Morning Update at 0800hrs for Intraday Market Level

[aid]

Thank you pranay. Everyday I start with your analysis.

 

[pranayk]

weekly markets analysis for week ending 14 august 09

although last week saw nifty cross the psychological level of 4700, it could not sustain above it & the last 2 days saw massive correction to fall from the weekly high of 4731 to week end low of 4464 to finally close at 4481 just above the critical 4477 support level. The fall was induced by met wizards who said that although july had a 95% of rain fall, august 1st week had 65% less rain fall. (oh, what a comparison? & next time dont be surprised to find a day wise comparison of rain fall with a day of this year to the same day of last year) this coupled with time & again repetition of the same, by some interested news channels who presumably had shorting interest, saw markets crashing by 254 points in nifty in just 2 days from thursday highs of 4718 to fridays lows of 4464.
Although the correction was due, but the lightening speed surprised many, as there were not much of fii selling nor internal fund selling & it was much of retail liquidation out of fear. This more than 5% fall in just 2 trading days brought down nifty on a week on week closing basis to close down by 3.3% compared to its previous week ending 31 july. So one can safely say that nifty took a well deserved pause after 3 consecutive weeks of mega rise from 13 july low of 3919 to 4th aug high of 4731.with this weeks closing, indian markets have under performed compared to rest of the world markets.
Comparing with previous weeks close, as per closings of all the indices on this fridays close, in us markets, dow had a 2% rise & had a consecutive 4th week of rise, s&p500 performed much better having closed above 1000 mark. European markets had a consecutive 4th week of rise, australia, brazil too had a consecutive 4th week of rise, among asian indices, japan had a consecutive 4th week of rise. Singapore after 4 weeks of rise corrected this week. Korea surprisingly had a 7th consecutive weekly rise. China after 7 consecutive weeks of rise, fell during this week, so also taiwan after 6 consecutive weeks of rise had a fall this week. It was only hong kong which like indian indices had a weekly fall after 3 mega weeks of rise but in case of hong kong the weekly fall was less than even 1%.so, indian markets having under performed rest of the world markets, may show a sharp rise much faster than rest of the world markets perhaps from this week starting 10 august only.
As was written many a times earlier, the cross over of 20 & 50 day moving average has a great tendency of pulling the indices towards it & as on friday 7th august, 20 dma at 4470 was above the 50 dma at 4413 & one could notice how nifty came down to touch 20 dma & one should not be surprised to see nifty touching or even breaching 50 dma to induce an overall bearish sentiment before the next sharp up move to shoot high above the last weeks high of 4731 to move towards much higher levels. Long term investors must make full use of such falls in markets to quietly add on to their long holdings gradually.
Stock market cycles are unique and the impact of met, corporate results etc have a temporary effect on it. Be absolutely sure that new bull cycle has started from 6th march 09 and has a long way to go & one should not miss such "once in a life time" opportunity. One may be surprised to hear next week that met conditions are far better than last week or govt has taken adequate measures to overcome the poor rain fall condition. In fresh long term bull markets, there will always be corrections & these corrections in most cases go beyond ones expectations to induce fear & bearish feeling as had happened between 6th july to 13th july or on 21 & 22 july or on 28 & 29th july but the markets kept on moving up & up & one should not be surprised to see markets moving up & up again. Because the markets had gone up much higher from july lows of 3919 and also had crossed july high of 4670, it is now correcting to retrace a portion of the up move from july lows & once this cyclic retracement is over one will surely see a much sharper up move to record highs of the year beyond ones imagination.
Although the savage fall during the last 2 days of the week has shattered the hopes of many bullish swing traders who fear that the previous swing lows of 4420 or 4380 may be breached, they must realize that except for the announcement on uncertain met, there are no other negative news & the met conditions are such that it can change overnight. This type of met announcements are nothing new & similar predictions were also heard during june also but markets moved up only. So the met impact will be short lived & the markets are likely to resume the bull run.

