Ashish Kyal - Participation of broader market will determine the trend ahead in Economic Times of NBT

Ashish Kyal - Participation of broader market will determine the trend ahead in Economic Times of NBT Written by Ashish Kyal    Monday, 18 November 2013 12:17 Sensex long term analysis:  Sensex has been moving in a big triangle consolidation pattern since 2008 onwards. The top made in January 2008 near 21200 was recently taken out in the month of November on the day ofDiwali Muharat trading & Sensex registered a high near 21320 levels. After touching life time highs we can see a fall of more than 1100 points. But on last Thursday again there was sharp rise and it seems the index is ready to touch the life time high levels again. Both September and October months have shown positive closes and has also taken out the previous month’s high. This keeps the monthly bias positive and November monthly close above 21300 will be the confirmation of the start of new Bull trend.  However, it will be important to see if the overall momentum increases with violent moves on upside and participation from the overall broader market which is important for confirmation of the next Bull trend scenario. Over here itself we have mentioned few weeks back about Sensex touching new highs and it did exactly as expected. Upside momentum and increase in volumes will be very important during this period. Economic cycle analysis:Interest rate cycle clearly shows that major bottoms in markets are formed during the period of reducing interest rates and the major tops are formed when interest rates are at highs. From Economic cycle perspective this also makes sense. In a normal inflationary environment it is the Bond market that tops out prior to Equity and later followed by Commodities i.e. Bond – Equities – Commodities. Also logically once the economy starts to heat up central bank starts increasing the interest rates to cool down the economy. This results in Bond topping out earlier than Equity market. This topping cycle was clearly visible during the 2006 - 2008 topping process as well. From Indian context, we think the interest rate cycle has already topped out in 2012 when we had interest rates near 8.5%. Since then we can see that interest rates have slowly come down but only it to be increased by 50 bps over past 2 months. However the current repo rate currently stands at 7.75% which is well below 8.5% top created in 2012. The interest rate cycle should now continue its downtrend and eventually Equity should start moving up. So from Economic cycle perspective Equity markets are due for an uptrend. Stock Selection:From stock selection perspective the stocks that can outperform during the next uptrend can be Reliance Industries, SBI, L&T, Tatamotors to name a few. Reliance Industrieshas been in a consolidation since 2008 till date and move above 930 will be first positive confirmation for this stock. Similarly for SBI move above 1900 will be an important positive confirmation. Tatamotors is already near life time highs and is outperforming broader market. This stock can continue to outperform for months to come. Week ahead: In short, given the strong reversal on Friday this week looks to be positive. On downside 20100 is very important support over short term and 19300 is crucial level from medium term perspective. Move above Thursday’s high of 20600 will continue the positivity and further above 21000 can result into life time highs again! For daily research reports and intraday / positional advisory along with long term forecast visit www.wavesstrategy.com

Long term analysis on Sensex, Global Markets, Bank Nifty, CRB index, EURUSD & USDINR comparison all in monthly report

Following is the summary of “The Financial waves Monthly update” which covers long term Elliott wave counts, projections and targets on Indian Equity market by Waves Strategy Advisors. For more information visit www.wavesstrategy.com

Along with this it covers comprehensive research on BRIC (Brazil, Russia, India and China) indices and Hong kong and DJIA.

Sensex has again approached near the life time high levels of 21200. In this research we have shown why the zone of …and …. is extremely crucial. The reason why we think there is still one leg pending on downside is based on Time cycles and also the current up move on Nifty and Sensex is on back of series of negative divergences. When a market has to break above the strong resistance zone which is probably a multi-year level it has to do so with lot of strength and momentum. On the contrary we are seeing slow down in price acceleration, no meaningful improvement in Advance decline line which is still near the lows. 

Interest rate cycleplays vital role in understanding where we stand in the overall Economic cycle perspective. We have used Interest rate analysis to derive the larger term outlook for Equity market.

Banking sector has shown good pullback from lower levels over past few weeks but even Bank Nifty has arrived near very strong resistance. The Moving average cross over concept which has been working very well on larger time frame can be used to get signals from investment perspective as well. It seems Banking index….

This time our stock pick is State Bank of India which is the PSU major from the Banking space. SBIhas few more months of correction pending post which it should start multi-year bull trend along with major market and should head towards…. levels by …... The Banking and IT relative chart analysis suggests that the IT index has started outperformance against Bank Nifty and should continue to do so for many more months to come.

CRB index is comprised of 19 diversified commodities including Energy, Precious metals, Industrial metals, essential Agro products. It therefore becomes essential for us to understand the trend of this index from the Global inflation perspective. To our surprise it seems that inflation is only localized as of now and is seen in developing economies like India as this index is way below the highs made in 2008. The prices of commodities seem to have increased in local currency terms but not in dollar value. This is what is leading the world developed nations to keep their interest rates at lowest possible levels on contrary to that seen in developing economies. The world seems to be divided between Inflationary and deflationary pressures!

BRIC equity indices along with DJIA and Hang Seng at a glance – We have shown 6 different charts on a single page with Elliott wave counts to understand what is happening among BRIC countries. You will clearly observe that it is not only India that has arrived at the crucial juncture but it seems entire world markets are now near crucial resistance levels. If India moves in isolation then why most of the world equity markets are also at crucial juncture that too at same time!!!

Above is the brief on various topics which has detailed explanation in “The Financial waves Monthly update”. To subscribe this report visit to us at http://www.wavesstrategy.com/index.php/store.html or call us on +91 9920422202 / +91 2228831358

Nifty Trading Strategy post RBI policy announcement!

In today’s policy meet RBI increases repo rate by 25 bps and cuts MSF by 25 bps.

After taking the governor position Mr. Rajan has increased the key policy repo rate by 50bps in total. Many thinks that the policy announcement decides the trend of the market but that is not necessary. There are times when market reacts to favorable news positively and at times it moves exactly opposite to the expected positive outcome. The reason being that the events do not change the trend of the market but only produces short term spikes that last from few minutes to hours or days but the original trend later on resumes. Elliott wave principle – an advanced technical analysis concept helps to understand this trend and provide forecasting ability.

Have a look at the below chart and try to forecast Nifty using only Interest rate cycle. Infact, if you observe markets have gone up after the repo rate hike on both of the instances.

 The above chart clearly shows interest rates do not decide the major trend of the market but nevertheless it plays a vital role in providing information from Economic analysis perspective. An interest rate cycle tops out before the major bottom is formed in Equity markets. There is much more to this chart about Economic cycle analysis.

In our forthcoming issue “The Financial Waves Monthly Update” we will be giving a very details observation on what we see on above charts without using any other technical indicators. It is simply prices and Interest rates that can also provide vital information as to the major trend of the market. For pricing structure visit Subscription or Contact US!