EOD Analysis For 3rd February 2012 and Outlook For 6th February 2012

Pretty much a topsy-turvy session for most part of the day with rangebound action and then we had the last 90 minute spike. OI in Nifty futures pretty much unchanged from yesterday and VIX marginally above 24.

Being a Weekly close this was critical [each weekly closing has been above that of the previous one in the last 4 weeks] and today is the 4th consecutive close above the 5177-5196 band and we can expect this to hold out on Monday as well on closing basis. However, to sustain further upside, more volumes are needed [can come with shorts in the system as well]

Critical levels and outlook remain unchanged from the last 2 posts.

As I had mentioned earlier, 2 consecutive weekly closes above 5250 and will be forced to believe that 4531 was indeed the bottom for the bear market on Nifty. If next Friday's close also goes above this that will be the complete confirmation.

Just an EW Perspective for the Alternate Bullish Count

As Raghuji and SMO also mentioned in their blogs that we can take the upside from 4531 as the start of the bull market - this is very much possible but would like to draw the attention of both bulls and bears to one point here basis wave personality /amplitude [Reference: Chapter 2 / Page 79]

[A very nice EW/Fibbo perspective for the recent price action has been given in firecharts.blogspot.com as well]

Whatever the final end of this upside from 4531 [will be the Intermediate Wave1] when falls will be triggered, if it is indeed the start of the bull market, then one can expect a 61.8% to 90% drop of this rise.

Here bulls should not lose hope and bears should be aware that it is just a back-test of the rise and should gear up for the next powerful Wave 3 that will be wonders to behold.

Unless we close below 4880, the hopes of plugging the gap-ups won't be revised; unless 4690 is broken on closing basis, panic won't enter the system.

Pardon me for repeating this on a daily basis but I see a lot of Puts being bought in desperation without adherence to Hedges/Stop Losses and all that this will do is erode trading margins.

From an investment perspective, we have always maintained that sub-4800 levels are good to accumulate NiftyBees, BankBees and some specific stocks in a staggered and systematic fashion.

Global Market Updates:

Dow: As mentioned in the DJIA Paradox section, the rise beyond 12600 certainly has had a lot of people foxed [including me] and if DJIA takes out the 2nd May 2011 top of 12873, then the next assault will be at 13200 in all likelihood. Initial sign of weakness only with a close below 12200 on a weekly basis and 1280 on SnP500

FTSE: Initial signs of weakness only with 2 consecutive closes below 5550.

DAX: Initial signs of weakness only with 2 consecutive closes below 5750.

Euro-Dollar: Targets remain unchanged at T1 = 1.25 and T2 = 1.185 but 2 consecutive closes above 1.325 and this will need to be revisited.

For those who have academic interest, there is a very nice article on marketoracle.co.uk about the perils of having bad fundamentals and a hot stock market.

Interesting Read Indeed: http://www.marketoracle.co.uk/Article32901.html

Enjoy your weekend - next update on Monday EOD

EOD Analysis For 2nd February 2012 and Outlook For 3rd February 2012

Good start for the day and barring a couple of straightline cuts [on the intra-day line graph], Nifty was positive for most of the day. Metals continuing their winning streak and bell weather stocks still making hay. Volumes were pretty much unchanged from yesterday with OI in Nifty futures hovering around the 26 million mark. VIX moved up to 24 levels today which should put bulls on alert now as IMHO, this is an indication of some broader market selling pressure and this rally is getting a bit tired now.

Unless we see a strong correction in Banknifty and more so in bell weather stocks [they have rallied far more than Nifty or Banknifty by a factor of almost 2 to 3 times from the recent lows] no major fall can take place. Falls and corrections will be healthy now. All major indicators showing the system is overbought but still no sign of cooling off - not a good sign for the medium/longer term

Critical levels and outlook remain unchanged from yesterday. Today was the 3rd consecutive close above the 5177-5196 band.

Unless we see a close below 4880, the hopes of plugging the gap-ups won't be revived
Unless we see a close below 4690, there will be NO PANIC in the system


Other Updates [For Academic Interest Only]:

The Great Fall on Baltic Dry Freight Index

I had a couple of queries yesterday as to what does the steep fall in the Baltic Dry Freight Index [fell to a 25 year low yesterday] mean for basic commodities now? How much of a correlation do we have for capital markets?

