Sunday, August 7, 2011

World at a Glance! Serious breakdown in developed world financial markets!!!

Global Markets:

World Markets: A glance of the above charts show that there is some serious capitulation in developed world equity markets. DJIA–US, FTSE-UK, DAX-Germany, Nikkei-Japan show steep selloff not seen for years. The steepness of fall itself indicates we are into something bigger and probably move down below 2009 lows in these markets. This can be the start of next impulse leg down in developed markets and Asian market cannot be insulated for too long from such falls atleast when everything is turning down together. The magnitude of fall might be less in Asian markets but the above charts convey scary picture over short term!

 Nifty Daily chart
 Nifty 30 mins:
 Given the meltdown in global markets, Nifty opened a gap down of 120 points. The selling accelerated as we were expecting.
Nifty opened at 5200 levels the long held support convincing the day traders that a bounce back should happen from there but we expected increase in selling pressure and those levels should not hold. Nifty than started cracking making a low of 5117 and rallied back during latter part of the day to close back to the previous support now resistance level of 5200 – 5220.
Wave counts are clear and we have either completed minor wave iv or shall do it in a day or 2 after which we will move down below 5100 levels. The next support levels that we expect come in at 4800 below 5120.
Daily chart shows that ROC still has plenty of room to move down and we are not oversold yet. The oversold condition on intraday chart is relieved by the rally back from 5117 to 5200 on Friday itself. It is common tendency for traders to think that market cannot fall so steeply and so it should bounce back but we can see from global charts that buying based on this thinking would have resulted into a state of ruin.
Daily chart also shows a clear formation of Head & Shoulder pattern and the neckline is now decisively broken with a gap. This indicates the long period of distribution that took more than a year might be finally over and next trend which is down has started.
In short, we maintain our outlook of extreme weak internals as of now and there is no positive divergence seen. The fall looks far from over and rating downgrade of US markets from AAA status (since 1941) to AA+ by S&P might act as a catalyst to this global selloff.
We again reiterate “Volatility is going to increase in either direction and movements are going to be steep. We want our readers to exhibit caution and have alternate scenarios in place in case market moves in opposite direction than anticipated. Risk management and Money management is extremely crucial to remain in the game.”
As long as the gap between 5320 and 5230 is not filled we remain bearish for a target near 4800.

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