EOD Analysis for 2nd December 2011 and Outlook for 5th December 2011

Fantastic day on the bourses and Nifty went well beyond my expected level of 4994-5011; The strength shown by BNF, Reliance, Infy, Automotive counters was great and have to hand it over to the bulls for staging this fantastic pullback from the lows of 4640. Volumes were encouraging with OI in Nifty futures at 26+ million with the rise. The close above 5032 is also an encouraging sign.

Critical condition for bulls still remains the same i.e. 2 consecutive closes above 5092-5125 levels with higher volumes nevertheless. Is the pain in the market over? My take is absolutely not and the markets are still not out of the woods and am still betting on some sharp correction to the downside from 5th December to 16th December. However, have to acknowledge that there liquidity in the system and this will find its way into index futures and options far higher than the equity side and unless the masses don't turn bearish, shorts will be chopped off [mine got chopped off too today and it is courtesy of hedges that I escaped with minimal losses but negative day in my trading diary nevertheless!]

Friday factor did not really have any impact today; taking a cursory look at the fall, Nifty fell from 5396 to 4640 = 756 points [50% retracement @ 5018 - achieved already; 61.8% retracement @ 5107 which in all likelihood seems the next assault point by bulls; this comes in the viscinity I mentioned 5092-5125 and 2 close here can put bears in ICU! Weakness confirmation for Nifty will only be after a close below 4880 and 8850 on Banknifty.

Euro-Dollar is above 1.34 that will keep banks steady for sometime;
For FTSE and DAX, 5750 and 6400 seem achievable targets from where we can see falls and weakness can only be confirmed with a close below 5550 on FTSE and 5800 on DAX.

Dow also has shown some strength and seems set to retest the recent highs of 12200-400 once before turning around. I think there is enough evidence all over the place that a deeper correction is due on all bourses but when bulls are on steroids, no point in coming in their way.

EOD Analysis for 1st December 2011 and Outlook for 2nd December 2011

Lots of liquidity injected into the global systems with concerted action by a lot of Central Banks.
So far so good; readers still need to remember that the market capitalization loss in the last 6 months has exceeded 13 trillion dollars [not counting the losses in commodities, bonds, private equity and 'hybrid' and 'structured' derivatives] This is far greater than QE1+QE2+QE3*[expected to be $545 billion] plus all of BoJ interventions, all of ECB interventions, all of BoE interventions and debt monetization continues to haunt inflation woes!

I am very disappointed with our media actors talking about Food Inflation coming under control and all nonsense; has the cost of aatta, chawal, daal decreased by even 50paise a kilo? Does your bhajiwala reduce the cost of your potatos and tomatos by even 25paise a kilo? That is the big economic situation we are living in - Economic Contraction yet Hyperinflation. Even the proponents of EW are harping all over with the dictionary meaning of 'Deflation' i.e. decrease in credit availability. That is what the banks are doing; less business credit, staff reduction but absolute punter action on all commodities driving the common man berserk. What one can purchase with a 100 rupee note or 10 Euros or 10 Dollars - the purchasing power of these notes are simply decreasing due to debt monetization. So much so for the fundamentals

Yesterday itself, we had highlighted that a corrective C wave is unfurling that will try to take out 4911-4944-4994 as it progresses. The huge gap up fulfilled 2 levels and the last poke towards 4944 and possibly 5032 is pending. Tomorrow is Friday so we may have some postive aspects in the first half and then some profit booking towards the end of the session. Option writers spot is tethering between 4900 and 5000 for now

Critical levels remain unchanged; conditions for bulls have already been highlighted
Condition for bears gets stronger only with a close below 4880 and then 4780. The gaps on upside created yesterday and today are in all likelihood due to be filled before 16th December as the OI in both instances did not exceed 24 million; today, the OI was 23.8 million on open despite such a big relief but increased to 25 million when the profit booking game started.

Inference: Sell on Rise is preferred strategy being deployed. Gap-ups and gap-downs will be a common phenomenon until about March 2012 by which time the full blown effect of the debt crisis will unfold.

