Yet another gap down courtesy weak global cues but today's gap-down was filled in the morning itself. From morning to middle session, the OI in Nifty futures was hovering around 23.5 to 24 million and VIX was pretty much unchanged. The last hour volatility added another million in OI whilst VIX cooled a bit [Shorts were royally trapped and chopped within 20 minutes!]. Such moves also highlight the importance of maintaining Trailing Stop Losses on positions that lock in the gains on profitable positions. Upto 4994, IMHO it will just be short-trapping and short-covering [volume conditions given yesterday and the day before]
As expected, the Euro-Dollar / Rollar are taking toll on BNF. Adding to the woes of 2 major BNF components are Credit Default Swap Premiums in the Asia Pacific market for ICICI Bank [i.e. the Bond Markets think a greater proportion of ICICI Asset Books are unsecured and capital infusion challenges for SBI - source for both these news bites courtesy Bloomberg] and thus, a test of 8280 on BNF is on the cards soon. Premiums on Nifty as well as BNF are pretty healthy now despite such low levels on spot indices. That being said, the rise from sub-8500 levels to almost 8600 levels today is also a morale booster for this counter. Again upto 8800 will just be a technical pull-back aided by short-covering.
Markets are still not out of woods and it is actually the IT majors that are giving some respite to the indices and RIL gave some cheer after the news on cash reserves came out [perhaps some short-covering as well]. On a longer term basis, RIL has potential to deliver some gains but we must be aware that even on monthly charts, this counter is stuck in a broad range of 600-1200 and then the bands get narrower as we move to weekly / daily charts.
Steel continues to remain weak and so will auto-majors for the time being. The bearish outlook for Nifty stays until the end of this week. 4911-4944-4994 continue to be strong resistances for the ultra-short term but a Santa Rally is on the cards. Euro-Dollar staged the first close below 1.3275 overnight and it is very critical to regain this level overnight today. In case it closes below 1.3275 today as well, then the next logical destination is 1.1850 in a phased manner of course [1.5 to 1.38 across 3 weeks in April; a 62% retracement to 1.44 levels across the next 5 weeks; 1.44 to 1.34 and then a 62% retracement to 1.385 levels; a sharp fall to 1.3175 levels now i.e. it is falling 1000 pips roughly and gaining 630 pips roughly and pretty much a 3-5 week cycle being followed for the falls and for the rise!]
Regardless of what Moody's, Fitch or SnP say about Euro-zone and downgrades, markets have discounted the challenges through Credit Default Swaps and Bond Yields. Dollar Index is headed to 81; The real challenge is almost nobody knows the degree to which these transactions have been leveraged and who are the under-writers. It is one thing to say we have a net credit taking MTM values of Long-Short positions and another to have the break-up because the MTM net credit is worth only if the counter-party insuring the debt is solvent; if not, it is a double whammy for financials and this is a highly probable outcome when the event takes place.
Looking for a bottom to be established for Nifty @ 4450-4550 and BNF @ 7800-8000 levels in the near future. Nothing much to add except for the fact that we are on the cusp of bottoming out on Nifty, some consolidation and then the upward march should begin. I would not lend too much credence to western analysts talking about BRICS under-performing in 2012-2013 etc; the longer term cycles clearly establish that Asian markets top and bottom out much earlier than western indices and Dow tends to be the last; case in point whilst Nifty and Hangseng topped out in last quarter of 2010 and started falling, FTSE topped in Feb '11 and Dow topped out in May '11; there is still the possibility of Dow retesting the 12200-12400 levels [again repeating 12200 has been achieved and 12400 is very much a possibility even now].
Even with a slow-down, BRICS will be growing at over 6% despite inflation and high interest rates. There are election pressures in a lot of countries in the next 6 months at state or country levels so the hot money inflows would wait and there are always liquidity pressures that may drive some sales further. In the period March 21st to June 21st 2012, we can expect the next phase of bull run to begin on Nifty.
