EOD Analysis for 21st October and Outlook for 24th October 2011

Huge OI in Nifty futures today at almost 31 million throughout the day indicating a lot of roll-overs on both short and long sides. The downside triggers were kept probably for the last minute and the most visible counter with action on both sides today was LnT; at one point of time leading by over 1.5% gains in a flat market, it dropped almost 75 points from the highs of the day [I have no access to 'media' bites in Spain but it was very fishy; aggressive Call Writing seen at 1350 and 1400 levels and likewise with Puts; [Short Puts covered at lows and converted to longs with a lot of fluidity that is not a characteristic of LnT options normally; Puts gained within a span of 20 minutes and ideally, such a manipulative move calls for an investigation by the toothless regulators of India! Deep inside I know nothing is going to happen and some big guys are going to feast at the expense weak hands]

Infosys still managed to hold the 2700+ mark but could not extend the gains; Tata Motors has given a close below 180 but still far away from the crucial closing below 175 after which bears can rejoice - right now the counter is dicey] IDFC too managed to hold the 120 levels. So still not the right time to go short on these counters as they showed strength in the trough of the day as well.

I still maintain that the news over Greece has nothing much to do with the market movements and in either case, the downside risk is far greater than the upside risk regardless of whether or not a solution emerges.

If the proposed leveraged bail-out fund system comes in, it means write-downs in assets as far as investment banking is concerned and this means a confirmed sell on all bourses to make up for results [Only thing is that in this scenario, markets will rejoice for a couple of days before biting the bullet and then fall IMHO] If no solution emerges, then it is a confirmed sell without even blinking the eye. So for all who think that this is going to have some major impact on markets - yes with more downside risks

Dow in all likelihood will again repeat a show of happy Friday and sad Monday and that implies a bad Tuesday on the cards for Nifty - nevertheless we take it as it comes on Monday and review the situation again. This is the 8th consecutive close above 5032 now; IMHO, if bulls manage to retain this level on closing basis on Monday, then this may hold the downside risk to 4980 next week but the probability seems bleak. Weakness to be only confirmed after Nifty posts a close below 4880 and Banknifty posts a close below 9500.

Global market updates will be given over the weekend as usual; thanks for visiting our blogs and hope you enjoyed the profits. After a disappointing performance last week, happy to say that things got better for us this week. Enjoy the weekend and I hope to meet some of you online tomorrow for the discussions with QOji.
That is it from my end for now

PS: We are planning to make some cosmetic changes to the blog as the readership is increasing and some of our followers are having challenges to download the pages on mobile. So we are planning to eliminate pictures on background etc and change the template to a very simple template without too much color etc; so don't be startled to see plain vanilla pages next week.

EOD Analysis for 20th October and Outlook for 21st October 2011

Before the post-mortem and outlook 2 points from me

One of my well-wishers keeps reminding me from time to time - Nagi you need to add MA also to your learning arsenal along with FA, TA and SA for Nifty maiya
FA = Fundamental Analysis, TA = Technical Analysis, SA = Sentiment Analysis and MA NOT Equal To Moving Averages but Manipulative Analysis! Whilst I find it a bit difficult to digest on an index basis but these days I do keep that in mind [remember the options data noise I mentioned yesterday?]

Now, for those who find it confusing about EW with regards to the index itself and with regards to stocks; allow me to quote from the EW textbook Chapter 6, Page 169-170

Q
As a mass psychological phenomenon, the market averages unfold in EW patterns regardless of the price movements of individual stocks, the count for many issues is often too fuzzy to be of great practical value. In other words, EW can tell you if the track is fast but not which horse is going to win. With regard to individual stocks, other types of analysis are probably more rewarding......[text continues]
UnQ

Q
Close-end stocks of investment companies and stocks of large cyclical corporations, for obvious reasons, tend to conform to the patterns of the averages more closely than most of other stocks
UnQ

