Nifty Analysis as on 29th July 2008

Dear Friends,

Its not easy to tell about the Stock Markets direction and see how it turned out (at the time of writing this post) for US markets. I'll come to that later, for now read about Nifty...

For Nifty, Yesterday it was 38.2% and today it was 50%. Yes I am talking about the supports Nifty was taking. Look at today's chart and you can see yourself. I have following observations:

1. Nifty broke yesterday's low and took support at 50% retracement of previous rise.
2. Nifty broke the 34 Day EMA support and is now around 13 Day EMA.
3. The volume for today is slightly up.
4. The FIIs and DIIs are both net sellers in today's trade.

Conclusion: If Nifty manages to sustain above today's low, it can show a bounce back. If it goes down below today's low, then the next support is around 4080 levels (61.8% retracement). As I told here yesterday, I am still bearish on the larger trend.

I have to mention that at the time of writing this post, I see US markets kind of rallying. I was almost sure yesterday that there will be further downside in US and I am still for it.It looks like yesterday's sharp fall in Dow Jones and S&P 500 made it oversold and now its a very small rally undergoing.

Yours...

Just for FUN

Hey Friends,

I was just going through the Reuters News on their website and stumbled on this piece - Frauds are increasing

Well, this happens when extravagant measures are used to spur economy, and when products out of the Financial Engineering Labs are expected to do miracles.

Yours...

Hello My Dear Readers and Friends,

Today, at the time of this writing, the S&P 500 and Dow Jones are falling in the US and in India, Nifty traded in a tight range and very near to 34 Day EMA and above 38.2 % retracement of previous rise.

The US markets, esp the Dow Jones Industrial Average, fell from almost 38.2% retracement of the previous fall and are now threatening to go further down. Look out for 11141 on Dow Futures, this is exactly 61.8% of latest rise and its today's low !!! (of course there is still half an hour left for market close), closing below that today will mean a confirmation of more downside to come.

Today I upload only Daily chart of Dow Futures as I thought sharing this information is enough till tomorrow. See how precariously Dow is hanging on 61.8%!!! Tomorrow it is a testing day for Nifty and it should decide further course of action...

Till then... Happy trading

Yours...

Nifty Daily and Weekly analysis as on 26th July 2008

Dear Friends,

Here I am presenting my analysis of Nifty on the basis of weekly and daily charts of 25th July.

First, the Daily Chart:

Nifty showed a good upmove this week but found resistance at the crossing of Line 2 and Line 3, just as I had posted in my previous post. The things to sum up are:
1. Nifty showed a spectacular up move but it looked more like a vertical one than a consolidated approach.

2. It came down in last two days, but still it took support above 34 Day EMA and 38.2% retracement of the upmove.

3. The volumes of two down days are lower but we should remember that markets can fall with their weight.

4. Both FIIs and DIIs are net sellers on last day (25th July)

THE WEEKLY CHART:
Looking on the weekly chart, we can see a good green candle with good volume. The long shadow above the real body of the candle is not good for bulls.

Conclusion: For short term traders, the support at 34 Day EMA should hold, but if it breaks down below that, there can be good downside again as the next supports are way too low. If it goes up near this week's high, one can go short with Stop Loss at 4650 on closing basis (Nifty Spot).
In my opinion, this is just a counter trend / bear market rally and no investing can be advised as long as the Main Downtrend Line - Line 1 holds.

Yours...

Hello Friends,

Today I am presenting here my near future plans. I want to expand my content to new fields like more about markets and explaining the details of Technical Analysis. I got to this idea as one good friend of mine advised me to add some stocks also in the analysis which can be beneficial for people who don't trade Indexes.

The second thing I want to add to this blog is accessibility by Hindi reading people. As its not a good idea to post in two languages on the same page, I am thinking of adding another blog for that purpose.

So friends, please suggest me your thinking about my plans...

I am waiting...

Yours...