My 2 cents on that is simple - the commodity prices will continue to depend on Comex futures [artificial values via speculation] values and one should not read too much into the BDFI fall; the steep cuts are a result of excess capacity in the system with lesser cargo demand/supply [physical cargo movement]. Freight rates will continue to be depressed unless there is a good demand supply balance.

For traders / corporations that have shipping freight rates as a cost factor, this is a positive development as their freight costs will greatly decrease [already down over 15% and another 15% -20% reduction anticipated for next 12-18 months].

For small and medium sized corporations that need containerized shipping, the breakeven point to switch from LCL [Less Than Container Load] to FCL [Full Container Load] has shifted downwards from 9 CBM -11 CBM [Cubic Metres] to about 6-8 CBM now [just a rounded back of the envelope estimate for Asia-Europe and Asia-North America sectors]

Containerized shipping corporations should ideally look into this aspect and create business relationships to tap this large customer segment dominated by middlemen rather than try to play with the speed of the ships, delay transit times etc. The greater the utilization of fleet, the better for all in the industry. Keeping ships idle or slowing ships down is no solution to the grave problem at hand. No major turnaround can be expected for the next 18 months or so as far as the shipping industry is concerned.

FDI in Retail

Politicians undoubtedly are misleading the people. Given the demographics of Indian populace and real estate costs, FDI in retail is certainly not going to replace the millions of kiraana stores - if anything, the development of retail segment will augur marginally higher benefits for farmers, improve operational efficiencies in the value chain and reduce wastage of agricultural produce of India [currently estimated at about 30%] Test runs of alternate channeling have already been done by ITC [via e-Choupal - most successful for soya in Madhya Pradesh] and even FMCG segment via Project Shakti Amma in Tamil Nadu.

E-Choupal did agonize the middlemen involved in the trade but enhanced earnings of soya farmers by almost 20% and yet gave a reduction in input costs for ITC! [and it goes without saying that the additional revenue in the farmers' wallets opens up markets further for ITC - a complete Win-Win proposition]

[Both the case studies for e-Choupal of ITC and Project Shakti Amma can be easily found and downloaded on the ECCH website - I am just relaying information as usual that I came across]

As early as 2001-2002, Spencers Retail forayed with Giant Hypermarket in Hyderabad and a couple of years ago, Metro Cash and Carry was successful in Bangalore - one interesting outcome was that a lot of kirana store owners preferred to make their purchases from these hypermarkets as their costs would be lower than the cost of ordering from the Carrying Agent.

So the political opposition is mere nonsense as usual but majority of people do not see the big picture [unfortunately]

EOD Analysis For 1st February 2012 and Outlook For 2nd February 2012

Muted start basis global cues and volumes pretty much unchanged from yesterday. A sudden spike up came in when Europe opened in the positive territory. Sectoral churns as usual for most of the day but bell weather stocks still making hay. BNF, Infra and related stocks witnessing remarkable recovery from the lows of the day.VIX hovering around 23 which is pretty much a respite for bulls.

Critical levels and outlook remain unchanged.

Today was the 2nd consecutive close above the 5150-5177-5196 band and hence one may expect more upside from here towards the 5280 region - hats off bulls for pulling this off [who have literally defied gravity in the last 4 weeks!]

4th milestone cleared in 4 weeks
A] 2 consecutive closes above 4840-4880 band
B] 2 consecutive closes above 4944-4994 band
C] 2 consecutive closes above 5032-5092 band
D] 2 consecutive closes above 5150-5177 band

Unless there are negative triggers, at a minimum upside can go to 5280 levels; momentum going in favor of bulls [volumes are coming in courtesy shorts] and the over-bought signals still remain stagnant. Gap-downs are getting plugged within the same day or next where as up-gaps are pending since 10th Jan '12.....

Only a close below 4880 can revive hopes of plugging the gap-ups
Panic to enter the system only with a close below 4690 [far away from where we are right now!]