Now, any surprise why Raghuji keeps saying trendlines, momentum and then waves? It is relatively easy to work out a count for counters like Nifty, SBI, Infosys but next to impossible for counters like Jubilant Food, KS Oils. Cals Refineries, Shri Ashtavinayak [all operator driven multi-beggar (not multi-bagger) stocks that di-worsify (not diversify) investor risks] Tomorrow somebody might turn up and say let us do EW for the Call Options and Put Options of this month series! The analysis will lead to paralysis and one can safely conclude EW = Idiot Waves - as my lovely captain wwji puts it, applied with the right context, they are brain waves and as the proponents themselves keep saying - use in conjunction with other indicators for best results

oodi baaba - it is still not time for weekend puraan version! back to plain vanilla stuff

The OI in Nifty futures stayed around the 25 million mark today in the morning and mid-session but rose to 28 million again with both the fall and the rise; VIX spiked up a bit and crossed over 25; Banknifty did spike up a bit beyond the 9750-9800 levels but there was never any indication of supply; that continues to be the profit booking zone now unless it stages 2 consecutive closes above 9750. Weakness to be confirmed only with a close below 9500 that opens BNF for retest of 9000-9250 levels. At the same time, weakness in Nifty to be confirmed only with close below 4880 that opens Nifty for a retest of 4750 levels.

5032-5092 levels survived yet again so the upside gains possibility is very much on the cards but difficult to see beyond 5169-5177-5196 levels for now. Infosys retained the 2700 levels and one can see the bounce it took in the last 1 hour. It still has some steam for another 25-50 points IMHO before the next leg down

Stay hedged, adhere to SLs and enjoy the net positive results - that is all for now.

EOD Analysis for 19th October and Outlook for 20th October 2011

Nifty opened on a positive note with positive [albeit temporary] positive news and today the volumes were encouraging with the rise; Nifty futures had an OI of almost 28 million throughout the day and Banks led the way along with Capital Goods and Reliance. Weakness will come in only with a close below 9500 and until then one should retain hedges on shorts until BNF does not show volume and momentum to the DOWN below 9650-680 levels.

2 consecutive closes above 9750 will open BNF for a retest of 10k levels whilst a close below 9500 opens BNF for a retest of 9000-9250 levels. For Nifty 5032 is extending its support and safe to assume that this may hold until Friday as well. On the upside, 5092-5125 zone was successfully tested and now the onus on bulls is to stage a close above 5150. With a close above 5150, Nifty can get a lot of steam to gain upto another 144 points filling up that gap of 5177-5328 on the upside. Markets are not out of the woods but for those expecting the down gap 4750-4880 [including me personally] - this will only happen after Nifty posts a close below 4880. The volatility factor seems to be a bit under control now as yesterday's fall did not trigger a big increase in VIX whilst today's rise has brought VIX to sub-25 levels [though this does not warrant complacency for bulls as it could simply be a ploy of hot money trying to suck out options premium and accumulate them at lower prices!]

Also it was strange to see the way Nov 4800 Put behaved today - at spot price of 5115 in the middle session, it was quoting 41 a piece and then towards the end even with Nifty at 5140+ on spot price, it managed to quote 42 a piece [whether this is accumulation or simply a lot of retail traders jumping on to OTM Puts remains to be seen towards the end of this week] Yesterday, similar behaviour was seen at the Nov 5200 Calls that extended significant premium towards the end of the session [at Nifty spot 5025, the 4800 Put was going for 70 a piece whilst the 5200 Call was going at 80 a piece] Whilst the options data do contain a lot of noise, even amongst the top stocks, some divergence was seen

Banks had a stellar gain and same was the case with LnT, DLF and marginal gains from Reliance. However, Infosys still maintaining a close above 2700 showed signs of tiring out and likewise with MnM. Good short-covering seen in IDFC, Tata Motors whilst TCS still remains a laggard.

EOD Analysis for 18th October and Outlook for 19th October 2011

Following weak global cues, Nifty opened with a gap down but the OI in Nifty futures was hovering around the 24.5 million mark in the morning session and as usual, another 2 million OI added with the further fall. BNF as usual was the first to take steep cuts due to the anticipated financial turmoil in the western world. Frankly, this is a lame excuse used on all bourses. The fact that Greece won't pay it's debt has been known for more than 2 years now and that is a stupid excuse to rant upon again and again. What is critical to see is whether the printing presses get activated or not - US is literally working 24 x7 to print currency and same is the case with UK now; ECB so far has refrained from doing so but the day is not far when it does
[and this is the real problem - the onus of bailouts rests only with Germany now and with inflation already much more than anticipated, it is fearful of printing more money and increasing inflation whilst a debt default will result in panic sell across all asset classes - Catch-22 situation did I read- yes indeed!]