Dear Friends,

What a blasting move today!!! Nifty was almost 6% up !!! And the surprising thing is the today's volume is reminding me of pre-Jan levels !!!

Looking at the Daily chart, Nifty got past the 34 Day EMA (red curved line) and even surpassed 50 Day SMA. Today it closed near the crossover of Line 2 and Line 3 - another big resistance area(the red encircled). It should get a lot of resistance here, but if it manages to get past it, then the final resistance according to trend lines, will be around 4620 - 30.

One more interesting thing is today, FIIs were big buyers and DIIs net sellers. We can have our guess as to what was the reason for that...


Thanks & Best Regards

Nifty Analysis as on 22nd July

Dear Friends,

Today Nifty showed good gains and closed up with a noticeable increase in volume. I am presenting here the Daily chart of Nifty of today.

The chart is for a shorter period, and the things to notice are:

1. Nifty is at the 34 Day EMA resistance. This can be a big resistance. If taken then we can expect to see levels near the 50 Day SMA which is near about 4450.

2. The upmove was supported by better volumes. So, We can't say the move was "tiring".

3. There is four consecutive days of upmove.

Nifty should not fall below 4030 as there it will fall below the previous resistance line. But, before that, it should maintain 4170 levels or above as there is the previous support line (of the channel).

The reaction of Govt trust vote should not be too much. In my opinion, charts are saying most traders believe the govt will survive. I don't look at news for trading and that's my advice for all.

With the same disclosure, I conclude this post...

Yours...

S&P 500 and Dow Analysis as on 21st July (Futures Charts)

Dear Readers,

There is a divergence on S&P 500 Futures Chart and Dow Jones Futures Chart. The S&P 500 Futures are trading nicely above the Main Downtrend Line but the same for Dow is not true (at the time of writing this post).

In short, I put the following scenario:

1. Main Downtrend Line - Has been crossed on S&P 500, but not yet on Dow Futures.

2. Moving Average Sequence - It is still negative for both indices. But it can change if the price continues to climb up.

3. Both S&P 500 and Dow Futures are still below the 38.2% retracement of preceding fall.

4. There is a SHOOTING STAR on the S&P 500 Futures Chart on 17th July. The high of that Shooting Star has to be taken out (1261) for a new upmove. So far for past three days, it's not been able to do that. So, today is crucial.

We need to watch closely today how the two indices behave and then decide whether the recent upmove is sustaining or not.

Yours...

Nifty Daily and Weekly Analysis as on 20th July

Dear Readers,

After pondering over some fundamental questions let us return to the Technicals again. Today I am posting the Daily and Weekly charts of Nifty.

Looking at the Nifty Daily chart the triangle breakout that happened on 14th July has still not given its target, which comes around 3600. After falling to 3790 on 16th, it showed two days of strong up move in sync with global markets. The first day of this upmove was not that good considering volume etc but the second day (Friday) the move looks better as the volume was higher. However, it closed on Line 4 which can be the most recent resistance line. If Nifty manages to sustain above Line 4 then the next resistance will be Line 3, for tomorrow it is crossing the previous channel support line (See lower Arrow). There somewhere is also the 34 Day EMA. So the area around 4200 - 50 will be big resistance for Nifty tomorrow (But first it has to sustain above Line 4).

The bigger resistance areas are on Line 1 and Line 2 (the upper arrow), which look too far to think now.

THE WEEKLY CHART:

Looking at the weekly chart of Nifty, The thing to notice is a hammer. The hammer low (3790) on Nifty should act a good support. However, the volume is not convincing and for the past two weeks (which are green candle) the volume is actually lower, which is indicating a mere correction in the larger downtrend.

Conclusion: The charts are not telling a clear direction as of now, however, the bias remains on the downside. If the above mentioned resistance areas are cleared, only then one should start looking for initiating long position.

Disclaimer: Same as past one.

Yours...

Continued...

Well Friends, though I didn't get a lot of queries to continue the previous post, I will still do that.

