Tuesday, November 8, 2011

EOD Analysis for 8th November 2011 and Outlook for 9th November 2011

Initial part of the day showed sideways movement in a tight range with Nifty futures clocking an OI of 29.5 mill in the initial session of the day. The auto segment showed some profit booking whilst interest rate sensitives were under pressure [the strength shown by DLF on open was amazing despite negative news and likewise with INFY] SBI as indicated earlier has now given 2 consecutive closes above 1950 and hence may try for another 50 points [or maybe a little more] and has stiff resistances around the 2025-2050 zone; 2 consecutive closes above 2050 can yield another 100 points but 2050 seems very much an achievable target for tomorrow IMHO; INFY is going strong and weakness can only be confirmed with a close below 2750 and then below 2650.

VIX did shoot up in the initial part of the day when the market was falling but then cooled off with the short-covering relief later. Markets are certainly not out of the woods and a lot of negative triggers loom around us. The real challenge as explained over the weekend is not sovereign debt but the over-leveraged derivative positions that when unwound can have a catastrophic implications across capital markets. The flight to safety i.e. risk aversion is clearly being seen with heavy demand for Gold, German Bund and US Treasuries. Critical levels remain unchanged.

Upside resistances lined up at 5308-5325-5348-5378-5408
Downside Supports at 5225-5169-5125-5092-5032

Market breadth is very bad with more declines than advances and also the volumes are not encouraging for upside. Banknifty taking interim support at 9500-9750 levels for now and if SBI upside continues, we may see a couple of attempts more to conquer the 10k zone - however the rise may be illusory and the outlook to sell BNF as close to 10k as possible continues, initially with a hedge and then ride the short for some more points. Weakness in BNF only to be confirmed after a close below 9500 and this IMHO to a large extent depends on Euro-Dollar posting a close below 1.375 and then 1.365 and similarly 1.57/1.56 for GBP-USD
For Nifty, for higher levels, OI has to increase towards 34-35 mill+ levels to sustainably take markets higher; for downside, the volumes not emerging can delay but not prevent the fall. 5032-5092 levels can provide support until Friday [or perhaps Monday considering that we only have 3 sessions this week]

FTSE/DAX/SMI all 3 have some more steam in them before a lethal third wave launches to the downside with targets 5300 on FTSE, 5600 on DAX and 5450 on SMI [looking at a time frame of 8 to 10 trading sessions] and this also co-incides with our time-line for bearish outlook to start manifesting. Corresponding levels for DJIA and SnP will be a close below 11500 and 1190 respectively. Bears need to be very patient and keep a close eye on the VIX levels before loading on Puts

No comments: