The market on friday opened with a gap up--the Sensex was
up 300 points and Nifty was 100 points higher at opening
bell. The market kept consolidating all through the day
and at the end of the trading session, the Sensex and
Nifty closed at their day’s high, posting gains of 743 points
and 188 points respectively. The momentum indicator on
the daily charts has given a positive crossover but trading
below the zero line. The 20- and 40-day moving averages
are at 10,500 and 11,600 respectively on the Sensex,
which are strong resistances on the upside. Good support
levels exist around 9,400 and 9,000. The market breadth
was positive. NSE witnessed 854 advances and 364
declines whereas BSE saw 1,594 advances and 926
declines. Our short-term bias is up with reversal at 8,594
and target at 10,500.
On the hourly chart, an inverted head & shoulders pattern
has been formed with a neckline at 2,920 and target at
3,600. The momentum indicator, KST, has a positive
crossover and trading above the zero line.
The Sensex and Nifty ended the day with gains of 743 and
188 points respectively. Of the 30 stocks of the Sensex,
Reliance Industries (up 14%) and Tata Steel (up 14%) were
the top gainers, while Suzlon Energy was down by 3.4%.
Power sector has gained upside momentum.
Monday, November 3, 2008
Expect the unexpected
THE benchmark Nifty faces a short-term resistance at 3030. The next major hurdle for the index is at 3495, which is the 30-day simple moving average. If the current rally is only a bear market correction, then the Nifty will not move above the 3030-level. As long as the Nifty Volatility Index remains on the higher side, investors should expect the unexpected. If the index slides, it has a support at 2675 and then at 2525. On Friday, the Nifty closed at 2885.60. The index had hit a panic bottom at 2252.75 on October 2008, witnessing one of the sharpest-ever falls from 3950 early October. The Nifty volatility Index has moved above 69%, which is still on the higher side. But it may be noted that after the sharp fall, Indian markets were in the oversold territory. The daily, weekly and monthly relative strength index (RSI), which attempts to determine overbought and oversold conditions of a security, was in the oversold region, suggesting the recovery that happened in the form of short-covering ahead of the October futures and options expiry was expected. (If the RSI indicator is below the 20-mark, it indicates oversold situation and above 80 shows overbought situation). The broad-based fall resulted in majority of stocks testing new 52-week lows. If a stock falls below its 52-week low, it is said to be bearish. Buying can only be considered in such a stock, only if it appears heavily oversold on monthly charts. Otherwise, it needs to get firm support and consolidation, which can be identified with higher volumes. But caution is important, as even if the stock is consolidating, the indices may not be. Heavy weight stocks such as Reliance Industries, Infosys, ICICI Bank, Bharti Airtel and Reliance Infrastructure were in the oversold territories. The five-month RSI for these stocks, which were in the oversold region, has given a ‘buy’ signal. Reliance Industries faces resistance at Rs 1,432 and a break above this can drive up the stock sharply. Infosys, which is trading above its 20-day moving average of Rs 1,307 on higher volumes, also appears strong. ICICI Bank has resistance at Rs 415, and if the stock closes above this level for at least two days, it will help the bulls to lend support. On the Nifty, many stocks that are available below their book value has given good opportunities to investors with medium-term perspective including Hindalco, Tata Steel, Cairn India, Tata Motors and BPCL. In the US, the Dow’s moving average combination of 30- and 5-day, which has given a ‘sell’ signal on first week of September 2008, has not yet given a ‘buy’ signal. But the interesting point to be noted is that if Dow breaks the 9640-level and closes consecutively for more than three days, then it will give a strong reversal, which can lift the Dow towards 10860. The short-term outlook for the Nasdaq is better than that of the Dow, because the extreme short-term combinations of simple moving averages of 3-, 9- and 18-day combinations have given a ‘buy’ signal. The 3-day simple moving average penetrates the higher moving averages of 9- and 18-day from the lower side shows further possible uptrend for the Nasdaq. It has tested 1500 levels thrice on October, indicating a possible reversal. If that happens, Indian ADR (American depository receipts) stocks, which are listed on the Nasdaq, are going to benefit, especially Infosys, TCS, Satyam computers, Wipro, ICICI Bank, HDFC Bank. Among Indian ADRs, Infosys, HDFC Bank and ICICI bank are showing positive divergence and further accelerated movements are expected.