So. I was there pondering over how could Kondratieff be wrong? Why didn't the new downward cycle start at all?

To recollect facts, there was sure a start of downtrend in economy in 1990. In the month of June, 1990 a recession started in USA but it ended early next year - 1991. That is official. The recession was mild in nature and there was not big damage - again official. But not all agree with that.

Some well known economists say the recession was far too greater in magnitude than told officially. Dr. Ravi Batra, a renowned economist explains it like this on his website - "The truth is that the slump of 1990, though not a full fledged depression of the type in the 1930s, was much more serious than revealed by official figures on output. The public said so at the ballot box and threw a once untouchable president out of office."

Harvard Professor Galbraith called it a recession cum depression

Economist David Levy said it was a "contained depression."

Lawrence Hunter, deputy chief economist for the US chamber of commerce, dubbed it as a "never-ending recession."

Peter Peterson, Commerce Secretary in the 1970s, called it a "middle class meltdown," and Wallace Peterson, a distinguished professor at the University of Nebraska, titled it the silent depression.

Even Massachusetts Senator Ted Kennedy, not a critic of Bill Clinton, described it as "quiet depression" as late as 1996.

The above quotes have been sourced from Dr. Ravi Batra's website which you can find at www.ravibatra.com

So, the worldwide impression is - the US brushed aside the recession and in fact prospered in the 1990s. That is true if we see it partially, but the fact is different.

In 1990, there was a crisis in Japan also. The Japanese Stock Market crashed in the start of 1990 which led to start of interest rate cuts there. The rate cuts should have started helping the slowing Japanese economy but it did not do that. What happened in fact was that this rate cut led to flow of money to the US, which was in need for it. The US current account deficit was growing leading to a host of countries having a big reserve of US Dollar. While the US economy should have gone down with the slowdown / recession, the inflow of foreign funds turned it completely and the trade deficit turned out to be a blessing for it!!! Japan continued slowing, the dollar reserves of some countries kept growing and US had a boom!!! Then there was the Asian crisis in late 1990s, which affected US more positively as falling interest rates led to the well famous (now infamous) Housing Boom. A housing boom creates demand for many other things and economy experiences the best boom times.

So, what could have been the start of a big bust, actually went on to grow into a big boom, increasing prosperity that also spread worldwide later.

Anybody who has the very basic knowledge of economics, should know how money is created in today's world, but only few think about it. Its just a virtual money which is created by debt!!! To put it in very simple words, there was time when new money could be created when there was a reserve against it - like gold, but that's not the case now. All over the world, the practice is that Central Banks keep a FRACTION of reserve of the "money to be lent" by Banks. This fraction averages about 10:1. This means for lending 10 units of currency, the Bank needs to keep only 1 unit in the Central Bank. This simply means 90% of pure virtual money out of thin air !!! This practice had been doing well so far as the new money created was financing new economy, but, now the time has come when there are chances that this very practice is going to lead to the biggest bust in the history of human beings economic growth. Please visit this website for a thorough information on Money As Debt You can also watch the video here which is very nicely compiled and very informative. I bet all your queries regarding money creation will be solved !!!

Now, coming the question again - was Kondrateiff right? I think he was right and once again we are just sitting on an unstable rock put on a high cliff. We have only managed to POSTPONE it so far, but we can't do it forever.

Dear Friends, I want your comments - good or bad all. So please post your valuable comments.

Yours...

The Fundamentals of Techincals - New Episode

Dear Friends,

Today I am not presenting here any chart as I am going to tell something on fundamentals. The first thing I want to tell is - Please, I do mean it, Please do not trade by fundamentals. Fundamentals are only for economists and somewhat for very long term investors and NOT FOR TRADERS. So, if you are a trader, forget fundamentals and concentrate on charts. Charts incorporate all the news, events and fundamentals in advance, barring unforeseen natural calamities and extreme circumstances (like terrorist strikes on a large scale).

