State of The Market

I love reading the daily Market analysis of Deepak Singh, a Market Analyst. The writting seem very rational. People interested may try this link :

Todays (28th April partial analysis is as below)

Bear Wall = 200 day Moving Average

There is a saying - "Bulls live above 200 day moving average whereas Bears live below 200 day moving average". It means above 200 day moving average, bulls buy the dips and defend support levels; whereas below 200 day moving averages - bears eat up the rally and defend resistance levels.

Nifty on Friday managed a breakout above 5070 and closed at 5111 just below 200 day moving average of 5150. Now, its decision time for market - Move up decisively OR Move down decisively OR Consolidate some more between 50 day moving average and 200 day moving average.

It is not the case with the Indian market alone. US indices are also just around key resistance levels example - 12800-13000 on Dow Jones; and 1400 on S&P 500. Both indices will have to break decisively above those levels, close and stay there for couple of days to give market participants a comfort that indeed - worst is over and may be a new bull run is about to emerge. Fundamentally such a scenario looks little remote, but that does not mean that breakout cannot happen.

I guess the description from Colin Twiggs sums up the current status very well -

The Dow retreated on Friday morning but rallied towards the close, ending near the day's high at 12900. Failure to react to bad news is a bullish sign — as is a short retracement at the resistance line (12800). Low volumes, however, indicate that the rally does not result from buying pressure, but rather from the absence of sellers — warning us to proceed with caution.

If you are bull, the following description from Maurice N. Walker will please you -

The bull market is not dead, nor is this a bear market. This bull market was only faking it's own death, perpetrating fraud against those who are short this market. Whom will ultimately pay the price for this deception.

As a market watcher, I am just confused as you may be. As a trader, it is much better to have an opportunistic mindset than either a bullish or bearish

Good One.... Especially the cartoon in the site... Thanks

Sats

Seems a nice find RK !!!! Thanks.

i am holding the share if ifci how long i hold to make it profit when it value reach rs 70 for per share

Why this post here and of all the persons from Prabhjeetrana!!!! Seems made some error while posting!!!

Thanks a lot rk sir... for sharing the website with good write ups!

Regards

thanks rkkarnani...it is a good link and deepak singh is doing faboulous job... If u know some other ppl also like him than plz let us know....

warm regards

chintan

Trading Notes MAY 05 2008


A rising tide lifts all boats, even the leakiest ones

Catch-up Game or Real Strength

As a Technical Analyst and a trader, I am trained to believe what I see on the screen. I have no business to ask - "Why prices have moved up?". I have to just accept the fact that prices have moved up and trade accordingly. There is no doubt that market is showing more strength than weakness and more and more sectors are now participating in the upmove. On Friday, even Autos joined the upmove bandwagon.

But is this a good news or bad news? The way different sectors are participating in the rally or falling off (like FMCG, Oil and Gas, Health Care) - it appears that the current upmove in Nifty is more of a catch-up game with Global markets, than real rally because of local factors. There is no clear leadership in the market except Technology sector. One week a particular sector looks good, and the very next week - it goes out of favour. It is this aspect of rally which a trader should be little careful about.

This can be shocking news that India from being one of the most sought after market last year has become a market which is just doing catch-up game with strong up moves in global markets. One of the reasons why this has happened - Once a technical momentum gets broken in a market, it is very difficult to build it again. And generally to rebuild momentum - you need a strong fundamental reason which market has failed to get so far. On top of that, worsening inflation situation coupled with confused policy making has made matters worse.

I am not trying to find a fault with current rally. There is a saying - the most bullish thing a market can do is to go up. But as a market observer, I thought it's important to get your attention to this fact - the market needs sustainable legs to rally and that's what is missing right now. The market desperately needs clear leadership - a leadership which is backed by both fundamental and technical reasons


Global markets - Strength continues

Global markets negotiated resistance levels very well last week, and closed comfortably above them on weekly basis. The data points have also been supportive be it economic data or be it Corporate results. Friday was no different. According to Labor Department, US economy lost just 20 000 jobs in April much lower than estimates. The figures reduced the fear about the health of US economy. The market rallied on the news but enthusiasm faded away on news of S&P ratings downgrade of Countrywide Financials debt to junk. The downgrade clearly came as a jolt to the "worst is over" belief. Technology stocks also lost little bit of momentum because of lower than expected results from Sun Microsystems.