The Euro-zone crisis will manifest itself completely only towards Feb/Mar '12 in a full blown manner IMHO.

For now 5032 survived and this was the 5th consecutive day above 5032. It is critical for bulls to retain this on closing basis tomorrow which then has potential to be the bottom upto Friday on closing basis. A close below 5032 will open Nifty for a retest of 4944-4980 levels where if the falls are not arrested, there is a danger of retesting 4880. Since 5032 has survived, we can expect one leg of short covering to at least take Nifty towards the 5092 levels and if bulls manage a close above 5092, there is still a chance of retesting 5125-5150-5177-5196; a close above 5150 will give upto another 144 points on the upside and a close below 4880 will yield upto another 144 points in the same direction.

Weakness to be confirmed when BNF stages a close below 9500 which opens BNF for retest of 9000-9250 levels. Now on a stock specific basis, although a lot of counters were badgered today, Tata Motors still managed to retain the 180+ level, MnM managed to retain the 800+ level and Infy managed to retain the 2700+ levels. This still keeps the hope of another 20-30 points each in Telco and MnM and another 50-75 points on Infy. [underlying message - refrain from blind shorting]

Still looking at 9750 as sell levels for BNF and 5092-5132 as sell levels for Nifty - as always initially with a hedge and subject to conditions given above. 2 gaps still remain pending to be filled [5177-5328 on upside] and [4751-4888] on downside

EOD Analysis for 17th October and Outlook for 18th October 2011

Nifty made a modestly positive start today and Banknifty also made that cross-over of 9750 level within minutes of opening bell and profit booking was witnessed around this pivot point as expected. The morning session had OI in Nifty futures hovering around 23.8 mill thereby keeping action subdued for some time. The first leg of fall attracted another 1 million of OI [unlike last week where a fall of 30 points was enough to attract an OI of 2 to 3 million] The VIX too did not shoot up drastically in the first leg of fall and in fact towards the end showed a lot of calm. Is it the silence before the storm - time will tell.

This is the 4th consecutive close above 5032 and IMHO this should hold out tomorrow as well and the downside risk should not go below 4980 for tomorrow at least [this is also the 2nd consecutive close above 5092]. Banknifty may once again try to cross over 9750-9800 levels but unlike what analysts project, very difficult to expect fresh supply here. Would rather look for signs of profit booking in this zone and that would be the recommended strategy for BNF futures. Open shorts around 9750 levels on spot with a hedge for the first short and 9800-9825 for the next one.

Automotive counters like MnM, Tata Motors continued their winning streak in the morning session. Now Tata Motors has fulfilled a crucial condition of 2 consecutive closes above 180 levels [of which 1 was a weekly close last week with an inverted hammer on the charts. Still vary of this because Tata Motors has gone through a sharp sell-off within a week of formation of the inverted hammer in the past few weeks. Technical Resistance lies at 195 and 215 now and the eventual target is sub 125 levels for this counter]

I keep mentioning Tata Motors and MnM from time to time because I see mass mailers going out from 'expert advisers' to short these 2 counters - whilst falls are inevitable, blind shorting will only increase losses especially considering the higher lot sizes for these counters. One should not short Tata Motors unless it gives a close below 175 and one should not short MnM before it gives a close below 780 levels IMHO.

Lot of noise and divergence seen on the bourses today. RIL and LnT gave negative divergence whilst automotive and IT gave a positive divergence [though some profit booking was seen in this segment] Markets are definitely not out of the woods and the proposed solution to the Greek debt problem will not result in a happy ending. There might be a knee-jerk reaction to the haircut on Greek debt balanced by money printing by the central banks in Europe and US - what will follow is a sharp sell-off worse than what we witnessed in September. Please ensure that you take hedged positions and adhere to stop losses and ride the winning leg.

Global Markets Update - Special Coverage For Indian Bourses16th October 2011

On Nifty, The move upto 4950-5032 was very much anticipated but beyond that, there have been a couple of googlies that forced some of us to go back to the drawing board.