I am a firm believer in Economic Cycles in Global Economy. This means I believe in economic conditions riding on repetitive cycles in Global Economic Activity. To express in simpler terms all events including economic activities occur in cycles - meaning they go up and down with a set and defined set of parameters. The most important of those is the time factor. for Example, an economic cycle goes up and all the economic activities represent a boom and then after some time it goes down and there is a period of depression. In the space between the two there are times of slow growth, stagnation, recession and sometimes stagflations. The recorded history of we human beings is witness to these cycles. There have been great economists throughout our history who calculated and predicted the cycles. One of those is my favorite Professor Nickolai Kondratieff (1892 - 1938) of former Soviet Union. In 1926, Kondratieff published his findings in a report entitled, "Long Waves in Economic Life". According to the report a long depression in the world economy is overdue. The downurn should have started in 1990s !!! For all those who want to know about the great Kondrateiff, all the information is here - Kondrateiff

What happened to the cycle? why was there increasing prosperity in US in the period and and later in other areas of the globe? I was as confused as most of the economists were. I got the answer, but, I am going to tell all that in the next part. Till then I want to see how many people are interested in reading the stuff.

Will continue very soon...

Yours...

The Rally in Global Markets

Dear Friends,

What a move in US and European markets yesterday!!! The Dow and S&P 500 both 2.5% up and Nasdaq even 3% !!! I have been hearing an all around cheer and chatter of happiness since morning and the Nifty and Asian markets are following suit. So, is the end of gloom there? and is this the beginning of a new up move in global markets? Well, I have my reservations for that.

As I told in my previous posts, the US markets looked oversold and a relief rally was due. My arguments are following:

1. The Moving Average Sequence on hourly charts have turned positive but that on Daily Charts is still negative. In fact the S&P 500, has been unable to cross the 13 Day EMA.

2. The volume is not supporting the up move. If it has to qualify for a Breakout, then the volume has to be higher than average which is not the case.

3. Looking closely, this looks like a "Typical Bear Market Rally" - fierce and vertical.

Let us see if this move continues or fizzles out. My bet is on the latter option. For S&P 500, the hammer low of about 1200 is still intact and it may get tested in the course of coming sessions.

For your reference, I am uploading the EOD chart of S&P 500 which should tell the story in short. Please note that this is a Yahoo Finance chart, copyrighted by Yahoo Inc. USA. The link for this chart is S&P 500 EOD chart from Yahoo Finance

Look at the EMAs, Volume and MACD. MACD histogram showing a bottoming out situation? Lets see in coming days.

Yours...

S&P 500 Hourly as on 16th July

Dear Friends,

Yesterday, I wrote about the US markets being oversold and the possibility of a relief recovery rally. The S&P 500 did show some good intraday recovery after touching almost 1200, But failed to sustain at higher levels and now is trading in a small range.

I am presenting Hourly chart of S&P 500. If you look at the low formed yesterday, there is a hammer and unless the hammer low is breached, it is looking stable. However, looking at the Downtrend Line and the Moving Average Sequence, the 55 Min EMA is proving to be too tough to cross. In fact, At the time of writing this post, even the 13 Min EMA is resisting upmove on S&P 500.

The MACD is also not giving a clear signal and so it is a wait and watch approach that is required for the time being.

Fundamentally, there are a lot of chaos and so many news and events are only adding to uncertainty.

Yours...

Nifty Crashed, S&P got some Relief

When on Sunday I told about Nifty looking to break the triangle, even I could not imagine this kind of move so fast !!! In the early trade US markets showed some good recovery ( S&P was almost 30 points up ) but right now, it looks not very good for bulls. The recovery efforts are getting sold into.

I'll post my next analysis for S&P after today's closing of US. For Nifty I'd like to wait for tomorrow's closing.

Till then, have a nice time...

Yours...

S & P 500 (US) Daily 15th July

Dear Friends,

Today, let me tell here my view about the US index S & P 500, which is considered one of the most important index in the world by analysts.

