Sunday, September 28, 2008

Nifty Future Weekly Analysis Based on Weekly Chart

Nifty Future Weekly Chart 26 August 2008
Dear Friends,
Here I present my analysis of Nifty Futures based on Weekly Chart. However, As I said in my last posts, there is an atmosphere of indecision all throughout the world's capital markets caused by direct interference into economy by US and other govts. My view is charts incorporate traders' general psychology but incidents of such direct interference may result in charts not showing the actual picture.

Looking at the Weekly Chart of Nifty Future, last week was a big move down after previous week's volatile movement. I've drawn Fibonacci retracement levels for previous down move which shows Nifty Future did not manage to cross the 61.8% retracement signalling the down trend is intact. Another thing to note is last week was a hammer and the low of that hammer should act as support. The Main Downtrend Line is still holding and its resistance for the week starting tomorrow is at 4420. The Moving Average sequence is still bearish as 34 Period EMA is Below 55 Period EMA.

For short term the trend is still up, if we consider the up side move from 3800 to 4300, Fibonacci retracement of 61.8% comes near 4000 and Nifty future managed to close just above it.

For US Markets in general and S&P 500 in particular, I am too scared to post any chart or any view. When I see clear signs of govt keeping its hands off, then only shall I dare to put my analysis.

Once again I want to reassert my doubts regarding the irrational behaviour which markets may show thanks to the interference by govts. My advice is to preserve capital first. One silly action by govt can damage your capital to the point of no return.

Friday, September 26, 2008

Another Day in History

Yesterday, on Thursday the 25th Sept, 2008, yet another big event happened which will be remembered in history. America's big bank, WaMu (Washington Mutual Inc.), collapsed by the weight of its enormous bad debt. The news is here on yahoo. They say by far its the biggest bank to fail.

WaMu was founded in 1889. It was safe in first world war (WWI). It was not in trouble in The Great Depression. It stood in WWII. It was unaffected in 70s and 80s. BUT IT COLLAPSED IN 2008 ! Doesn't this speak of something very dangerous about US economy? Ok, so the govt there has "stronger reason" to interfere (I deliberately use word "interfere" and not "intervene"). Now those who were there to save innocent taxpayers and who kept their eyes closed all the time and who kept convincing "economy is alright" ARE "compelled" to take action. The situation is so dangerous that their action can be anything. They are planning to buy the wrongdoings by Wall Street firms with taxpayers' money and they may announce they are sitting on terminals to stop markets from falling. They have already banned short selling in almost a thousand shares and they may soon announce a ban on ANY kind of selling - even by the legitimate shareholders !

This is where stock markets become dangerous and virtually untradeable. Traders are worried about what new "rules" the govt can announce for this "free market". The natural dynamics of demand and supply are no more there and volumes of trades are drying up - meaning lack of liquidity resulting in wider spreads, increased volatility and sudden reversals.

In my last post, I doubted Buffet's intelligence. Read the following paragraph which is quoted from the news story:

"The seizure by the government means shareholders' equity in WaMu was wiped out. The deal leaves private equity investors including the firm TPG Capital, which gave WaMu a cash infusion totaling $7 billion this spring, on the sidelines empty handed."

TPG Capital would have thought they made a killing when they "infused" $7 billion in WaMu. Now they must be weeping for their "intelligent decision". Buffet is too intelligent to be wrong. I hope so. But I also heard a story about Newton, the great scientist, who is said to have created two holes, one big and one small, on the cage for his two cats, one bigger and and one smaller. I don't know whether this is true or false but even if its true, does not mean Newton was not intelligent. May be after some time people talk about Buffet's story in a similar way.

Friends, I still maintain that the markets are not tradeable as long as the blatant manipulations are there. However, as my friend Jules of Jules in Jumbles fame said, intraday one can trade, but my addition to that is trade if you have good reflexes and tight stop loss.

