Thursday, April 30, 2009

US Markets: S&P 500 Analysis Update

Dear Readers,
I am very keenly watching the developments for few days and things got interesting enough to post my analysis about S&P 500 (Future) of US. But, let me first tell about how far my recent analysis stands:
  • On April 21, S&P 500 Future did not break my support level of 823 (it was the low for the day!) which I had posted on April 21, and after that it is trading well above that level.
  • Same day, I had put first resistance on 876 and today (at the time of writing this post) it is just above that level, at 882.
  • I have been insisting on for quite some time that the trend for short term (now medium term) is clearly up and I was surprised on many pundits shouting danger when we saw markets falling on odd days. People have the habit of getting overexcited on rallies and overfearful on declines, both of which must be avoided by serious traders.
Now, let me put my views on what is expected in coming days:
  • The short to medium trend is up but since the fall of April 20, there is a certain amount of weakness in the rally. However, I expect it to test 895 if the upward momentum continues. 929 remains key level if it can manage to get there.
  • As 876 is cleared at least for intraday, I think this level should act as support now.
  • Resistance: 896, 917, 929
  • Support: 876, 864, 855, 845, 823

Monday, April 20, 2009

S&P 500 Future Analysis on 20 April 2009

Dear Readers,

For this week starting today I have following to say about S&P 500 Future based on Daily Chart and Weekly Chart -
  • In my last post I put resistance at 876 and it touched 871! The resistance worked and it fell from there. Now, for today we need to see how far it comes down.
  • The short term trend is still positive and 929 remains key level to watch out for.
  • Resistance - 876, 917, 929
  • Support - 845, 823, 804, 774
In all the possibility this is a bear market rally and the main trend remains bearish, however, on Daily Chart 34 EMA has crossed over 55 EMA which is a sign of this trend (up) to hold for medium term. But, you know counter trends are risky, so always keep your positions hedged (for longs, buying VIX is a good idea).

Saturday, April 18, 2009

Analysis of Nifty Future

Dear Readers,
Today I am here with my analysis of NSE Nifty Future based on various timeframe charts - Daily Chart, Weekly Chart etc. For some good time Indian markets are in up trend and whenever people think it has been enough, we see new upper levels! The current trend is certainly strong. But, as I have told in my last post, the uptrend is quite steep in rise and such vertical rallies can surprise anytime.

Considering it is a good uptrend going on we should better be waiting for corrections to buy rather than jumping straight away. Following are the points I have arrived at :
  • Looking at price action in last two days of this passing week, I think a correction to 3250 odd level is possible next week. If it corrects more then even 3150 is possible.
  • 3140 was key resistance level when it went up and it is again key but support level. Breaking 3140 on closing basis will not be good for bulls.
  • If 2920 (too far for now) breaks then this entire rally will be over.
  • Going upwards, 3750 - 3780 will be key resistance area although there will be other resistance levels before that - 3520, 3580, 3699
  • Support - 3304, 3264, 3230, 3175, 3140
Remember, trend is your best friend but also remember that your friend can change clothes unexpectedly. So, as long as it is up trend, better look for buying opportunities than be contrarian.

Saturday, April 11, 2009

Markets This Week... Changing Trend?

Dear Readers,
Markets world over gained good this week and the present up move has remained in effect so far. I post my views here about S&P 500 Index of US and Nifty Index of India futures. I will share my views about these two indexes based on weekly, daily and hourly charts for short to medium term trends.

S&P 500 Future:
The rally that started in march is continuing so far and S&P 500 future has managed to get past an important resistance at 838. It closed just near the next resistance level (855) I told in my last post here and now following are the points that I feel are important for traders:
  • If next week it manages to keep above this level around 855, we can see an important development on Weekly Chart and the possibility of it touching the very important level of 929 as well. If it does go there, it will be an interesting event.
  • Looking at the development on charts I feel it can retrace somewhat and behave volatile and then resume the up trend. However, a straight up move if is there, then it is more an overbought situation and bulls need to be cautious.
  • Resistance - 855, 876, 917, 929
  • Support - 823, 804, 774
My advice is - ride the trend but don't forget that this is a vertical rally. Anyone who says "worst is over" may be living in day dreams. So, be cautious if you are riding this short term up trend.

