Saturday, January 31, 2009

S&P 500 (US) Future and Nifty Future Analysis

Dear Friends,
Today I am posting my analysis of S&P 500 (US) Future and Nifty Future based on Daily and Hourly Charts.

S&P 500 Future Daily Chart

Looking at the daily chart of S&P 500 future following is my observation:

  • There is a clear and complete rising wedge which started in late November last year and completed (breakout downwards) in the first week of January this year. The implication of this breakout is that we can at least see the retest of November 2008 lows (if not break of that).
  • The trend is clear down as 13 (green curved line), 34 (red curved line) and 55 (blue curved line) EMAs are in downward sequence. The only thing that may be giving false hope to bulls is 200 SMA which is still near 1050.
Nifty Future Daily Chart

Looking at the daily chart of Nifty Future I arrived at the following conclusion:
  • Nifty Future is perfectly in tandem with what is S&P 500 Future. A rising wedge started from late October last year and completed in first week of January this year. What an amazing similarity! The implications of this pattern is a cool 1000 points down from near 2800! So my guess is if this pattern gives its target, we may very well see 1800 on Nifty future soon (intermediate term).
  • The moving average sequence is also clearly downward as 13 EMA is below 34 EMA which is below 55 EMA. Once again, like on S&P 500 Future chart, the 200 SMA is still far away which may give false hope to my bull friends in India.
Nifty Future for Short Term

For short term traders, I present my brief observation of Hourly Chart of Nifty Future:
  • There seems to be a Double Top forming (if it stops going up from here) which will complete only if Nifty Future breaks below 2760. But, before that we need to look at recent uptrend line support which is at about 2800.
  • The EMA sequence is positive for bulls as 13 EMA is above 34 EMA which is above 55 EMA. However, the 200 SMA on Hourly Chart is above these which means this upward bias can be weak. The EMAs are very near each other and a breakout on either side can be expected soon.

Sunday, January 18, 2009

Sunday Spare Thoughts

Hi Friends,

Today I got 30 minutes free from my busy schedule and felt obliged to post "at least something" here. Well, actually there are few things lingering in my conscience for quite some time. Today I feel I should share those things with my dear readers.

Scams, Scams and Negative Surprises!!!

In last few weeks we received few shocks emanating from Madoff in US to Satyam and Wipro in India. As Madoff was a person of repute in US (he was former head of NASDAQ ) similarly, both Wipro and Satyam were respected not only in India but throughout the globe. While Madoff and Satyam don't have any direct connection with each other I find a certain amount of similarity. The similarity is not in the "nature of scam" but it is in the "timing".

When economy is in steep downturn, the mistakes of recent past (read bull market madness in every asset class) reveal in the most undesired ways. Its no surprise that we are hearing one scam after the other and I doubt there could be many more in future if economic downturn continues. When everything is going up it was much easier to hide scams but in times like we have today its not easy to hide them for long.

Wipro although not in a scam of the kind of Satyam, has managed to shed its reputation by allegedly bribing World Bank personnel. We all know this is not surprising and almost all companies are involved in such practices , the important thing is once again the "timing" of such incidents. May be the Wipro guys were not able to pay "good fees" this time and so all this drama.

The WORSE scam
Madoff, Satyam and Wipro etc may look bad but what happened with the "first team" of US - President Elect - Obama makes the atmosphere even worse. The person selected by Obama for Treassury Secretary, Geithner, is in trouble for his failure to pay taxes on his income when he was serving with IMF. This is shameful for someone who is supposed to be taking over the job of "VIGILANCE OVER TAX COLLECTION OF THE WORLD'S BIGGEST ECONOMY".

What's Up, Next?
I read this weeks newsletter from John Mauldin and the following para from that letter is something I thought is "must share" thing. Here is what he says about future:

"We are in completely uncharted territory in terms of the economic landscape. Like the USS Enterprise in Star Trek, we are boldly going where no man has gone before. But the captains of our fleet are Keynesians to their core (and they don't have any Vulcan advisors). They don't have any historical maps to guide us back to a functioning economy; they only have theory. The North Star they are guiding us by, for good or ill, is John Maynard Keynes, with a slight nod to Milton Friedman."