Wednesday, September 24, 2008

Manipulated Markets Are Dangerous

Dear Friends,
I believe in Technical Analysis and its my firm opinion that a trader, at least short term trader has to follow technicals. As you know, I have not posted any new analysis since the "Weekly Analysis" on Sunday. There are two reasons for that:
  1. I am feeling very undecided. After what happened last week one can safely assume that markets are being manipulated. The Men In Power are doing strange things and have resorted to DIRECT intervention in financial markets. Its not that they had not been doing it earlier, they were, but the intensity of their efforts and the desperation has made it crystal clear that they will interfere and brazenly manipulate markets in the coming days. Today they are banning short selling, what happens if tomorrow THEY announce they will sit on terminals and buy like retailers !!! And remember, they don't NEED money, they have their printing presses running in the basement. Recently they were busy "stabilizing" naturally falling dollars and their "efforts" have now turned towards financials.
  2. The second reason is, as I concluded in my Weekly Analysis, there was a doji on S&P 500 Future with a long shadow and tail. The indecision in traders' minds was clear. So even technicals are saying its not a time to trade. In fact traders are scared to take positions as they don't know what to trust and what not.
News today is Warren Buffet is doing what nobody today would have dared to do (except the ones with printing press). Buffet is buying 5% stake in Goldman Sachs! I think what buffet is doing proves two thing for sure -

  1. The law of gravity - "what goes up, comes down". Buffet had been going up and went too far away, he had to fall and this is what he has decided to be the cause.
  2. Scientists say our brain cells degenerate and deteriorate with age and aging buffet might be showing those signs.
Whatever be the reason and whatever be the outcome, I was a fan of buffet and I will remain that way. No fun intended.

Friends, Technical Analysis is a measure of psychology of traders who participate in FREE MARKETS. A chart reflects what mass psychology is about and what are the implications of that. But, when markets are brazenly and blatantly manipulated, the charts may not produce the same results. This is why I am sitting quiet, scared to trade.

I apologize to all those who may have felt bad reading this post and I accept from the core of my heart that "they" are powerful and I am nothing. "They" may soon become almighty.

- The Undecided Trader

Sunday, September 21, 2008

Weekly Analysis of S&P500 and Nifty Futures

Nifty and S&P 500 both had a big swing this week with most of the drama on last two days of the week, courtesy US govt. Here I present my weekly analysis of S&P 500 Future and Nifty Future based on Weekly Charts.

S&P 500 Future Weekly Analysis
SnP 500 Weekly Chart 19th Sept
There was a lot of action in not only US but entire global markets the roots of which originating from US and the mishandling by the US govt. The S&P 500 Future had a 140 points swing and most of that in last two days.

Looking at the Weekly Chart of S&P 500 Future, last week ended up as what Japanese call a doji, which means indecision by traders. The thing to note here is the body of this doji (the horizontal bar) is right near the double bottom of Jan and March joining line (see pink straight line) which is a resistance now. In my last week's analysis I mentioned this to be important and this week again the price is there - near 1250. The conclusion: indecision by traders.

Nifty Future Weekly Analysis
Nifty Future Weekly Chart 19th Sept
NSE Nifty of India danced matching steps with global markets, to the tunes of music created by Bush & Co., US. Looking at the Weekly Chart of Nifty Future, this week proved to be yet another hammer. What happened was the low of last important hammer - the mid July one, was almost tested and bears could not break that. The two lows of that week's hammer and this week's hammer become very important now. The Main Downtrend Line is still intact and its resistance is near 4450 now. Next resistance comes at 34 Period EMA which is near 4680. Bulls will have upper hand only if they manage to get past these two resistance areas, the chances of which are not very good given the uncertainty in global markets.

Conclusion: I would better wait for a confirmed price action in coming week for a positional trade. However, there will be lot of short term opportunities available for traders in coming week.

Friday, September 19, 2008

Nifty Future Analysis on 19th Sept Hourly and Daily Charts

NSE Nifty Future opened gap-up today in accordance with global markets and we witnessed one more fierce rally (considering last two days). Here I present my views based on Hourly and Daily charts.

Hourly Chart of Nifty Future

Looking at the hourly chart, we see Nifty Future rushing above 55 Period EMA and remaining above that. The trend according to Moving Average sequence is still bearish on hourly chart as 34 EMA is below 55 EMA, however, the price is above these. The past two days of drama in global markets haven't still managed to turn the tide. In my view, Nifty Future is still below a major resistance on hourly chart - the 200 Period SMA about at 4350.

Daily Chart of Nifty Future

Looking at the daily chart, Nifty Future today closed just below 34 EMA which is below 55 EMA which means it is still in Down Trend. The interesting thing is 55 EMA on Daily is where 200 SMA on Hourly Chart is - 4350. For tomorrow if there is another upswing, 4350 is going to be crucial level. The trendline resistance is way above near 4450 which I don't think will be tested soon.

