to come in the next few days.

As far as the global cues are concerned – they are not good at the moment – what can happen till morning is --- uhh !! not likely to become good – but then as I sleep the world turns around. Asia was good – we had Nikkei up 0.58%, Hang Seng up 0.69% and Strait Times – the one that was not trading yesterday make most use of the lost time and ended up 1.88%. I will not talk about our levels as shown close after adjustment were far away from where they were at the moment. – they were green nevertheless. Europe had opened green and perhaps that was the strength that was with us to remain green – all the same the Europe thereafter nosedived to close at the day worst levels. FTSE was down 1.08%, DAX down 2.44% and CAC down 1.38%. US has reached its mid session and no – it is nowhere good as of now. They are waiting for the beginning of two day feds meeting. As of now Dow is down 1.07%, Nasdaq down 1.38% and S&P down 1.36%.

As far as our technicals are concerned – there is no good news inspite of this bounce in green that we had. Let us see the details… 3 EMA first had crossed below the 15 EMA and now it is below the 20 EMA. So shorts rejoice. We are past the middle of the Bollinger Bands on the down side now – it remains to be seen when and how we hit the bottom of the lower Bollinger band. Bollinger bands are constricting and I – being the bear I am at the moment am not interested in at the moment. The volumes were low – 74% of the last 50 Day average. Do not look at the ADX in the chart – I have already written to iCharts that their values are incorrect and they have promised to rectify them – till then the ADX reading is 16 – weak trend. So I am really waiting for a value above 20 while the markets fall for it to be classified as a down trend as per this. All the same the sell signal remains. MACD is bearish. RSI is at 50.53 so I will disregard the bearish indication that it had generated yesterday. Slow Stochastic is bearish but oversold. Remember – if we are indeed in a downturn then it can remain oversold for pretty long – so keep aside the worry for some time. The TRIX – the leading indicator is looking down.

As far as the options data is concerned not too much of change – nor any out of the way build-up at any levels so the same holds true for today as yesterday. So I will summarise – the Global cues are likely to remain weak tomorrow. Technically markets are weak and likely to have a greater down side in the days to come. The ideal strategy is to go short or remain short who initiated them earlier. Stoploss for shorts is 4555 and absolute stoploss for longs (if anyone is holding) is 4421. For day trading be long above 4500 and short below it. The fireworks will start only below 4388 levels. And mind you there is a strong support there.

 

Indicator	Bullish/Bearish	Sell/Buy Signal	Nifty level at signal	Points gained/lost since 4471	Remarks.
Harami	Bearish	Sell / 04 Aug	4681	+210
315 Strategy	Bearish	Sell / 10 Aug	4437	- 34
ADX	Bearish	Sell / 07 Aug	4481	+ 10
MACD	Bearish	Sell / 10 Aug	4437	- 34
RSI	-	-	-	-	Disregarding – waiting for clearer indication.
Slow Stochastic	Bearish	Sell / 05 Aug	4694	+ 223
Options	Neutral	-	-	-

I would like to wish every one for tomorrow’s trades.

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…