Nifty: Daily Price Analysis

[SwingKing]

Word on Markets

Nifty has come a long way in its current movement. As of now there seems to be nothing which suggests that this rally is going to end. In fact, the WRB I have highlighted on the chart are testimony to the fact the underlying Bullish pressure is pretty much intact. I have also marked a trend line on the chart to show the pace of movement. Usually when we see such an angle being formed, we must be prepared to witness some volatility. Volatility in this means, for the next few - many sessions markets are going to be extremely good for day trading. The bias will remain positive, but we will also see negative days more often. The main reason why will see this is because this is a market which has split open Bulls and Bears into two equal halves. On one side, trend followers are arguing that the markets will continue to rise and on the other hand, Bears will argue that markets are seasonally due for correction and are very rich on valuation. The end result could be lack of weekly trend in the market but significant amount of intraday trend going forward. Overall though the markets will continue to inch upwards. Momentum traders should be prepared to adjust their stop losses as and when volatility expands.

At the end of the day, use your own analysis and don't buy what is being reported in the media. They never got this upmove right and hence don't expect them to get any down move right either.

Tc

 

[SwingKing]

Nifty Price Analysis

The word of some serious corrections is again doing the rounds; especially by the coveted guests in some of the prominent channels. Not all are notorious and misleading, some of them are indeed stalwarts of the markets who have seen many cycles in the market and know the structure of the market well enough to draw attention towards what they are saying. Though their views and (our's) cannot be negated, we need to be as objective as the ticker requires us to be. In other words, we need to listen to what the screen is telling us.

There are many arguments about momentum slowing and divergences forming. But, as Haile Gebrselassie will tell you, in order to win a long marathon , one needs to slow down at intervals and needs to breathe slowly before the next acceleration is enforced. This is the essence of winning a Marathon. Similarly, Markets slowing down in momentum and forming divergences is actually a sign of Bullishness (on longer term) and Bearishness (on smaller term). The concerned Bearishness need not have to be larger in magnitude as it is engulfed by the longer term Bullishness.

The question that we need to answer is where do we feel the markets are heading? But even before this fundamental question can be answered, there is another basic question of a more technical character, which must be addressed andif not answeredat least contemplated. Where is the next underlying base for the market? There really are no generic, ready-made answers to this question, because base for me might be different for you and something completely different for someone else. Whatever your answer is, it is correct for you and not for anyone else to question. Markets tend to reverse at bases and hence we need to keep our 'feeling' out and need to focus on near term bases. An upper base that we have identified is currently at 6250-6300 and the lower base identified (highlighted in chart) is between 5800-6000. As far as we are above this base, things are merrier. This is not something I am telling you. This is something which is very evident on the price structure.

In my last post, I had mentioned that markets are going to be extremely good for intraday trading and I continue to hold that view even now. Last few sessions have been wonderful for day traders and this trend is likely to continue for sometime.

Tc

 

[SwingKing]

Word on the Markets

Q.E. 2

Quantitative Easing Part 2 seems more like a movie than a broad based measure taken by Government. I am sure, the Promoters of this move are prepared to give the Wachowski Brothers (Promoters of Matrix Trilogy) a run for their money. Look at how much coverage its getting. Nearly everyone seems to have an opinion on what is going to happen and everyone is literally spelling out next week as doom's day for the markets.

Anyway, the market structure is completely healthy and as of now there are absolutely no signs of any crack down coming in the markets. Look at the chart posted below. I have circled the October Months action. There are just 3 Bullish price days in the entire month and nearly 11 bearish days followed by 3-4 days of indecision. Despite of this negative price bias, we are literally at the same level as we were when October started. To me, this does not look like a market which is about to correct heavily. Balance of power still remains with the Bulls as they have taken just 3 session in the entire month to stamp their authority.

Going forward, we could well have consolidation which could take is around 300 points lower but that for me will be the limit of the down move. I expect November to be similar to October with prices moving below October lows and probably heading 3-5 % lower. In December, I expect the markets to bounce back from November lows and retest highs made in September and finally from December end to January 2011, I expect the markets to take out the September highs and move forward. This is just how I am visualizing the movement of the markets. In the end, my aim is always to move with the markets and I sincerely hope, you'll do the same. As traders we need to honor the market's opinion and should not expect otherwise.

Going forward, my views regarding Intraday trading remains the same as posted above. This market is going to be very good for day traders and it will remains so for at least a month or two.

Tc

 

[SwingKing]

Nifty Price Analysis 8th November 2010

The Current Price structure of the Nifty remains Bullish. At present there are three important zones within which price structure is confined. The one highlighted in Purple is the all time intra day high of the Nifty which would prove to be a stiff level for the index to cross. The ones highlighted in Red and Black are the two support zones where one highlights an important peak formed in December 2007 and the another one highlighted in black as the immediate level where the markets took support recently. Another aspect which represents the underlying Bullishness is the gap up opening (with increased volumes)which has happened on two instances (highlighted in Black arrows).

On the higher time frames, the Index continues to remain extremely positive but certainly appears to be over bought. Going forward, it would be healthy for the markets if it were to consolidate or even correct from these levels. Rise has almost been vertical and this is never a good sign for any entity. The immediate course of movement it seems will be on the upside towards the all time high. Once that level is breached, we will then have to measure the quantity and the quality of the rise to make a better assessment.

On the Macro Economic front, with the QE2 out of the picture, things remain a bit mixed. There was some pertinent weakness across the commodities markets, but given the news of QE2, things will have to be reviewed again. With the Fed's boosting the economy with Quantitative easing, another bout of liquidity inflow should be expected. Personally, I don't think QE2 is all so good for markets. In the short run, it could provide the desired boost, but in the long run it is posing some serious problems for RBI and our Economy.

Capital inflows are good for the country to the extent they help bridge the current account deficit (currently at 13.7 Bn Dollars), but in the long run, it leads to currency appreciation which impacts many sectors within the economy. In nominal terms, Rupee is still trading at 43.9, but in more realistic terms as denoted by Real Exchange effective Index (REER), Rupee has already crossed (Currently 124) the levels made in October 2007 (previously 115). India, unlike Brazil is not a country which imposes the Tobin tax (Tax on capital inflows) and hence RBI has to deal with this problem in different way. Rising inflation is also another problem which the RBI needs to address. RBI has categorically stated that it will not use currency appreciation as a toll against inflation and therefore this leaves the RBI with no other option than to intervene in the Forex market. However, even this option does not seem feasible. Intervening in the markets would mean that RBI would be buying Dollars. This would infuse liquidity into the system and hence will fuel inflation. The main agenda of RBI at present is to curb inflation and by intervening in the markets it would be acting against the desired objective.

What we can draw from this is that in the shorter run, liquidity driven rally might continue. Main inflation (food) in our country is a result of rising prices of pulses which has greater weight in the food inflation index. RBI at present would hope that with good rains and better transportation network, the supply of such food items meets the demand. Historically demand has never been met, but we are entering a cyclical phase where inflation does cool off a bit. At the most we can expect RBI to tighten interest rates further in wake of appreciation of currency and can expect RBI to step into control the volatility of Rupee. It seems unlikely at the moment of the RBI to intervene and determine the direction of the Rupee.

In conclusion, things remain good for the Economy, but the problem of "Pace" of Currency appreciation and Inflation needs to be addressed. Assuming that liquidity flows will not affect the Currencies and Commodities adversely is wrong. Hence, while we should trade in the direction of trend, we should also be aware of the stark realities.

Tc

 

[oilman5]

a great thread to read!!!!!!!!!
Regards