I have drawn one downtrend line Line 1 starting at the high it formed in Oct, 07, and joining the high in Dec, 07 and extending it. This line maintained till April 08 and it looked like the downtrend in S&P is over, as it took support on the same line twice in May. But one thing to notice was the 200 SMA(the curved green line) - despite taking support on the Line 1, the 200 SMA proved to be too strong and it could not break it convincingly on the upside. Then in June, S&P fell below this line again and falling continuously since then. Around same time the Moving Average sequence for it also turned bearish again as the 34 EMA (Exponential MA, red curved line) crossed 55 EMA (blue curved line) on the downside and S&P falling below these.

I drew one more downtrend line - Line 2 joining the contemporary highs but this line has to be resisted at least once more to qualify as a trend line.

If we look at Jan Low and Mar low (Red circles), it looked like a double bottom formation, but recently those lows have also been breached. The overall scenario is very bearish for S&P. The only relief for bulls is - it is oversold. See the ADX and William's Percent Range - both saying it is in oversold zone. So, we can expect a relief rally in the near term. Also, any such relief rally can be resisted at first the prvious bottoms of Jan and Mar at around 1260, second the 34 and 55 EMAs and then Line 2.

Caution: Being in official Bear Market, the oscillators can remain in oversold zone for quite some time and any trade against the primary trend can prove to be too risky.

I conclude this analysis with the hope that you will like it and comment.

Disclaimer: My analysis is in letter and spirit "just an analysis" and not a trading recommendation. Trading in Stock Markets is full of risks so kindly consult a professional before initiating any trade.

Thanks...

Yours...

Dear Friends,

Today I am analyzing Nifty - both EOD as well as Weekly. Let me come to the weekly chart first:

I have drawn only two trend lines and two Moving Averages (Simple) on the Long Term Chart of Nifty Weekly. The Line 1 is the major support line under formation (I say so because it has still not found the third point in order to qualify to be a "trend line" by definition). This Line 1 support comes at around 3100. But, before this line, there is the 200 SMA (Simple Moving Average) which is at around 3500 and is going up still. So, going by this, the first major support for Nifty, according to 200 SMA should come at 3500 - 3600 levels. If this support area is breached then the next logical support should be the Line 1, at around 3100 levels. If this Line 1 gives support, then it will become a Major Support line for a good time. Breaching this line decisively will mean Nifty is in a Long Term Bear Market.

If Nifty manages to move up from here, the major resistance should be at the Major Downtrend Line - Line 2. The level for this line resistance come at around 4500 - 4600.

For readers' convenience, I've put arrows and a red dot at the above mentioned support and resistance areas.

THE EOD CHART

Looking at the EOD (End of Day) or what we simply call it Daily chart, Nifty refused to breach either the support (Line 6) or the resistance (Line 4), as I had mentioned in my last post. However, one thing to be noticed here is that it closed below another resistance line - Line 5, which is indicative of how weak are bulls. The bulls can only have some relief as the Line 6 is still holding. Line 5 is very steep, so I will place my bet on Line 4, which is at almost 45 deg angle so should be more trusting.

I want to tell one very important thing to my readers. Did you notice a triangle is being formed (see Line 4 and Line 6)? Well, If it really does prove to be a symmetrical triangle, then it gives a target of near 3600 in coming days !!! Now remember what I said in Weekly analysis above? remember the 200 SMA on weekly Nifty chart? Its at around the same level - 3500 - 3600 !!!

So, If Nifty continues the previous downtrend then my advice is look for volumes as a triangle breakout will be confirmed if it goes down with big volumes.

If you are a Fibonacci follower, then taking the high of 18th June and the latest low, Nifty FAILED TO CLOSE ABOVE 38.2% RETRACEMENT FOR THREE CONSECUTIVE DAYS !!! Almost everything is pointing to more pain for bulls in the coming days.

I hope you find my analysis worth giving a serious thought. I would definitely like my readers to put their comments after reading.