Looking at Fibonacci numbers, today's close is just at the 61.8% retracement of the down move from 8th Sept high to yesterday's low.

S&P 500 Future Today - Wall Street is Drunk Again !

Yesterday I told you before market opening the S&P 500 Futures being at resistance of 1180-90. That was a good opportunity to short as short term it was bearish and what a profit it'd have given ! it dipped to below 1140 !!! Then as usually happens in oversold markets - a fierce Bear Market Rally. In less than 24 hours we have seen more than 100 points move !!! But what happened has turned the short term down trend into short term up trend. The S&P 500 Future is well above 200 SMA on Hourly. However, the Medium and Long Term Trend are still down. Even the Moving Average sequence is still bearish. On the hourly chart, there is a symmetrical triangle formation, which usually is a continuation pattern but it can go in other direction too. My advice is keep a close eye on this triangle and see which side it breaks out to. The next resistance is at 1250 and then 1263 according to Daily Chart.

Well, coming to the mid-day rally in US, the ostensible reason is the govt declaring itself official matchmaker for troubled banks. When I read this news
I could not control my emotions and started laughing out loud. The govt "going to rectify the problem in economy by aiming at the heart of the problem" !!!!! Oh my GOD. Can you believe this? The govt "could" do something to address the problem by "aiming at the heart" !!! Then where were they for so long? This is a cruel joke. I tell you the fact - The govt can't do anything. There is NO WAY OUT. PERIOD. The solution that they are talking about is nothing more than the govt acting as "buyer of bad and troubled assets" - with the money they don't have, with the taxpayer being the ultimate sufferer. I am not an American, but if you are then you as a taxpayer are doomed. Read this from the same news link:

After the discussions Thursday night, Paulson said the goal was to come up with a "comprehensive approach that will require legislation" to deal with the bad debts, or illiquid assets, on bank's balance sheets. He did not provide any details, but the plan taking shape called for Congress to give the administration the power to buy distressed bank assets."

The other moronic way the govts found to stop the "crisis" in equity markets is they are banning short selling or restricting it. This will be the last nail on the coffin. They will destroy the liquidity whatever of it is left and dent the confidence of traders.

Dear friends, you must take example from Japan, which had similar crisis (housing and banking) in the start of 90's. Please Read my earlier post on this issue to know my views on the issue. What happened was the govt there refused to let the markets take their own course and intervened and tried to "save" the markets. What happened? even after 18 years of continuous "efforts" and interests rates nearing zero, THE JAPANESE SHARES ARE DOWN FROM THE TOP OF THE BUBBLE. Do you believe the US should follow the same path? Moreover, there is a difference and a significant one - US is NOT Japan. If US also goes for that prolonged period, then it will be all different. In Japan's case it was the US where money went when the interest rates were kept artificially low. Where will it go in case of US, which is the largest borrower itself and already under BIG debt?

Very troubled times ahead... Don't be a stocks investor. If you have money, invest in Gold.

Wednesday, September 17, 2008

S&P 500 Future Hourly Chart as on 18th Sept (Pre Market)

S&P 500 Future is moving all over over the place and today I'm presenting here Hourly Chart to tell my view about coming day. For last few days its a real thrilling roller coaster ride for traders and small understanding of technicals is proving to be effective, rather than going by complex methods which many use.

Looking at the Hourly Chart of S&P 500 Future, 1180 is where the 34 Period EMA (red curved line) is and its acting a good resistance. Also, look at the RSI - it is near 50. If it anyhow manages to get above it, then the next to look at is 55 Period EMA (blue curved line) near 1190.

In my last post I told that 1200 was a good support earlier and should act as big resistance in coming days. It broke that resistance for some small period of time and then again fell below it. I still maintain that there is going to be big resistance thereabout and at most I see around 1225 as that is 200 Period SMA on hourly chart.

Tuesday, September 16, 2008

The Global Equities Markets Trouble

As you are well aware of, there is a storm going through global financial markets and the US Markets have confirmed my fears of registering lower lows. The S&P 500 Future has plunged down below 1200 as I was expecting
and now it should be resistance equally strong as was the support.


