Premature Bulls - Keep an eye on these

I am seeing many eager premature bulls who are itching to go long right now. The following points are to be kept in mind before deciding to go long right now. If you have any more add them in this thread. If there is any dissenting opinion please say it also.

1. First and formost, crude has not shown any signs of cooling off.

2. Indian Government budget is slowly getting out of control. We have not yet seen huge budget deficit and trade deficit, current account deficit etc. right now. But days of seeing them are not far off.

3. FII are selling continuously. On the whole, FII have remained sellers during all these months.

4. Most importantly, keep an eye on Monsoon progress. So far, every one has ignored it. Monsoon has been a failure in major portions of South India this year so far. Though Monsoon season is not over yet, still the situation so far is not encouraging. Some may argue that we are moving away from agriculture and stock markets are not dependent on Monsoon, still keep in mind that lack of sufficient Monsoon rains can prolong the bear market or atleast put off the begining of new bull market.

5. I am reading reviews by some of the leading traders that US is yet to see the worse days. What is being projected as end of agony is only upto the Presidential elections. Full blown horror of their financial wreckage will be revealed only after November Presidential elections.

6. Interest rate in India is inching up. Though originally Government officials were talking about cooling of inflation rate by October November this year, last week they uncannily said that it will take at least one year before the inflation comes down to 6 to 7%. Inflation and higher interest rate are detrimental to bull market.

7. Industrial production is slowing down. Many midcap and small cap companies are finding it tough to raise funds for their proposed/ongoing expansion projects.

8. Last year, top line growth of many industries is mainly due to cost push factors rather than genuine demand factors. Now cost has increased, demand has slowed down and consequently margins have shrunk. We are yet to see first quarterly results for June 2008. Let us see how good it is.

Dear Prakashreddy garu,

Good post.You can add Political Uncertainty as another factor.

but these very bulls provide short term intermediate bottoms 2 the mkts..

The real threats are external

The biggest is the possibility of an Israel (alias USA) - Iran conflict pushing up crude to God-knows-where. (Iran will have to be attacked sometime in 2008 if its nuclear weapons plan is to be foiled; else it'll be too late) This is something that cannot be 'factored in' till it actually happens.

The other risk is the US financial mkt crisis. Even if 10% of the 10 trillion $ mortgage securities become junk it'll mean a hit that's twice the total outstanding debts of the US economy. This'll devastate the dollar.

Also, our mkts haven't yet reached the level of undervaluation that one'd expect at a bear mkt bottom.

So although i'm bullish on the Indian economy & mkt till 2020, i'm well aware of the short term risks as well.

Prakash Reddy garu,
Good Post sir, Welcome to traderji

Tapaswi.S

wow very good post keep it up sir