Now some autopsy as to why I got foxed with some stock specific action

1] INFY: We could not see beyond 2700 for this counter [because a close above 2700 would be a crucial game changer with possibly another century of points before heading south which seemed improbable] especially with so much aggressive Put Writing that took place at 2600-2700 levels

Reality: INFY made 2 attempts to cross over 2700 and on 2nd attempt, made the half century beyond 2700 in a jiffy! All Short Puts ran for cover and now this counter will make that desperate attempt to cross-over 2800 and the bearish stance [we are very sure of the bearish outlook unfolding soon] will be confirmed with a close below 2650 - until then one should not jump for shorts or Puts on this counter

2] RIL: Anticipated a rise towards 825 with a close above 750 but could not see beyond that. Now weakness will only be confirmed with a close below 775 and until then one should wait and avoid jumping on shorts here

3] LnT: There was a counter-trend rally towards 1375 pending but the short-covering rally went far beyond that. I was keenly looking at behaviour of 1350 / 1400 Call Options on this counter and saw a lot of aggressive call options being written here [looking at the rear view mirror, seems like that was Short Calls running for cover rather than fresh call options being written]

4] Tata Motors: This is one of the biggest failures in anticipating the counter-trend moves - so damn focussed I was in observing the behaviour of 150/160 Put Options behaviour because I was pretty sure that the counter-trend move won't go past 170 odd levels. There was Put Writing on-going here and with 2 googlies down already within 2 sessions, went a little further ahead to see what was happening at 190 Put Option and the same aggressive Put Writing came through over there that made me vary of some more steam here.

Our team has never staked a claim to fame nor has run out when something went beyond what we anticipated. We are only humans, prone to errors and when the moves fox us, we are upright in admitting that we are wrong at this point of time and provide the SLs [and at least fortunately for us, we adhere to our SLs]

Now coming back to the broader outlook, the bearish stance prevails. As mentioned on Friday. 3 consecutive closes above 5032 is pretty significant for Bulls and they now need 1 close above 5150 to stay in the game a little longer. A close above 5150 has potential to go all the way to fill that pending gap towards 5328 before reversing direction. Now only a close below 4980 will give first hint of weakness and 4880 will confirm the same.

Looking at the option chain for Deep ITM Puts and Calls on the NSE website, the pivot point is showing up at 3800 but IMHO, the deep correction pending that is expected to take toll on the bourses should not go below 4550 [but a weekly close below 4550 will give a retest of 4200-4400 levels in the 3rd week of November as per a critical pivot time analysis] The upside is capped at 5532 and it remains to be seen whether this manifests before or after Diwali - taking hedged positions is critical and as I have always said - cash continues to be king and we are coming to a stage where some counters are beginning to look attractive

In the auto-ancillary space, would be looking to enter Apollo Tyres at sub-50 and sub-40 levels with a 12 to 18 month time horizon; Now that Hangseng Bees are also available, would look to add some units in my DP account when Hang Seng starts trading in the range 12k to 15k [the current bounce pegs upside at 19500 on Hang Seng spot] BankBees can be systematically added in the range 7800-8800 on BNF spot and of course Nifty Bees forms a very good investment now in the range 3800 - 4500 with a 3 year target of doubling the net worth.

This is not the time to get into gold, silver etc as they are on a set path DOWN with current moves in consolidation mode. The negative divergence has already been confirmed by the negative price impact on copper and platinum!

We hope and pray for your profits and as always insist on staying hedged in trading positions until a trend is confirmed. Cutting losses is critical and warrants a deeper study [I think it is only fair for me to say yes we did get caught on the wrong side of the trend this week - if I harped about profits when moves played out as anticipated, it is a moral responsibility to stand out and say - stopped out and the week has not been good for the trading account]

Global Markets Update - 16th October 2011

So the counter-trend rallies did show up as expected. The crucial levels were provided a couple of weeks ago and we categorically said that the major indices are set for a counter-trend rally. Now where do they move from here?