Fundamentally, the way things are unfolding and the way US giants like Lehman are failing its more of a confirmation that the crisis is just entering into middle phase and not over as many morons had been predicting and the worse thing is the FED and US Govt are finding it difficult to handle. Make no mistake - the US economy is still so big (the decoupling theorists are another bunch of morons) that it will be hard to remain unaffected for any economy in the world. Hopefully the emerging economies like ours in India will manage to retain some growth but fundamentally we are nowhere near bottom. The worse times are still ahead.

I conclude this post with the repeat of my warning that a trader should not trade by looking at events and fundamentals and its best to stick to the charts.

Sunday, September 14, 2008

Weekly Analysis of Nifty and SnP 500 Futures

The NSE Nifty Future (see weekly chart) fell last week and the US index - S&P 500 Future went all over the place to finally close marginally up. Today I am presenting my views based on Weekly Charts of both these indexes.

Nifty Future Weekly:

Nifty Future Weekly Chart 12 Sept 2008
Last week I warned my readers about resistance in the 4500+ area and again on Wednesday, Sept 10, I warned there can be a fierce down move on Nifty Future and the last two days of the week showed just that. Looking at the Weekly Chart of Nifty Future I have following view:

1. Nifty Future is in confirmed downtrend that started in January this year. The Main Downtrend Line is holding firm and last week it acted as major resistance.

2. Nifty Future is well below the 61.8% retracement, about 4700, of the down move from May high to July low. For any trend reversal, it has to break this on upside.

3. The Moving Average sequence is still down as 34 Period EMA is below 55 Period EMA which is below 200 Period SMA. In my charts 34 EMA is always the red curved line and 55 EMA is blue curved line. Also, If you notice it, the 34 EMA in itself is a big resistance on Nifty Future Weekly Chart.

S&P 500 Future:
SnP 500 Future Weekly Chart 12 Sept 2008
As I told last week, there was an almost retouch of 1200, the July low on S&P 500 Future. Looking at the Weekly Chart of S&P 500 Future we can see last week there was a lot of movement in the price but the closing although up, was more a confirmation of primary bear trend. Based on the Weekly Chart, following are my views:

1. The weekly close (1254) is just around the double bottom lows of January and March this year, indicating a resistance point.

2. Moving Average Sequence is still bearish as 34 Period EMA is below 55 Period EMA which is well below 200 Period SMA.

3. S&P 500 Future failed to retrace back to Fibonacci 50% retracement of the down move from May high to July low.

Conclusion: Both Nifty Future and S&P 500 Future are in clear Bear Trend. There are fierce rallies at times but those are more entry points for fresh shorts than any trend reversing signals.

Wednesday, September 10, 2008

Nifty Future as on 10th September and Tumbling US Markets

Nifty Future is precariously placed as seen on Daily Chart as well as Hourly Chart. When I presented the weekly analysis, I warned there could be resistance near 4500 and for three days we see that happening. A prudent trader should look for important signals. Today I present both Daily and Hourly charts of Nifty Future as both make some interesting views.

Looking at the Daily Chart, we can see Nifty Future is struggling at the Main Downtrend Line and if we take into account the Current Support Line, my guess is there can be a fierce move either side. See the ADX and it is also signaling some big move in coming days. However, the chances of downside are more as the Moving Average sequence is down (34 Period EMA is below 55 Period EMA). In fact, if its a calm day tomorrow, there can be an opportunity to by straddles / strangles (if Implied Volatility comes to below 30).

Looking at the Hourly Chart, there looks like a Double Top formation. As of now, Nifty is just above the support line, but if fails and 4340 is breached, then it will be good signal for a retest of 4207 as it would be a breakout on downside of Double Top as well as breach of Fibonacci 61.8% retracement of latest up move.
However, if Nifty Future manage to cling on to the support line, then we can see some upside.

Speaking of US Markets, as I told in my last post, on Monday they gave a good opportunity to short. The S&P 500 is struggling near 1230 and threatening to retest/break July lows.

Monday, September 8, 2008

Weekly Analysis of US Markets

Last week there was big move in the US Markets, the S&P 500 swung about 86 points. There were rallies and then crashes and so many things happening - vindicating what Bush said some time back - wall street behaving like it is drunk.

The close of last week saw a recovery when the crash sent markets into short term oversold zone. Then, the US govt bailing out the mortgage twins news after the weekly close has made ripples throughout the world markets and poor (yes, poor) traders are celebrating like .... what they, actually, should have been lamenting. Well, that's the irony but I put it like this that there had to be some catalyst after the oversold Bear Market Rally which could give a new chance to short to prudent traders.