The important question is not what govts and central banks will DO? They will do what they know - reinflate the credit bubble with all their arsenal. The question that is actually important is - "Will these efforts by govts and central banks all over the world be able to save world economy?" My answer is pessimistic for the very simple reason - You can't fill in more water in a tank to save someone drawning in that tank. But, I may be wrong. Who knows "they" might have the "skills" to fool one and all once again BUT even if they succeed the most we will receive can be a mere "postponement" of the real disaster. The more it is postponed, the worse we will have to face it. You can safely assume that I belong to the Austrian School and following paragraph sourced from WIKIPEDIA explains my view:

"Economists of the Austrian school challenge the idea that Japan experienced a liquidity trap, contending instead that it suffered from the bust portion of a business cycle brought on by monetary inflation, which could only be cured by allowing the bust to liquidate the malinvestments made during the boom. Austrians contend that busts are necessary corrections to booms and that artificial credit expansion or other government interference will only make the bust longer or delay an even bigger bust. Thus, they blame Japan's rigorous government interference in the market for causing the bust to last throughout the decade."

I see deflation on the prowl and then hyperinflation following. All over the world. (Its not a news that Zimbabwe recently unveiled 100 Trillion Dollar Currency Note !!!). The next reality will be End Of US Dollar as World's Reserve Currency and serious degradation in US Dollar's value. But make no mistake - it does not mean that other currencies will rise against USD, in fact, other currencies will also deteriorate accordingly and so my last sentance is not trading call for selling USD for another currency. If you can derive something from my views - it is GOLD. Yes, gold can be safer bet against all currencies and esp USD.

Let us wait and watch who proves to be right - Austrians or Keynesians. Whoever wins, we should note one thing - ultimately there will be a recovery, however late it is AND then that will be a big chance, not for speculators, but for everyone to grow alongwith new technological breakthroughs in IT, Biotech, Nanotechnology and Green Energy. BUT, the time for that growth is still a good distance away. Anyone investing today for that growth is most likey to suffer before recovering. I will not be an investor in US stocks before I see S&P 500 below 500! And I am sure we will see 400 - 500 range in it sooner than later. Remember - The bull market of past five years was merely a Bear Market Rally!!!

Sunday, January 4, 2009

Nifty Future Analysis - Hourly, Daily and Weekly Chart

Here is my analysis of Nifty Future for short, intermediate and Long term based on Hourly, Daily (EOD) and Weekly charts.

First quite some time ( a month and half) I have been busy in some project which has taken the most of my time and that is why I can't post frequently. However, I am sure very soon (as early as 15 days) I will be able to regain the frequency of earlier times or may be even increase it few hertz. Today I stole few hours to analyze markets and so I am posting here.

Short Term trend - Hourly Chart

Looking at the Hourly Chart of Nifty Future following is my view:
  1. Sort term - its in uptrend and this passing week we saw Nifty Future retracing to 50% or so of its latest uptrend and resuming up move. This means if the up move continues, we can see 3243 in few sessions as this is Fibonacci target.
  2. The rising wedge on hourly was broken last week and that is something bulls should be careful about.
Intermediate Term - Daily and Weekly Chart

Looking at the Daily Chart, following is my view:
  1. Its nostalgic. Its Deja Vu. Yes, see how rising channels and wedges in primary trend bear market end up (see circles on chart during Mar - April 08, July-Sept 08 and this latest one - Nov-Dec-Jan). Does history repeat itself? may be. Even if it does not repeat, it at least does enough to make us feel nostalgic. This rising wedge on Nifty Future is indicative of how bad future may be for bulls, if History once again Repeats itself.
  2. The Main Downtrend Line is still holding and this month it will complete one year. As we have seen in past, this line is BIG resistance in every bear rally and since Sept 08 we have not even seen Nifty Future coming close to this line. However, on its first anniversary, we may get a kiss on this line. Bears know what to do then.
Looking at the Weekly Chart of Nifty Future I have following to say:

  • Its similar to Daily Chart with one addition: there seems to be a triangle forming which can prove to be a continuation of previous down trend.
  • The bigger resistance is 34 EMA and in few weeks I expect it to go below near to 3400 levels. Nifty Future has been behaving scary for quite some time whenever it nears this 34 EMA on weekly chart.
Long Term Analysis
For Long Term future of Nifty Future hangs precariously and depends on many things including fundamentals. As many economists have turned positive on economy for after next year (2010) there should be a bottom in second half of 2009 as Equity Markets are believed to be six months in advance of fundamentals.

Having said the above, my worry is still about how US handles the situation. The way US and other govts world over are doing currently is NOT good in my opinion. The best solution would have been a hundred percent Free Market correction. I don't believe how all world leaders and policy makers are pumping in full force to REINFLATE the bubble of credit originated from excess of fiat money. Cause of a Disease CAN NOT be its cure. Its like trying to cure a drug addict with extra supply of drugs! God bless these policy makers.

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