Friday, November 11, 2011

EOD Analysis for 11th November 2011 and Outlook for 12th November 2011

Banknifty as indicated earlier took steep cuts on the back-drop of a weak Euro-Dollar; now many might see the Euro-Dollar exchange rate showing up on the screen with a mild tinge of green and wondering what really went wrong; on 9th BOD, Euro-Dollar was at 1.382 and started moving back towards 1.3641 as I was doing the wrap-up for the day; it went further down to 1.3555 before resurging back and the result is that even Indian banks have some exposure to European debt directly or indirectly and hence both Euro-Dollar and risks associated with bad debts of Europe will have an impact on Banks. Secondly, the lack of business credit growth and rate hikes by RBI are not helping either;

The relief rally on Euro-Dollar may go once again upto 1.375 levels before heading down to the next destination that is 1.3475-1.3495; one may recolleact that the first fall was aggressive, then it took about 8 days in a tight range before heading to sub-1.36 levels; now, once again, it may spend some time consolidating in the 1.3550-1.3750 [or a shade higher] which in turn may bring in some short-covering on BNF. Infy did crack below 2800 levels but is still above 2750; TCS saw some gains; MnM saw some gains; index heavy-weight RIL held the fort well today and the critical 5148-5169 levels held fort.

So critical levels remain unchanged from previous post; today marked the 20th consecutive close above 5032-5092 levels and may hold fort on Monday as well IMHO. What remains to be seen is whether these levels will hold fort on Tuesday on closing basis. In case, these levels hold fort on closing basis on Tuesday, safe to assume that the same will hold fort for another 2 weeks [when 5 sessions held, 8 was probable; when 8 held, 13 was probable; when 13 held; 21 was probable and hence this outlook]

Another thing for those interested in the day charts and a little more study - today marked 89 trading sessions from the 6th July high of 5740! pull out a chart for the moves surrounding +/- 3 days from that day and the moves for the last 5 trading sessions - hourly charts would be the best way to do so.

FTSE, DAX are staging a counter-trend rally after the severe falls from the highs; FTSE has potential to go all the way to 5550-5600 before retreating and DAX has potential to go to 6050-6100 before taking the next leg down; eventual target for FTSE is 4800 with a stop at 5300 for next week in all likelihood; DAX is sub-5k levels with a stop at 5600 levels again next week in all likelihood and Euro-Dollar rates given above. SGX Nifty, Banknifty and Nifty will all mirror these moves simply

Example of how stupid media channels are getting, even reputed ones like bloomberg; yesterday Hang Seng had a fall of 1050 points on closing basis and today it closed 173 points above yesterday's close. The headline reads 'Asian Stocks Up due to calm in Euro Region'!

Back to Nifty, short-covering is pending so we need to see how things pan out; charts for Dow suggest that one more leg to 12k-12200 levels are expected before the eventual fall; Dow has a pending target of visiting 11500 levels once within the next 8 to 10 trading sessions as per charts and counts that I have.

A Black Swan Event: There is one event that may send all markets on steroids giving bulls a lot of fire power so one needs to be alert on that as well; ECB printing money by bucking under pressure from a lot of politicians - remote chance but given such a grim scenario, one cannot rule out this possibility. Now the money printing can come in the form of lower interest rates, unlimited bond buy-backs or some sort of a ponzi leverage scheme of the EFSF - just in case this happens, then stocks and commodities have one trajectory and that is north with a lot of fire power with bulls; one needs to be alert and if this happens, bears will be trampled royally by the bulls [something similar to the rise from 5177 to 5944 we had in April or 5196 to 5740 we had in July/August]

That is how the outlook stands for Indian as well as global markets and hence there will be no updates this weekend in terms of Global Market Updates as all major points have been covered here. The DJIA section will have a brief update tonight and that should wrap up the week.

Hope all of you had a nice and profitable week - we did with some good gains again made by the hedges rather than the original positions. Wishing all of you a good weekend. I may not be able to join the call tomorrow with QOji but will upload the audio file when I receive it.

As usual, if I am around on yahoo or skype feel free to ping me; those sending add requests, again my humble request would be to send the add request with an introduction and contact details - otherwise the request will be simply declined. Hope all of you enjoy a good weekend.

Adios - hasta el lunes en tonces ;-)

Wednesday, November 9, 2011

EOD Analysis for 9th November 2011 and Outlook for 10th November 2011

A day before the holiday, everything seemed hovering around the surface and 2 triggers brought in steep cuts on broader markets and Nifty

SBI results below par [although it did make a day high of 2017] by the time the results were announced, selling en masse and what a dramatic fall it was - leading the steep cuts on BNF rather than extending it as a result.

Italian debt yields hit 7%, Euro-Dollar broke the 6 day tight range and printed below 1.375 [1.3641 as I write this] that is setting the course for banks across the board. 9500-9750 seemed to provide interim support but how long it will stay, one has to see; lots of short-covering pending but things are on tenter hooks

Critical levels remain unchanged and if Euro-Dollar goes towards 1.28 - 1.32 range which is an expected target over the next few days, all interest rate sensitives will take steep cuts as we saw today. FMCG and IT are showing some strength but as mentioned yesterday as well, the market breadth is negative and it remains to be seen how long these hold out. 5032-5092 levels are still holding out and we need to see whether these levels hold until Tuesday EOD.

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