Looking at the weekly chart of S&P 500 Future, it has jumped overnight from 1242 to 1278 !!! (the latest green candle is of this week). However, speaking of last week, it almost tested July low and closed at about 1242.
Today, the futures have opened gap-up and if this euphoria continues, the next resistance comes at the 34 Period EMA and 200 Period SMA near 1330 (Please see carefully that there might be a negative crossover of these two moving averages). The 34 EMA is red curved line and 200 SMA is small purple curved line. However, I don't think S&P 500 can go to that level. In fact I am still bearish on this fierce rally - a typical Bear Market Rally. Also, the gap-up opening is currently being resisted by the 13 Period EMA (see the green curved line).

Some chartists can also interpret it as a formation of Double Bottom. If this is the case then as I said above, there can be a test of 200 SMA and 34 EMA.

The Dow Jones Industrial Average Index Futures chart (not shown) is also presenting identical formation.

Sunday, September 7, 2008

Weekly Analysis of Nifty Future

Last week was a week of perfect indecision - what the candlestick chart of Nifty Future suggests, a doji. Bulls tried their best and so did bears but no one had a decisive upper hand. The volume however remained average.

Looking at the Weekly Chart of Nifty Future, the Main Downtrend Line since Jan this year is still holding and acting as resistance. One more thing to note down is Nifty Future is unable to get past 34 Period EMA on weekly chart and if we take into account the May month high and July month low, the 61.8% retracement (a very important Fibonacci number) around 4680 level is also near this 34 EMA and very close to the Main Downtrend Line.

The short term trend is up if we take the July low and August high as Nifty Future bounced from the 50% retracement level of this up move.

My view is that for the coming week there can be an upside which may find resistance at around 4500 level. If it comes then the next level to watch out for would be 4680. Considering the main trend as down, I think the chances of that are low but if it eventually comes and weekly closing is above it, then the Bear Market would be in danger. For support 4320 is going to be first crucial level for next week, breaching it, the next support would be again at 4207.

Friday, September 5, 2008

S&P 500 Futures As on 5th September

In my last post an its previous post I told in clear terms that the rally that was there in US Markets was none other than a suckers' rally. Yesterday you saw what happened. Actually the rising channel/wedge that was there on S&P 500 Futures from mid july was decisively broken on 18th August and then confirmation was on 25th August. This breakdown has implications of S&P 500 at least testing the mid-july low at 1200 if not breaking it to see new lows.

Even going by Fibonacci numbers, the recent uptrend was unable to get past the 50 % retracement level of May high to July low. Yesterday an important thing happened - the recent uptrend (from mid-july to 11th August) has failed to retain the very important 61.8% retracement which was at 1242.

So, My conclusion is we should better prepare to see newer lows than to be optimistic.

Tuesday, September 2, 2008

Nifty Future on a Resistance

Nifty rallied today almost 4% and a lost confidence of bulls was somewhat back. In my last post about Nifty Future I told how important was the 4207 support and now you can see why. Today's move has turned short term indicators bullish but again the rally looks more like a Bear Market Rally - Fast and Furious. Looking at the Daily Chart of Nifty Future it looks like Nifty Future was in a hurry to get past above an important resistance and failed.

Let me tell about the chart first - there are two trend lines - Line 1 is the Main Downtrend Line which is in my view an important line to consider. Line 2 is the Previous Important Support Line which was holding nicely till June and once breached then has been acting as big resistance, the interesting thing is this line is above Line 1 now. Following is my view based on the chart:
1. Today's high of Nifty Future touched Line 1 and closed just below that.
2. Nifty Future is still well below Line 2.
3. It was a vertical rally and looks unsustainable.
4. The Volume is good suggesting renewed interest in buying.
5. FIIs and DIIs both are net buyers today, in fact FIIs buying figure is quite impressive - more than Rs. 1100 Cr.

Looking at Fibonacci numbers, today's close is at 50% retracement of down move from the high of 5th May and low of 16th July, the 61.8% level is at 4690, which is coincidentally close to Line 2 !!!

From the above points it is not clear whether the short term uptrend will sustain or not, however, the main trend is still down and I would not advise buying.

As I am typing this post the US Markets are rallying but my view remains still the same - its only a suckers' rally.

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