Jai

Week No1 of 2011 to Bears

 Indian Market/Stocks  Comments Off on Week No1 of 2011 to Bears
Jan 102011
 

The bears have covered considerable ground in the first trading week of the new year. Indian markets are clearly the worst performer amongst its global peers. The grizzlies have managed to plough into the gains of the past 3 weeks and handed in a loss of 3.75% for the Nifty and 4% for the Sensex.

Nifty Weekly Charts

An important development has been in the price action of copper - an ominous dark cloud cover formation (If you are a P&F chartist, a high pole warning). Although a follow through sell off week is needed here before conclusions can be drawn about the extent of the damage, copper is deemed to have a doctoral degree due to its ability to pinpoint key market turns. Hence, this chart remains the key market to focus this week to gauge the health of the global equity indices.

Copper - DCC on weekly charts

Yet another market where bears have made serious inroads last week has been in the precious metals space. While Gold's stumble around the $1425 level for the third time may be obvious to many, Silver the key out performer in this printed run to prosperity, has logged some substantial loss.  A reversal signal on weekly charts, a "bearish engulfing" pattern is a high probable indication that the run here is coming to an end at least for the intermediate term, if not for the longer term.

Silver - Bearish reversal sign on weekly charts

 Posted by at 4:28 am

Watch Copper

 Commodities  Comments Off on Watch Copper
Jan 062011
 

Copper:

Copper - Daily Chart

An evening star pattern is visible on copper's daily chart. While this is a high probability reversal signal, a close into the coloured region would add further weight to this reversal signal.

USD:

This currency basket clocked a wide ranged bar yesterday and is taking aim at the 200 DMA. With a micro double bottom in place, piercing through the much followed 200DMA is the likely scenario.

 Posted by at 3:39 am  Tagged with:

Hero Honda – start of a bigger fall?

 Indian Market/Stocks  1 Response »
Dec 152010
 

Hero Honda - Weekly Chart

The weekly charts of Hero Honda shows the obvious resistance at 2100. After failing to clear this level for the third time, the stock has plunged below the previous support.  A normal measured move for the above kind of  price action would be a move to somewhere around 1100 (the width of the previous price band). If you are an Elliot Wave fan, one can also count clear 5 waves to the highs and the current move is probably C leg or wave 3 to the downside.

So unless there is an immediate reversal with volumes, this might be just the beginning of a bigger fall for the stock. The stock is oversold in the short-term and may see a bounce to 1700's.

Topping signs in Precious metals, CRB Index, Crude

 Commodities  Comments Off on Topping signs in Precious metals, CRB Index, Crude
Dec 082010
 

Gold - Daily Charts

As can be seen from the above charts, the climb up for gold has been loosing lustre, at least for the intermediate term. Each successive peak has been on declining momentum.

Silver - Daily Charts

As one should expect the picture is similar for silver, double negative divergence just as in Gold. Also both these precious metals made new intraday highs only to be repelled lower and rejected by the market - a bearish outside day formation.

CRB Index - Double Top potential

The CRB index has also formed a bearish outside day right the previous swing high and thereby raising the possibility of a double top formation.

Crude Oil forms a shooting star

A shooting star pattern is visible on Nymex crude. The momentum here too has been diverging negatively with the price peaks.

Dollar Index - Bounces from 38.2 Fib retracement

A look at the charts of the Dollar Index, shows that the Index has probably resumed its uptrend after a 3 day corrective decline. The index is bouncing from its first fibonacci retracement level. Over next 4-6 weeks a level of 85 is the price objective for this currency basket.

Barring an immediate reversal in the above markets( though not impossible), one should expect the negatives to start trickling into equity markets.

Red Alert: Five Charts and their implications

 Commodities, Indian Market/Stocks  Comments Off on Red Alert: Five Charts and their implications
Nov 292010
 

A couple of  weeks back I had posted a note on my own derived indicator and highlighted how important it was for the indicator to hold above the previous trough. On Friday, this indicator dipped below the previous trough on a closing basis and has warned that the Indian markets have probably peaked and a bearish phase is a very distinct possibility. So naturally one has to ask - how has this indicator fared in the past?