Disclaimer: Trading in Stock Markets is full of risk and you should consult a professional before initiating any trade. My views and analysis expressed here should only be treated as a "view" and "analysis" and NOT a trading recommendation.

Yours...

Nifty Analysis as on 10th July

Dear Friends,

Today I am posting my analysis of Nifty as of 10th July, 08. First my apologies for posting so late.

Please refer to the chart, there I've drawn several trendlines depicting the major areas of support and resistance. As we see, the index is in sustained Bear Market. The Major Downtrend Line is still looking too far away and so there is little for those who think the Bear Market is over or is going to be over soon. The resistance area considering this line is the place I have put "Rh" standing for Resistance - highest. The level for this is 4650 and getting lower every day.

The next line of major resistance is Secondary Downtrend Line, which interestingly is on the verge of meeting with the well known support line which I have termed on the chart as Major Support Line (Previous). This area, the one at the meeting point of these two lines is going to be the biggest resistance for coming time, which I've marked as Rb - Resistance biggest. The level for this is around 4500 - 4550.

Before Nifty can try to reach the above mentioned Rb area, it will need to cross the latest downtrend line, the level for which for 11th July comes at 4310 - 4330. I've marked it as Rt - Resistance today.

In the above paragraphs I have mentioned only resistances but, there is definitely one support for Nifty which is at the latest uptrend line and the level comes at around 4000. I've put St - Support today for this area for 11th July. This means that bulls need to maintain at least 4000 in order to be in the game. Also, it looks a triangle is forming which can very well be a continuation triangle and we may see even lower lows if it breaks down.

I conclude my analysis with this and hope you all enjoy reading the post.

Disclaimer: Trading in stock markets is full of risks and one should consult a professional before acting on any kind of trade.

Nifty Analysis based on Hourly and Daily Charts

Dear Friends,

Here is my today's (2nd July 2008) Nifty Analysis based on EOD chart. Today there was a run away kind of up move which is quite characteristic of BEAR MARKET RALLY. Before analyzing the chart, I want to give a word of caution for those who think the tide has turned. The reason is - such fierce and sharp up moves are very well known in Bear Markets. If it were a consolidated move, only then one could think about it.

Looking at daily chart, it looks Nifty today has taken support at Line 4, which is a Line I drew joining the high of 27th Feb and 28th March. By definition it qualifies to be a trend line merely on the basis that it got resisted again on 2nd April.

The immediate resistance comes at Line 6, which is the latest and steepest downtrend line. Looking for tomorrow, the level comes to around 4130-40. Amazingly, this is almost same as that presented on hourly chart.

If Nifty ANYHOW manages to cross this hurdle of 4120-50, then the next resistance comes at Line 3. This is the downtrend line which is comfortable in terms of steepness. The level for that tom is about 4430 thereabout.

Now, let me come to Fibo retracements. If we go by larger downtrend and take the 20th May high and Today's low, then the 38.2% retracement comes at 4354. Taking the nearer downtrend in consideration, the high of 18th Jun and Today's low, the 61.8% retracement comes to 4354 again!!! What a coincidence !!! The 38.2% of this smaller downswing is at 4161. Taking the nearest downswing, High of 26th June and Today's low, the 61.8% retracement comes at 4143, again quite near the 4161 number !!!

So, going by this, the resistance for Nifty are at 4143 - 61 and 4354.


THE HOURLY CHART

I have drawn two trend lines Line 1 and Line 2. As we can see Line 1 is the current resistance line and Line 2 is the previous resistance line, which, after breaking has acted as support yesterday and today.

So, going by it, the resistance on hourly chart is at about 4120 area. Breaking it will be a signal for further upmove. Also, the 61.8% retracement of latest downswing is at 4141. So going by it, 4120 to 4150 can be good resistance for Nifty.


I conclude today's analysis here with the hope that you will reply with your valuable comments.

Thanks & Best Regards
Harish Dobhal