EOD Analysis For 10th February 2012 and Outlook For 13th February 2012

First things first, I had mentioned last month that 2 consecutive weekly closes above 5250 will imply inherent strength on Nifty at least until Diwali 2012. That has been confirmed today and hence until proved otherwise, 4531 was indeed the bottom for the medium term [unless proved otherwise]. Corrections will come in and they will be healthy but even a fierce downmove will at the most plug the gaps created from 20th Dec and that too should be reviewed only after a close below 4880. Going below 4580 is an extremely low probability outcome now.

In 2011, Nifty spent almost 50 trading sessions in the trading range 5408-5532 and over 75 sessions if we broaden the range to 5200-5700. Similar price action can be expected in 2012 also as a lot of gains have already come in from the lows of 20th Dec '11; For now, the rally has moved too much too fast [almost 900 points in 7 weeks and the appreciation in a lot of stocks has been anywhere between 25% and 60%]

As we keep saying, there is no perpetual rise or fall - we cannot fight the ticker regardless of personal biases. From an investment perspective, again would like to reiterate that infrastructure related stocks have found their bottom - of course now they are over-heated and one should wait for the correction to buy into them

Banking stocks again have rosen remarkably but there are some head-winds pending and one should wait for a correction to buy into them. IT stocks have lots of headwinds pending and this sector should be avoided at best for 2012 in terms of fresh longs. The best bets will continue to be the index based ETFs directly like NiftyBees, BankBees and HangSengBees on dips as they automatically take care of a lot of diversification. That is all from a fundamental perspective for Nifty and major stocks.

Now for the trading levels and outlook - they remain unchanged from previous posts. OI in Nifty futures again half a milllion up from yesterday to 30.5 million today and VIX a shade hovering around 24; again reiterating these volumes are enough to take Nifty on upside to 5440-5480 levels as well as 5225-5250 levels on the downside - direction is still unclear [could be profit booking or consolidation for another leg up]

We are now 9 sessions away from Feb expiry and some fireworks are expected on either side. From a trading perspective, taking hedged positions are better.

Even the Greece impasse has apparently not created any major triggers for falls on global markets so far - thanks to central bankers who have thrusted in a lot of liquidity into the system and keeping bulls calm for now [when and how that will change - nobody knows]

Next Update for Nifty: Monday EOD

General Updates For Academic Interest
Over the weekend, I will be posting a couple of articles for academic interest only with regards to Central Bank actions and the way our lives are being wrecked by governments and some fundamentals of India.

Enjoy your weekend.

EOD Analysis For 9th February 2012 and Outlook For 10th February 2012

The gap-down start was quickly bought into and Nifty was range-bound for most of the day. OI in Nifty futures pretty much the same as yesterday and these volumes are good enough to move on either side of the scale; Sectoral churns as usual and VIX again cooled below 24.


Critical levels for downside remain unchanged from previous posts;

For the upside, now what to say??? result is on the ticker and Nifty has managed to close above 5408 and BNF is on a roll with a close above 10400; a confirmation on closing basis tomorrow will be 2 consecutive ones on a daily basis and 5th consecutive week of gains. Should that happen, the next assault in all likelihood will be at 5532 on Nifty and 10800 on Banknifty

Today was the 8th consecutive close above the 5177-5196 band and if it holds out on closing basis tomorrow [almost a sure shot event now] then the downside may be restricted to these levels only until 16th Feb EOD [following the 2-3-5-8-13 sequence on trading session basis]

EOD Analysis For 8th February 2012 and Outlook For 9th February 2012

Volumes were higher in Nifty today with OI in Nifty futures hovering around 30 million with the spiked fall and subsequent rise [sharp spikes indeed on either side]. VIX was hovering around a shade below 25 and the last hour spike brought it marginally above 24; sectoral churns doing the needful but the key thing is dips are being bought into. With these volumes, and positive global cues, definitely more upside is possible [on the other hand, should there be negative cues, these volumes are good enough to trigger sharp corrections]

Critical levels and outlook remain unchanged.

EOD Analysis For 7th February 2012 and Outlook For 8th February 2012

A very positive start to the day but most of the gains were given up by the end of the day. Technical oscillators are showing negative divergence but IMHO it is still too early for bears to rejoice. Corrections will be healthy for the market but bulls may just pick some steam up if global cues come in favor [albeit temporary] of the headwinds.

Critical levels and outlook remain unchanged. Today was the 6th consecutive close above the critical 5177-5196 band and hence the downside may be limited to these levels until Thursday EOD. To the extent the 4880-4911 band is intact, my outlook is that the scale is in favor of bulls [it doesn't matter what my personal view is but what is shown on the ticker is the reality!]

As usual, the advice is to take hedged positions and drop losing legs only after a trend is confirmed.

EOD Analysis For 6th Februry 2012 and Outlook For 7th February 2012

Positive session in the morning following amidst positive global cues and some profit booking after Europe opened; OI in Nifty futures surged marginally higher to 27.8 odd million amidst signs of profit booking. Bell weather stocks extended their gains whilst some sectoral churns were seen.

Negative divergence observed today was the surge in VIX to almost 25 levels despite the positive session and Put / Call Premiums showed premiums shifting to Put side; The put premium on the 5400 Strike carried an extrinsic value of over 50 whilst the deeply ITM 5500 Put had an additional premium of 40 [premium over intrinsic value]; On the Call Side Deeply ITM 5200 Call had a time value of just 40 odd points whilst OTM 5400 Call barely budged during the trading session

Where do we go from here?
As mentioned on Friday as well, the close above 5300 levels was significant and global markets may impact price action for the next couple of sessions. Falls untill 4900 odd levels [if they come in] will just be routine profit booking.

Critical Levels and Outlook Remain unchanged from previous 3 posts. Today was the 5th consecutive close above the 5177-5196 band. If this holds out tomorrow on closing basis, then IMHO, we can expect this to stay firm on closing basis until Thursday EOD [following the basic Fibbo sequence 2-3-5-8]


Some Fundamentals for Those Inclined Academically:

From a Rollar perspective, lot of buying has been witnessed with Rollar above 52 and Rollar below 46 in the last few weeks. In between this price band, liquidity and other concerns drive buying/selling.

From the Fixed Income perspective, a clear negative divergence is the fact that the Bond Market is lapping up near-zero Treasuries and Negative Yielding Bunds! This IMHO is significant because despite so much upside in Dow, FTSE, DAX [from Dec lows], the bond market is lapping up 'safety'.

Such extreme behaviour has been observed on 5 major occasions in the past [based on some data lookup over the weekend across bloomberg, yahoo finance, investopedia and free EWI articles ] First 2 instances were prior to the World Wars, 3rd was around 1986-1987 when there was a royal crash of the roaring 80s; 4th prior to the dot-com bust towards 1999-2000 and 5th prior to the sub-prime debacle in 2007. Now is the 6th major instance - whether it will prove the jinx wrong - I do not know but it is important to keep this in mind - the bond markets are usually well ahead of the curve on what to anticipate......