Sunday, November 29, 2009

Dubai News or Sentiments??


Dubai News or Sentiments??
Panic selloff in global markets including Gold, Oil, Copper - The news is Dubai may default on its debts. It is said 'Panic selloff in World markets is an over reaction but my understanding is: it is not the news that drives the market but the markets that create the news. As Mr. Prechter (founder of Elliott wave International) said, we are conditioned to view market behaving on laws of physics but it is the sentiment that drives the global market.
Such extreme Global reaction on Dubai news is something that is worrisome to me, indicating the rally since March this year, in some of the global markets, was on a very weak internal structure. The sentiments are changing tides very fast!
I am expecting a strong Dollar technical bounce back now from here for next few months before a major collapse leading to further extreme sell off in world equities and commodity markets
Is it a mere coincidence that we mentioned in our previous blog on 24th Nov "As long as prices do not cross the top of previous wave (5) i.e. 17493, we still hold bearish view with very appealing Risk / Reward ratio" well before the news came out!
Happened: On 26th prices brokedown out of corrective trend channel moving steeply in downward direction
We may have started a deep correction now and prices should fall well below previous bottom of 15330 made on 3rd of November.

Wednesday, November 25, 2009

A good opportunity!

Sensex is following a 4 month cycle. Prices bottomed just 5 days before the cycle lows, in form of Wave A
Prices have rallied steeply after that and even crossed 76.4% retracement of the late October fall
This steep rally was unexpected and was a surprise but we did mention in our previous blogs that prices are moving very fast, faster than we can think of.
When prices move fast in our direction for sometime and suddenly takes a "V" turn moving in opposite direction with same pace, lots of emotions creep in forcing people not to adhere to their "Risk Management" and "Stoplosses". This is precisely what Mr. Market wants -- proving maximum number of people wrong in either direction
Please adhere to strict risk management in times when markets are moving fast and not behaving exactly the way we want it to
As long as prices do not cross the top of previous wave (5) i.e. 17493, we still hold bearish view with very appealing Risk / Reward ratio
We will look at price movement and adapt an alternate count once the above said level stands broken. Till then maintain your short positions!

Monday, November 9, 2009

A corrective rally??


The current rally in Sensex looks corrective in structure
This looks to be wave c of corrective wave B
Prices might resume its downtrend anytime soon!
A break below the red corrective channel will provide confirmation that major trend down has resumed
A short position can be initiated after the break of upward sloping trendline (near 16000) from 3rd November

Thursday, November 5, 2009

Fractal Nature & A sucker rally!!!

Sensex: Fractals

Sensex: 5 mins

The first chart is a daily chart of Sensex and the below chart is a 5 min chart. The movement in Sensex yesterday (seen on 5 min chart) resembles a close pattern with that of movement on daily chart of Sensex from mid July till 22nd October (highlighted).
This is a classic example of markets exhibiting fractals at various time frames!
The fall after completion of pattern on daily chart was steep and we can expect the same now!
Becareful: Yesterday's rally looks to be a "sucker rally" in form of wave B. It can be very choppy but markets are moving very fast as we are constantly saying and wants to complete the minor upward correction as soon as possible to resume their downward journey.
We will review our negative bias if Sensex moves above 16450!

Monday, November 2, 2009

Happened: The Breakdown! An impulse down

Strategy to adopt:
Trailing stoploss methodology is an ideal strategy to follow now if you are well in the game! Indian Markets are rather moving very fast and can move faster than we think. Selling on targets might deprive you of some exorbitant returns which otherwise would be possible! Just think...

The move down on Sensex is of impulsive structure indicating we are in for some major correction in coming weeks!
Regional rallies on 30th failed to reduce the pessimism - A sign of worry!
We have shown the Sensex target zone for first time on 11th October, before the meltdown and also warned, if you refer our previous blog on 4th October, "....any long positions shall be immediately covered as this market will not give much clues when it turn"

We showed probable path of Hindalco on 11th October, but we were little early. It is always better to be earlier than late!
We are expecting a meltdown in Hindalco prices soon in form of wave iii

Suzlon has broken down from triangle pattern of corrective Y.
Happened: We mentioned in our previous blog: "A strong breakdown...."
I will not be surprised to see this stock at previous low of March i.e. near 35 range!

A clear H&S breakdown!
We mentioned a trendline break in Maruti before it happened
We showed an up arrow a few days before 29th October, indicating Maruti is following 29 days cycle and a temporary support possible. Prices rallied on exactly the same day. This shows how precisely prices can sometime follow cycles!