 

[pranayk]

weekly technicals for week ending 14 august 09

technical indicators in the monthly charts continue to give bullish signals. Most of the important monthly indicators are still giving bullish signals, with monthly rsi & monthly cci sending the strongest bullish signals confirming to the long term bullishness of indian markets. For the first time since dec 2004,8 month moving average has moved up from below the 13 month moving average & crossed the 13 month moving average which signals a strong long term up move as was the case from dec 2004 to jan 2008.so, long term investors make full use of these clear long term indications to accumulate on declines for long term.
In case of the indicators in the weekly charts, the lower weekly closings has dented some of the weekly indicators. Rsi which last week was at 66 has slopped to 62,however as long as it remains above 50 there should be no danger to weekly rsi. Weekly roc has dropped to 0 levels which is a danger signal if it falls below 0 without any about turn. Weekly trend indicator adx still continues to show bullish trend with adx at 40 still above +ve dmi at 30 far above -ve dmi at 11. Weekly stochastic & macd continue to send strong bullish signals. Cross over of 200 week ema by the 50 week ema around 3844 levels is the strongest bullish signal for the long term. This is happening for the first time after july 2003 when the previous bull market had started from april 03 & continued till jan 08.also in the weekly charts, there is a compression of weekly smas of 5,8 & 13 weeks between 4370 to 4413 levels that should arrest further falls in nifty. A decisive close below 4360 to 4380 levels will certainly be a cause of concern for the bulls as there could be bigger falls towards making a larger flat by moving towards july lows of 3919 levels.
In case of the daily indicators in the daily eod charts, the savage falls during last 2 days of the week has definitely weakened most of the daily indicators. Daily rsi 14 is just hanging in balance around the critical level of 50 and another big fall will bring rsi to negative lower half zone. Similar is the case with macd where the signal line is just about to breach the macd line to go below it. Daily roc 10 has just entered the lower zone at -ve 1. Daily stochastic is also giving -ve signals so also daily adx indicator.
So unless there are some solid rearguard action by the waiting bulls from monday onwards, there is every possibility of another fall towards 4420 to move downwards to threaten the make or break point around 4360 to 4380 levels. During the coming week, a decisive cross over and sustaining above 4525 will be the first signal that the bulls are regaining initiative. A decisive cross over of 4580 & then moving up to sustain above 4600 only can confirm that the bears have lost the battle for supremacy. Till such time nifty does not close above 4600 levels, bears will have the upper hand & there will always be the fear of nifty sliding further down towards july lows for making a larger flat during august.

 

[pranayk]

elliott wave count for week ending 14 august 09

we have assumed that fresh bull move had started from 6th march low of 2539. The 1st up wave was completed on 12 june high of 4693.the 2nd wave a,b,c correction came down till 13 july low of 3919. The 3rd up wave started from the low of 3919 and on 4th august the 1st sub wave of this 3rd wave was completed with the highs around 4731 and the 2nd sub wave abc downward correction started. Most likely this 2nd down sub wave abc correction at the worst case can come down till as low as 4229 levels to start the largest up wave of this current bull market the 3rd sub wave of the 3rd wave. However there are possibilities that this 2nd wave zigzag may be terminated around 4325 or at the best around around 4420.

There could be another case, where the new bull market after the completion of the 1st up wave at the 12th june high of 4693, the 2nd corrective wave is still on as a 3, 3, 5 bigger flat with 1st set of 3 down waves completed at the 13th july low of 3919, the 2nd set of 3 up waves completed on 4th aug high of 4731 & presently we are in the final 5 down leg of this flat that can go down all the way till 13th july lows of 3919 before start of the mega 3rd up wave. However the thing to be kept in mind is that as per elliott wave theory, 2nd corrective wave is generally in the form of abc zigzag as per paragraph above & the 4th corrective wave is generally a flat.

 

[pranayk]

fibonacci levels for the week ending 14 august 09

the up wave from 13 july low of 3919 till 4th aug high of 4731 covered a total distance of 812 points. So various fibonacci levels nifty can retrace down are 38.2% till 4420, 50% till 4319 and 61.8% to as low as 4229 levels. Suppose the rain gods become sympathetic towards the bulls & further fall from fridays lows of 4464 does not take place from this 33% downward retracement, then taking 4731 highs & 4464 lows a fall of 267 points, nifty can retrace upwards firstly by 38.2% to 4566,then 50% till 4598 and finally 61.8% till 4629 levels. In any case even a decisive close above 4600 levels may signal that bull move has resumed.

 

[pranayk]

Chart analysis

 

[pranayk]

weekly trading range for week ending 14 august 09

the broad weekly trading range for nse index during the week could be 4646 on the higher side and 4303 on the lower side. Even if nifty manages to cross 4606 during the the week, it would be considered a glorious effort by the injured bulls, similarly on the down side, if nifty breaches the critical level of 4380 & closes below it, then bulls may like to convert themselves into bears to join hands to take nifty all the way towards the magic level of 4222.

So critical levels nifty must cross and close above for early resumption of the bull run is 4606 and the critical levels bears must try their best to breach & close below to throw a grand bear party is the level of 4380, a close below which will certainly make the bulls to run for early cover.