EOD Anlaysis For 31st January 2012 and Outlook For 1st February 2012

A good start to the day but volumes were lower with OI in Nifty futures hovering around 24.5 odd million in the morning session and another 1.5 million added after Europe opened. Sectoral churns were happening as usual with banks, IT, Reliance leading the rise whilst LnT, Infra saw some short-covering in the last hour adding to the gains. Bell weather stock Tata Motors once again extending gains [hats off to some seniors on mmb and our group who were quite confident of this upside even when the counter was at sub-180 levels]
Another stock that has gained good traction in the recent past is Sesa Goa. The momentum exhibited by these 2 counters in the last 4 weeks is over-whelming. Yesterday's gap-down has already been plugged

Critical levels and outlook remain unchanged. To sustain the upside, more volumes are needed which again seems like have a chance to surface basis shorts entering the system! Thanks to one of our team members Abhay Dubeyji for pointing this out- a strange jinx seems to have entered on Tuesdays since the beginning of 2012; every Tuesday, Nifty maiya tends to hit a century to the upside [how far it will happen, GOD alone knows]

Today's close is also significant due to the monthly close and the verdict for 2012 seems to be very clear IMHO- Nifty will gain a lot of traction as we progress through 2012 and from an investment perspective, now all falls must be utilized to accumulate.

The only factor for which my opinion is different from some seniors / experts is that at a minimum, the recent lows need to be backtested to plug the gaps; however, 2 consecutive weekly closes over 5250 and we have to accept that sub-4550 was the bottom. My personal concern with the meteoric rise from 20th Dec lows are the volumes

Options Data Noise (Some air cleared today):
On the options data front, the 2 deeply ITM options mentioned yesterday 5000 Feb CE / 5300 Feb PE still displayed same traits as yesterday initially; the 5000 CE has an additional time value of about 60 points over intrinsic value whilst the 5300 PE had 25 points over intrinsic value until the last hour where it gained another 25 points of time value. Now it seems realistic on both sides compared to yesterday. Lot of demand / supply coming in for the 5300 PE in the last 30 minutes.

EOD Analysis for 30th January 2012 and Outlook For 31st January 2012

Negative start to the day aided by global cues and the Hanging Man candle spotted on EOD Friday was vindicated today. OI in Nifty futures was pretty much the same as on Friday i.e. 26.5 odd million; VIX did spook up to 23.5 odd levels but no panic for bulls as such - just an alert. Compared to the last 3 series, it is still a good sign IMHO because we used to see OI in Nifty futures well below 25 million when new series used to begin. 1 gap-up created on Friday has been plugged [and goes without saying that we can expect today's gap-down also to be plugged within the next 5 weeks or so]

BNF as usual led the falls and other index heavy weights like LnT (all gains of Friday reversed) and the IT pack also saw profit booking. As long as bulls manage to retain 5032-5092 levels, they have a good chance of testing the UTL of the main resistance line 6338-5944-5740 now at about 5280 odd levels* [*subject to 2 consecutive closes in the 5150-5177 zone or above]. Upto 4911-4880 on the downside will just be routine profit booking if such steep cuts do come in which I guess they will as we progress through this series.

However a close below 4880 can set in a fresh round of shorts but we will see when we get there; closing above 5150 was deemed a low probability event in some of my earlier posts but then we saw 2 consecutive closes above that!

Options Data Noise???: Surprisingly even the deeply ITM Feb 5300 Put did not move with with expected delta factor of 1 and even at the lows of the day, it was hardly commanding any additional time value [around 10 points only] over its intrinsic value! IMHO, we should observe price action of this security over the next couple of sessions because such weird behaviour in options price is rare at the beginning of the series. Moreover, deeply ITM Calls like Feb 5000 still carry significant time values over intrinstic values!!

Personal Inference: The big bets still are lying on the upside for a couple of sessions OR Call Writers are setting up the stage for bulls just as they did for bears in Jan series.

Time frame, thankfully went in our favor once again with high weightage for 30th Jan! Next 2 high weightage time periods are 6th Feb to 8th Feb and 3rd week of Feb with highest weightage revolving around 22nd Feb - direction for 6th-8th to be determined later but I am personally bearish for the 22nd Feb period.


Panic will enter the system only with a close below 4690 and should that happen, at a minimum we will retest the recent lows and worst case scenario make a new low [far away from where are right now so let us take each session as it comes]