Indian economy barometer

This indicator has a commendable track record over the last 10-12 years:

1) In 1999 - the indicator peaked in Oct 1999, and warned of a bear market a few weeks before Sensex and Nifty peaked.

2) Likewise in 2003 when the Sensex/Nifty bottomed in April, this indicator was a few months ahead signalling an impending new bull market (some might consider Oct 01 as the bottom for the Indices, even then this indicator was ahead)

3) In 2006, during the infamous sharp drop in May this indicator stood its ground.

4) In Oct/Nov 2007, this indicator warned of an oncoming bear market.  The Indian markets peaked in Jan 2008.

It is often a good idea to look at other inter-related markets before coming to a conclusion about a major trend-shift. And here is where the fixed income /bonds come into the picture. Here is a chart of the 10 year OIS swaps.

10 Year Swaps - Daily Charts

As is evident from the chart, there is still an intense struggle to cross the 200 DMA. AND when stock markets were trading near the all time high, the 10yr swaps were actually miles away from the peak made in February!  If stocks are that attractive why are investors still seeking the safety of fixed income?

I have for quite some time held that the continuation of this bull market is largely dependant on the debasement of the USD. Which was exactly why I had stressed the importance of staying  near the door of the bullish camp and having price objectives as opposed to a price target (see CNBC interview) on emerging markets, Gold, Silver and other asset classes. That brings us to the chart of the Dollar Index:

Dollar Index - Ichimoku charts

Not only has the Dollar Index reclaimed the key level of 80, it has also punched through the cloud resistance on its daily charts. If  my reading of the wave count here is correct, what we saw between QE2 day and Nov26th was just a milder part of the Dollar Index rally. The stronger portion of the rally has just about begun! ! (Remember the tight inverse correlation between emerging markets/commodities here and here?)

In 2010, emerging markets have had 2 significant corrections prior to November. One in Jan-Feb and the other one in Apr-May. The gross short interest in MSCI EM was 15% lower at November peak when compared with the January peak. That is a substantial level of complacency!!

MSCI EM Gross short interest

Let us also look at Gold which can give us a fair idea of inflationary/deflationary pressures in the global economy.

Gold Daily Charts - A potential H&S top?

The daily charts of Gold shows us that the swing to 1425 is in disagreement with the momentum readings. We can also see the potential for a Head and Shoulder top formation.  A close below the neckline, currently at 1340, is likely to augment further selling and a minimum drop to 1225 level is the expected outcome of such a breach.

From out-performance to under-performance

 Indian Market/Stocks  Comments Off on From out-performance to under-performance
Nov 262010
 

Nifty is now the second worst performer amongst its Asian peers (taking USD into account) only behind the Philippines Index. In absolute terms, at the third place behind Philippines and China. Although on a quarterly/half yearly and Annually the Indian Indices are scoring handsome gains, what a swift reversal in performance! Anybody there who does not believe in Momentum?

Yesterday’s low on Nifty/Sensex a must hold level

 Indian Market/Stocks  8 Responses »
Nov 242010
 

The boundaries of yesterday's low and high marked an important level in many global markets. On Sensex/Nifty yesterday's low is of significance. It was not just a 'hammer' pattern - the low also came of an important trendline.

Nifty - Daily Charts

The trendline is more perfect if drawn on the Sensex, we can connect the lows of March 2009  through these significant lows. A close below yesterday's low can make things turn nasty and that makes yesterday's low a must hold.

Axis Bank – a trend reversal?

 Indian Market/Stocks  Comments Off on Axis Bank – a trend reversal?
Nov 222010
 

For the first time in since March 09, Axis Bank has clocked a lower high, lower low pattern. This is shown in the chart below.

Axis Bank - Daily Charts

Also visible on the charts, is the break of an important trendline and 100 day exponential MA. The green circles on the chart highlights how these levels acted as supports during prior declines.  A breach of these levels along with a lower low, lower high pattern is a clear warning signal that the risk has grown for those holding longs. Ideally, I will look to enter short positions on a small rise.

A similar breach is visible on BPCL (no trendlines though).

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