For tomorrow, 4720-4728-4750 will be critical supports and 4840-4880-4911 will be critical resistances.
[Have made some lengthy posts since Friday to throw light on both domestic and international factors for fundamentals and some longer term outlook] Now until Friday, expect shorter posts with critical support, resistance levels and some stock specific advice only
As expected, the Euro-Dollar / Rollar are taking toll on BNF. Adding to the woes of 2 major BNF components are Credit Default Swap Premiums in the Asia Pacific market for ICICI Bank [i.e. the Bond Markets think a greater proportion of ICICI Asset Books are unsecured and capital infusion challenges for SBI - source for both these news bites courtesy Bloomberg] and thus, a test of 8280 on BNF is on the cards soon. Premiums on Nifty as well as BNF are pretty healthy now despite such low levels on spot indices. That being said, the rise from sub-8500 levels to almost 8600 levels today is also a morale booster for this counter. Again upto 8800 will just be a technical pull-back aided by short-covering.
Markets are still not out of woods and it is actually the IT majors that are giving some respite to the indices and RIL gave some cheer after the news on cash reserves came out [perhaps some short-covering as well]. On a longer term basis, RIL has potential to deliver some gains but we must be aware that even on monthly charts, this counter is stuck in a broad range of 600-1200 and then the bands get narrower as we move to weekly / daily charts.
Steel continues to remain weak and so will auto-majors for the time being. The bearish outlook for Nifty stays until the end of this week. 4911-4944-4994 continue to be strong resistances for the ultra-short term but a Santa Rally is on the cards. Euro-Dollar staged the first close below 1.3275 overnight and it is very critical to regain this level overnight today. In case it closes below 1.3275 today as well, then the next logical destination is 1.1850 in a phased manner of course [1.5 to 1.38 across 3 weeks in April; a 62% retracement to 1.44 levels across the next 5 weeks; 1.44 to 1.34 and then a 62% retracement to 1.385 levels; a sharp fall to 1.3175 levels now i.e. it is falling 1000 pips roughly and gaining 630 pips roughly and pretty much a 3-5 week cycle being followed for the falls and for the rise!]
Regardless of what Moody's, Fitch or SnP say about Euro-zone and downgrades, markets have discounted the challenges through Credit Default Swaps and Bond Yields. Dollar Index is headed to 81; The real challenge is almost nobody knows the degree to which these transactions have been leveraged and who are the under-writers. It is one thing to say we have a net credit taking MTM values of Long-Short positions and another to have the break-up because the MTM net credit is worth only if the counter-party insuring the debt is solvent; if not, it is a double whammy for financials and this is a highly probable outcome when the event takes place.
Looking for a bottom to be established for Nifty @ 4450-4550 and BNF @ 7800-8000 levels in the near future. Nothing much to add except for the fact that we are on the cusp of bottoming out on Nifty, some consolidation and then the upward march should begin. I would not lend too much credence to western analysts talking about BRICS under-performing in 2012-2013 etc; the longer term cycles clearly establish that Asian markets top and bottom out much earlier than western indices and Dow tends to be the last; case in point whilst Nifty and Hangseng topped out in last quarter of 2010 and started falling, FTSE topped in Feb '11 and Dow topped out in May '11; there is still the possibility of Dow retesting the 12200-12400 levels [again repeating 12200 has been achieved and 12400 is very much a possibility even now].
Even with a slow-down, BRICS will be growing at over 6% despite inflation and high interest rates. There are election pressures in a lot of countries in the next 6 months at state or country levels so the hot money inflows would wait and there are always liquidity pressures that may drive some sales further. In the period March 21st to June 21st 2012, we can expect the next phase of bull run to begin on Nifty.
For tomorrow, 4720-4728-4750 will be critical supports and 4840-4880-4911 will be critical resistances.
[Have made some lengthy posts since Friday to throw light on both domestic and international factors for fundamentals and some longer term outlook] Now until Friday, expect shorter posts with critical support, resistance levels and some stock specific advice only
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