Nifty Future:
Indian Stocks are rallying harder than the US ones and as I posted earlier, the fact that Nifty Future has managed to cross and remain above 3264 may very well be beginning of end of Main Downtrend Line. It closed below 3366 though, the resistance I posted in last post. There are few important developments we witnessed this week:
  • First time since it went below 34 EMA on Weekly Chart, it has closed for the week WELL ABOVE that and also, 5 EMA has crossed over 13 EMA for the first time! Is the trend changing? May be yes. May be no. However, the signs that are emerging do not favour bears and already it has closed three days in a row above the Main Downtrend Line that had mainained all throught this Bear Market so far.
  • If we raise the above mentioned trend line to Sept high and extend, then there is a case for bears as it touched that line and close below it.
  • On Daily Chart it is first time since the down move started that we see it closing above 200 SMA! Also, its the first time that 34 EMA has crossed above 55 EMA on Daily Chart! These things do point out to strong uptrend and a change in medium term trend as well.
  • Resistance - 3366, 3400
  • Support - 3264, 3230, 3175, 3129, 3095
Looking at the things right now, there is no doubt that bulls have ruled for past one month or so but the fact remains that this is a vertical rally and so caution is advised.

Sunday, April 5, 2009

Quick Analysis for S&P 500 and Nifty Future

Dear readers,
This passing week we saw both US as well as Indian markets reaching important resistance levels - levels that can be decisive for Main Primary Trend. Here I present my views on both the indexes futures:

S&P 500 Future:
The S&P 500 Future was supposed to face a good resistance near 838 and the fact that it has managed to close just above it confirms my view that there is a strong short term up move. What is important is that this breach of 838 is not good for bears for near term. If it moves up further, the next important level to watch out for is 929 although there are other levels before that but this one may change trend with bigger impact.

Resistance - 855, 876, 917, 929
Support - 823, 804, 774

Nifty Future:
Nifty Future also looks strong as I thought and now its at a resistance which is most important to all market participants. If 3264 is taken with good volumes then it might mean danger to the Primary Main Trend which is bearish. This region between 3200 and 3300 is going to be the key for traders. I believe it should face stiff resistance here. Ideally for bears, it should not even touch that important number - 3264 but if it does then bears are in grave danger. However, my bet is with bears. I believe this may be a good opportunity for going short as risk to reward is good on that side here.

Resistance - 3264, 3310, 3366, 3400
Support - 3175, 3135, 3095, 3070, 3013, 2972

Friday, April 3, 2009

Obama, G20, IMF and BJP. BJP? - Weekend Musings

Dear Readers,
Last few days (or weeks?) have been very rewarding for bulls and bears are getting slaughtered every time they try to fight. Today, there are some news that are of important significance, so I thought let me put my perspective for my dear readers.

The first news is from G20 meeting. Yet another TRILLION DOLLARS to fight global meltdown! The news is that USD 1.1 Trillion is there at IMF's disposal to save world economy from going under. Obama, the US President acted more as a facilitator at the G20 meeting and in the end there were smiley faces all over the place with some leaders playful like playschool children. Is this new struck deal between biggest 20 developed and developing countries so important? Is this really start of a New World Order as British cousin of Obama says? Let us come to the facts.

We have been hearing this TRILLION word for quite some time during this ongoing crisis and and this overuse of the word has made it taken for granted. Let me put some facts so that we once again could be able to imagine the size of this word in real senses. Being a millionaire meant something not long ago and one billion means the potential to create 1000 millionaires! That makes one billion a big amount of money. Now consider a trillion - it is as if there are 1000 x 1000 = 1000000 = ONE MILLION MILLIONAIRES! That's the value of a TRILLION! Simple maths, isn't it?

Now let us take an Emerging Economy - India for the comparison. India has population exceeding one billion and for simplicity, let us assume there are exactly one billion heads living in India. If we were to distribute USD one trillion to all, each individual receives USD 1000. If we consider the family shape of Indians there are roughly 10 members on an average in a joint family. This makes USD 10000 per family! So, you can distribute USD 1 Trillion to each family of world's second most populated country and they receive USD 10000 apiece!

Let us look at it the other way round. The GDP of India is slightly above the $1.1 Trillion figure announced at G20! So, it effectively means they are putting in an amount nearly equal to the ENTIRE GDP of INDIA! And to make things look rational, India fairs at 12th rank in the world in terms of GDP which means that is really a big amount!

From the above comparison we should be clear what a TRILLION means and look at the way mainstream media puts it - as if its a child's play to play around with such big sums. Even in the start of crisis when Bush distributed $200 billion as stimulus package, it was considered real big amount. Hardly one year after that BILLIONS (hundreds of them) don't seem to be enough money! what a wonderful situation! If this is the way things go on then very soon they will be dealing with quadrillions ! like Gono introduced trillion dollar currency note in Zimbabwe !

Now, the issue is will it be able to fight of global meltdown? I am certain it will not. Its very simple, these leaders and there economists are only worsening the situation day by day, dollar by dollar. This problem was caused by excess of cheap fiat money and it will not end before the excesses are wiped out. Even if things look like stabilizing, it would be merely a postponement of real big crisis that is inevitable and the more it is postponed the more it grows in severity.

The second news is of BJP, the main opposition party of India declaring so many populist measures its election manifesto. Many pundits don't think BJP will be able to get big majority and perhaps that is the reason they (BJP) decided to announce such big populist promises. The manifesto says they will spend in massive infrastructure programs to generate employment, give farmers and hawkers loans at four percent and housing loan at six percent! And add to this they will subsidize rice to Rs. 2/- per Kg for BPL (Below Poverty Line) families! If they come to power and they keep their promise then they will need to run special charity to get money for all these govt expenditure and subsidy measures! The fiscal deficit may jump manifold if they go on with that. There is a point though, that may go in their favour - if deflation gets hold in the meantime, then that low interest rate thing is not going to be that difficult. Who knows they may be aware of this possibility and so are not worried about the promise!

Wednesday, April 1, 2009

The Public Car of Future USSA (US of SOCIALIST A)

Dear Readers,
Following is a sarcastic piece of letter by my favourite Bill Bonner of The Daily Reckoning fame. He wrote this on the possibility of US Govt nationalizing the troubled GM and Chrysler. Here is the actual text copied from the e-letter:

"We were trying to imagine the car that General Motors/US Federal
Government would come up with. Surely, it would have to be safe...and
wheel chair accessible...and fuel-efficient. It would probably have to
have warning lights telling you where to exit in case of
emergency...and maybe some kind of GPS system for blind drivers.

The new government-run industry would probably have to abandon the
assembly line; the idea would be to create as many jobs as possible. So
workers would put the new cars together with old-fashioned screwdrivers
and adjustable wrenches, stopping frequently for 'get out the vote'
rallies and other consciousness-raising events. So, it would take
months to produce a car...and you'd have to wait for a new one, just as
they did in the old Soviet Union.

New cars could be designed by Congress like any other important piece
of legislation. Onto a hefty chassis could be bolted hundreds of
riders, amendments, exceptions and earmarks. Maybe a solar collector on
the roof - made by a large campaign contributor in Atlanta? Maybe an
extra steering wheel in case the driver has a sudden heart attack
(helpfully suggested by a supplier of steering wheels...and put forward
by his Senator). Maybe a smoke detector that automatically shuts down
the engine if it senses the driver is having a cigarette, as earnestly
proposed by the anti-smoking lobby.

And let's not talk about paint color. Color is a sensitive topic in
America. Probably all the cars would have to be either desert
beige...or even camouflage pattern so as to be useful for military
transport in case the country is invaded."

Hilarious! ain't it? I hope congressmen read it and take some ideas...

If you have arrived here from a search result, please click here to see main page where you will find the latest post