For tomorrow, 4944-4994-5032 will be sell levels; no buying encouraged for Friday factor and recommend folding maximum positions by EOD regardless of profit or loss and take fresh guard on Monday

EOD Analysis for 30th November 2011 and Outlook for 1st December 2011

Volaility filled day with a lot of opportunities for alert day traders and at the same time, a potential cruel day for safe traders with so many whipsaws intra-day. Such action is not uncommon after the meteoric rise on Monday and from an EW point of view, my views are slightly divergent from that of seniors [again, would like to remind all of you that such differences of opinion are not uncommon and it does not impact our relationship in any way. Apologies for any confusion caused to readers with this divergent outlook and can only say that when in doubt, stay out of the market or play with Edge of Hedge; of course it is prudent to do one's own homework]

Back to my interpretation of waves; from the lows of 4640, I am looking at the wave structure as a 5-3-5 zig-zag A [some fractals covered in the gap-up], Flat B done today and a zig-zag C unfurling now that will try to take out 4911-4944-4994 before resuming the next furious leg down. [Expecting this furious downleg to play out in the period 5th December to 16th December with some relief rallies in between]

INFY still latching on to the 2600 mark [though 2650 would have been better] after showing a low of 2561 today. Tata Motors saw a correction to 169.5 and then some pull-back. Banks also had a very topsy turvy day though BNF closed marginally negative today.

Critical levels remain unchanged; condition for bulls is to manage 2 consecutive closes above 5092-5125 levels and for bears, 1 exhaustion gap [created on Monday's open] is signal enough and the same will be bolstered with a close below 4700; if 4640 does not hold this time and the volumes are significant with the fall, 4450-4550 is where we can expect things to bottom out.

Volumes are not very encouraging and VIX somehow is not reflecting the true status of the market. VIX shooting beyond 29-30 levels will be a disaster on the bourses.

For tomorrow, sustaining above 4840 for 60-90 minutes will open up Nifty for retesting 4911 on the upside; sustaining below 4780 for 60-90 minutes invites a retest of 4720-4740 levels. Larger trend is still down as reflected in the broader markets.

EOD Analysis For 29th November and Outlook For 30th November

Pretty dull day on Nifty with lower volumes as usual; not very surprising to see marginal profit booking after such a strong pull-back yesterday itself. European bourses also are showing strong pull-backs [DAX well above 5700 and futures trading at a premium; Stoxx 50 registering a record 5%+ intra-day gain last evening after a very long time and likewise for FTSE] Euro-Dollar still lower but does seem to be having too much impact on punters;

Back to Nifty, markets are not out of woods but if global cues are positive and Rollar eases a bit, the potential of retesting 4911-4944-4994 is open; sustained volume and momentum below 4780 opens up a potential retest of 4700-4720 levels . Critical levels remain unchanged. Keep an eye on VIX as it seemed to spike a shade more than anticipated in a a range-bound session.

EOD Analysis for 28th November 2011 and Outlook for 29th November 2011

Positive global cues and gap-ups across the board on Nifty, FTSE, DAX and Banks led the way for Nifty's rise today. Concerns still remain that the OI in Nifty futures was just 24.5 million despite such a strong rise across the board and Euro-Dollar is still well below 1.34 levels. VIX dropped more than 2 points which is a positive sign at least for the ultra-short term.

More short-covering expected on Dow as well and next targets for DAX is around 5700-odd levels before heading for the next leg down. On FTSE, we may see a leg up to around 5300-5350 before heading to the next leg down and Dow towards 11650 odd levels.

Markets are still not out of the woods and the threat of retesting 4640 and going below 4600 is very real as we chug along Dec-Jan series. On individual counters, the strong bounce in Hindalco was impressive, and DLF, Tata Motors, HDFC were strong in their bounces too.

Unless volumes rise by another 15% or so, the rise can be attributed to short-covering; Critical resistances lie at 4911-4944-4994 and critical supports are 4720-4751-4794-4808. Expect some profit booking to come through in counters that had more than expected bouncebacks [apart from banks that rose well today, major benchmark index counters rose by 1% to 2% only showing stock-specific action on upside]