FTSE: Has support at 4900 and to the extent 4900 holds, there will be bounces towards 5200-5400 and we saw these manifest already. IMHO, the upside is capped at 5550 for now and only 2 consecutive closes above 5550 will add more steam to FTSE. Once the signs of topping out come through, the next major leg down will take FTSE to sub 49k levels

DAX: The bounce to 5600 was definitely expected but the push towards 6k levels was one of surprise.....on the weekly charts, the last time DAX fell from the 52 week high of 75k+, it had taken support at the 6k levels and thus the 6k level can provide significant resistance. Unless DAX posts a weekly close above 6k, one can now expect the next furious leg down to sub 5k levels in 6 to 8 weeks time.

CAC40/Ibex35: The banking stocks in these 2 indices are most hit and regardless of what the rating agencies say or the ECB says, the counter-trend rallies here are almost over IMHO and unless CAC40 posts a weekly close above 3350 and Ibex35 posts a weekly close 8200, the next stops for these 2 indices are 2700 and 7500 respectively

Dow: The results season are around the corner and the pathetic earnings on banking counters are already discounted by the markets [seen in the KBW Banking index]. To the extent the EPS of major banks hover around 60 cents to a dollar for this quarter, the impact on Dow will be minimal. 2 consecutive closes above 11450 was crucial for Dow and this week, Dow got 3 consecutive closes above this crucial level. There is potential to retest the 11875 level now and possibly one poke at 11950-12k levels as well before it heads down. [If one has margin to hold the position for a slightly longer period, one can now short Dow futures on NSE as close to 11875 as possible with a 3 months forward contract for a target of 10250-10400 in 6 to 8 weeks]
For those who have accounts in US, it is easier to go short on Dow now with a 3 months forward contract hedged with a December 12k Call Option

On SnP 500, 1225-1250 are now Sell Levels and one can look to buy the 1200 SnP 500 Put option of December series with targets 1050-1100 in sight

Gold has confirmed its bearish outlook and with a small poke over 1725-1750 levels in the current bounce, it is all set to go down and complete the short-term target of 1450-1550 for now. Unless, another flash of mania stems into gold, it will be difficult for it to go far above [unless there is a Black Swan event of simultaneous decay of fiat currencies in a flash] that can make gold poke over the 52 week high and go to retest the 2k levels. All other things normal, Gold is headed south for now and if the anticipated bear market takes its toll next year on western bourses, gold is all set to retest the 1k mark per ounce in USD

[Confirmation of this trend comes from a lot of bull calls on bullion whilst pygmy firms have already setup up means to start collecting gold from the retail investors in shopping malls all over the place - case in point here goldbuyers-international.com that is in the forefront now with highest marketing spend]

Silver being high beta has shown its tendency to fall faster than gold and from the 52 week high, twice has shown how quickly it can fall [one just needs to see the fall from 44 to 30 that took place in a jiffy] I am hearing a lot of bearish calls on Silver projecting a price of 13-15 etc but as of now I doubt whether that would happen. In the next leg of fall, I expect silver to stabilise at USD 20-25 levels and hang in there

Euro-Dollar staged its counter-trend rally and moved beyond the 1.38 mark; with some stabilization arounf the 1.38 - 1.4 mark now, the next major leg of fall should take this below the 1.3 levels and a weekly close below 1.345 will confirm the bearish outlook on Euro-Dollar

Dollar seems to be back in vogue as most debt outstanding be it sovereign or corporate, are denominated in dollars. So when margin calls are triggered on the bourses and debt repayment instalments come closer, the demand for dollar spooks up sending all currencies down. That being said, hay days for dollar has still not begun and this negative divergence on dollar is confirmed by the USD-JPY rate; sooner than later, there should be a BoJ intervention to devalue the JPY as the charts indicate the worst case scenario for USD-JPY to be around the 72 levels and then a stellar rise to 100 plus [so from a currency futures point of view, my preferred strategy still continues to be Long Dollar-Short JPY with a 3 months forward contract]

[Note the insistance of futures and not options or intra-day trade through forex sites - forex sites go on adding swap factors for carrying the positions forward and options have a limited time to exercise unless one is holding American Options that can be exercised at any point of time] For traders in India, such trades are best left alone and one should continue with Nifty and stock specific trades.

Indian bourses continued in Part 2.....