 

[pranayk]

markets for 10 aug 09

the new week opens at the back drop of massive falls on thursday & friday that had generated the fears in the minds of traders that if the last swing low of 4420 is breached then nifty can fall like a stone to its previous swing low of 4380 which is the make or break pont for the bulls. Over emphasis on poor rain falls last week and 4 suspected death cases from swine flu out of a population of 120 crores, makes traders to seriously think whether to laugh or go along with the news channels to continue shorting the markets on every rise.

Well, the 2 days of well coordinated falls in the markets have definitely dented the very short term out look that can only be repaired if nifty rises to close above 4600 levels. Although a good rise in us markets on friday night to be followed up by asian markets may mitigate the bearish out look on indian markets for some time, yet unless nifty rises to close above 4600 levels, chances of a sustained recovery looks bleak & every rise may meet with ruthless shorting till such time nifty is made to fall below the critical level of 4380 to induce a bearish feeling to liquidate balance of the weaker hands.

For intraday trading on monday, even a rise in nifty to sustain above 4525 can bring some hopes for the trapped bulls because sustaining above 4525 can take nifty towards 4557. A follow up buying above 4557 can take nifty towards 4580 levels to again encounter shorting pressure, as a 100 point rise under such bearish condition looks to be a bit too much under the present circumstances although short covering by the bears can take nifty towards the 4600 levels but sustaining above it seems to be highly ambitious for the bulls who would prefer to liquidate their longs to wait for the alarming news on rains as well as swine flu to die down as had happened in june.

ON THE DOWN SIDE PATH OF LEAST RESISTANCE, NIFTY MAY FIND INITIAL SUPPORT AROUND FRIDAYS LOWS OF 4464 TO GENERATE A FALSE HOPE AS IF A TEMPORARY BOTTOM IS ESTABLISHED ONLY TO SLIDE LATER TOWARDS 4444 TO 4433 A BREACH OF WHICH CAN QUICKLY TAKE NIFTY TOWARDS THE INTRADAY DECIDING POINT OF 4420 WHERE THE BEARS WOULD LIKE TO POCKET WHATEVER PROFIT THEY MAY GET AS THIS IS A POINT WHERE BULLS MAY AGAIN SPRING INTO ACTION AS HAD HAPPENED ON 29TH JULY WHEN ALL BEARS WERE CAUGHT NAPPING.

AS PER HOURLY CHART ABOVE, MARKETS LOOK OVERSOLD AND IMPORTANT HOURLY INDICATOR IS GENERATING A FEEBLE +VE DIVERGENCE WHEN THE PRICE WAS MAKING NEW LOWS BUT THE STOCHASTIC INDICATOR WAS NOT MAKING A NEW LOW AND IS ABOUT TO COME OUT OF THE LOWER ZONE THAT SHOULD GENERATE SOME INITIAL UPWARD MOVEMENT. HOWEVER FAILURE TO MOVE HIGHER THAN 4525 AND SUSTAIN ABOVE IT CAN AGAIN WEAKEN NIFTY AS WELL AS THE STOCHASTIC INDICATOR.

 

[pranayk]

morning update at 8 am 10 aug 09

us markets were highly bullish on friday. Dow was 113 points up after correcting from a 175 up during the day. S&p500 regained its supremacy above the 1000 mark & nasdaq also closed above 2000 mark. Brazil was up by more than 1%.european markets were up by 1% to 1.5% with uk ftse being subdued with only a .8% rise. Asian markets have opened strongly & may continue to maintain strength. However some indices of korea, china & taiwan may find pressure in moving up faster.

For indian markets, having fallen so much during the last 2 days when most of the other world markets were rising, one can expect a strong gap up opening around the or higher than initial critical level of 4515. Short covering from here on can take nifty towards the next resistance of 4558 or even 4580 levels where selling pressure is likely to mount. However moving up & sustaining above 4606 can see the emergence of bulls & further short covering by bears .

For intraday trading, traders may continue to hold both calls & puts and around the level of 4600 may reduce the calls or write higher calls by holding on to lower calls. As markets correct downwards, traders may hold higher puts but short lower puts to carry along with bought higher puts. Carry over of un hedged long future position should be avoided. Long term investors should make use of every fall to quietly accumulate stocks in the sectors of pharma , fmcg & other sectors like tech, oil & gas, cement for good gains in the medium to long term.

 

[pranayk]

MARKET FOR 11th AUGUST