More market analysts are now embracing the fact that Global markets may show more strength than weakness in coming days. This is what Colin Twigg said in his market analysis - "The Dow Industrial Average reversal to a primary up-trend has now been confirmed by the S&P 500. Expect a test of the 2007 highs at 14000. While the market is recovering, this is more a function of cheap money than a booming economy — the old maxim still applies: Don't fight the Fed. Milder than expected employment losses may hint at a soft landing, but the housing market collapse and resultant credit squeeze are likely to plague the economy for some time. Banking, housing and other cyclical sectors should be treated with caution"

Today most of the Asian markets are up strongly on strength in commodities. A measure of six metals traded on the London Metal Exchange, including copper and nickel, gained 2 percent, with copper jumping 2.3 percent. Markets in Japan, South Korea and Thailand are closed for holidays


Technical Factors - Nifty - Next Target is 5368

Nifty is slowly and steadily inching up, though it lacks momentum. Friday's action cannot be called very bullish considering market closed below its opening price. On a closing basis, the Nifty moved up 62.3 points or 1.21% to close at 5 228.20. But Nifty closed 36.8 points down as compared to the opening quote for the day. Nifty May 2008 futures closed at 5253, at a premium of 24.80 points as compared to spot closing of 5228.2.

Though on weekly basis, Nifty did very well. It closed above key moving averages. The probability now points to more strength than weakness in coming days and weeks. Technically, the next probable target is 5368. This is the same level at which Nifty formed double top last time. The level of 5368-5400 is also 50% retracement of the complete fall from Jan 09 highs to March 18 lows.

The likely trading band in near term is 4950 and 5370.

Levels to watch out are -

Resistance 2 : 5368
Resistance 1 : 5300
Support 1 : 5150-5160
Support 2 : 5080



Market Observations

FIIs net bought stocks of worth Rs. 658 crores on Friday whereas DIIs net sold stocks of worth Rs. 18 crores, as per provisional figures. (Cash market figure)

The Futures & options (F&O) turnover on NSE was 36 304 crores - up 6% over previous day trading volume.

"Sell in May and Go Away" - Will this phrase be applicable this year? The strength in Global markets suggests otherwise.

The most important information available in a market is how it's acting right here, right now. A lot can happen in 12 months, so rather than make predictions about long term, it's best to take each day as it comes.

On a weekly basis, Nifty was up 2.27% last week.

The Sensex broke out of its trend channel, indicating the down-trend has weakened. Expect a short retracement to confirm the new support level at 16500, followed by a test of primary resistance at 19000...Colin Twiggs

The biggest problem in charting is wishful thinking. Traders often convince themselves that a pattern is bullish or bearish depending on whether they want to buy or to sell

Inflation is showing no signs of cooling off. On Friday, Government reported 7.57% WPI based inflation for week ended April 19 2008.

Market reaction can be sometimes very puzzling. On Friday, Government reported highest inflation reading since Nov 2004; and yet the best three performing sectors of the day were all rate sensitive - Banks, Autos and Real Estate.

The sell off in Metals applied brakes to the index. Sterlite Industries and Hindalco saw a sharp sell off on Friday on above average volumes.

Indian Market View - Sideways to Up

My Portfolio - ITC; and UTV Software.

Sectoral Chart clearly tells us that money is no more chasing defensive themes like FMCG and Healthcare which was the case a month back.

One sector where fundamentals and technicals both look great = Technology and especially mid-cap names.

Most of the auto stocks be it Maruti, M&M or Ashok Leyland - made good moves on Friday.

Mahindra and Mahindra faces strong resistance at 200 day moving average of 720. It needs to be seen whether stock clears this level this week or not. There are reports that company will sell a 3.68 per cent stake to a unit of the Goldman Sachs Group to expand its automobile and tractor business. It would be interesting to see market reaction.

Trading mantra - Patience is the key skill when it comes to trading.

Arvind Mills - Technically, Arvind Mills has gained lot of strength in last one month. It seems stock is consolidating sideways before next move. The stock presents great opportunity to accumulate with 70 as a medium term target.

One stock that has not participated in the last one month rally - Balaji Telefilms. There has been no recovery in Balaji Telefilms since April 01. The stock has delivered negative returns of 7%. Is IPL the reason?

Jai Corp - the stock made a strong upmove on Friday on trading volumes = 3.3x of 10 day moving average volume. It is a stock on which momentum crowd should keep an eye on.

Instead of watching TV to shape your trading decisions, use the price. Price is the purest form of information that the markets give…..Michael W Covel

Despite commodity sell off, Brazil did well last week. The reason - Brazil was raised to investment grade by Standard & Poor's. There is no doubt that Brazil has taken leadership status as far as emerging markets are concerned.

As an investor, you don't need to predict the economic cycle (or even pay much attention to it). Instead, you should focus on evaluating individual businesses if you pick your own stocks -- or, simply buy the entire market in the form of an index fund…Warren Buffet

Longer-term trends still appear Bearish for the dollar and Bullish for commodities….Robert Colby

Trading is a fuzzy process and I mean fuzzy in the best sense of the word. That is, as in fuzzy logic, as in the willingness to accept the idea that things aren't exactly quantifiable and to forge ahead anyway....
John Bollinger
(creator of the Bollinger bands)

DOW HOVERING JUST BELOW THE 200 DMA.......

Trading Notes June 13 2008

In volatile markets, investors are often hit with conflicting messages from the gloom-and-doom crowd who says "the end is near", and the buy-and-hold crowd who counsels "this, too, shall pass".......Gary D. Halbert

Are Bears underestimating Bulls?


One should never underestimate the opposition. I guess bears must have learnt this lesson by now.

To be honest with you, I was surprised at yesterday's market behaviour - but not frustrated and confused. One of the lessons I have learnt in the market - Get excited when market surprises you because that is the time when market rewards you the most (Yes, I made some money on long side of Nifty). One should never crib on market surprises. Remember, we are not in market to prove something....we are in market to learn something and profit from it. As long as we have that perspective, market will always be fun and rewarding; and not stressful.

How would you read yesterday's market -

Nifty ended the day with marginal gain of 16 points OR

Nifty made a spectacular rally of 140 points from lows of 4400.

I guess you will get different answer depending on whom you ask. The fact of the matter is - We are in sideways volatile market. In such market environment, traders need to be extremely agile to keep up with rapid changes in market.

What I understand? - When a market refuses to fall on bad news - it is a very bullish sign. Does that mean one should start aggressively buying? I don't know. FII figures are outright depressing. But what puzzles me is that market is able to absorb this kind of selling without much discomfort. Technically, we are now in Neutral Zone. As long as market remains between 4400 and 4725 - the market may exhibit volatile sideways trading action. But as we spend more and more days above 4400, the stability and comfort in market can return in big way. This kind of trading action can also make market more resilient to surprises and shocks on the way.

I am not writing off bears also as long as we are in volatile sideways market. Remember, Market does the most obvious things in the least obvious way. You never know. The time is to stay flexible.

Technical Factors - Nifty
Yesterday, as expected, bad Global cues and repo rate hike meant a strong gap down opening. Nifty opened weak below 4400 and then traded sideways between 4400 and 4440. And around noon time, just when it appeared that Nifty might breakdown - it did the reverse and made a strong upmove above 4440 all the way to next resistance level of 4540. Though, in last few minutes, Nifty cooled down and there was aggressive shorting in Nifty (profit booking by intra-day longs) which widened the discount. On a closing basis, Nifty ended the day with + 15.75 points or 0.35% to close at 4539.35. Nifty June 2008 futures closed at 4500.55, at a discount of 38.8 points as compared to spot closing.

Where do we go from here? Market is now in neutral zone. It means bears have lost the battle but it does not mean that bulls have won the battle. In last three days of trading, Nifty has traded in a band of 4400 and 4540. To give some hope to bulls, Nifty needs to breakout of this band, and sustain there. A move above 4540 can take Nifty to 4620; and breakout above 4620 can propel Nifty to 4725.

Levels to watch out are -

Resistance 2 4620
Resistance 1 4540

Support 1 4440
Support 2 4370-4390

This is from a Newsletter from Deepak Singh