RBI move may extend rally
THE sooner-than-expected measures by the Reserve Bank of India (RBI) to ease the money-supply crunch, including an interest rate cut, may enable the bulls to stretch Friday’s rally into early next week. But as the week progresses, the domestic investors will look for directional cues from US and European markets.
The US market rose nearly 2% on Friday, as investors cheered JP Morgan Chase’s measures to stem the crash in America’s housing market. The Fed slashed the benchmark interest rates last week and indicated additional cuts to revive the economy, prompting other central banks to trim the rates in a co-ordinated manner. Equities across the world rallied strongly as a result. Investors in Indian equities took a special note of the decline in inflation, triggering hopes of interest rate cuts, and the Standard & Poor’s (S&P) statement that India’s investment-grade credit ratings is safe. Investors expected RBI to cut rates next week, with the overnight interbank lending or call rates rising to a 19-month high of roughly 20%. “We expect more upsides in stocks early next week, as the much-needed interest rate cut was earlier than anticipated,” said Mirae Asset Global Investments senior fund manager Gopal Agrawal. “For any rally to sustain, it is important that there are no fresh issues in global markets and economies,” he added. The liquidity-injecting measures initiated by several countries last week, following the free fall in equities to four-year lows, has improved investor sentiment world-wide. “In the past few days, we’ve received more requests for stock screens than usual. This may mark a shift in sentiment, from the relentless selling of recent weeks to finding buy ideas,” said UBS Securities in a report on Asian equities. Analysts are, however, unsure whether the bear market is nearing an end. Global investors remain averse to risky assets. Moreover, the credit crunch threatens to jeopardize the growth plans of companies in developing economies such as India. “We continue to believe that investors are underestimating the impact of the credit crunch on countries having current account deficits,” Nomura International Asia and emerging markets analyst Sean Darby said. Driven by high oil prices in recent years, India has a large current account deficit and this shows the extent to which a country’s consumption exceeds its production.
The US market rose nearly 2% on Friday, as investors cheered JP Morgan Chase’s measures to stem the crash in America’s housing market. The Fed slashed the benchmark interest rates last week and indicated additional cuts to revive the economy, prompting other central banks to trim the rates in a co-ordinated manner. Equities across the world rallied strongly as a result. Investors in Indian equities took a special note of the decline in inflation, triggering hopes of interest rate cuts, and the Standard & Poor’s (S&P) statement that India’s investment-grade credit ratings is safe. Investors expected RBI to cut rates next week, with the overnight interbank lending or call rates rising to a 19-month high of roughly 20%. “We expect more upsides in stocks early next week, as the much-needed interest rate cut was earlier than anticipated,” said Mirae Asset Global Investments senior fund manager Gopal Agrawal. “For any rally to sustain, it is important that there are no fresh issues in global markets and economies,” he added. The liquidity-injecting measures initiated by several countries last week, following the free fall in equities to four-year lows, has improved investor sentiment world-wide. “In the past few days, we’ve received more requests for stock screens than usual. This may mark a shift in sentiment, from the relentless selling of recent weeks to finding buy ideas,” said UBS Securities in a report on Asian equities. Analysts are, however, unsure whether the bear market is nearing an end. Global investors remain averse to risky assets. Moreover, the credit crunch threatens to jeopardize the growth plans of companies in developing economies such as India. “We continue to believe that investors are underestimating the impact of the credit crunch on countries having current account deficits,” Nomura International Asia and emerging markets analyst Sean Darby said. Driven by high oil prices in recent years, India has a large current account deficit and this shows the extent to which a country’s consumption exceeds its production.
Sunday, November 2, 2008
Market Up for third Consecutive day
The Sensex continued to move up for the third consecutive day with the index registering smart gains on buying in heavyweight and sectoral stocks.
The 30-stock benchmark index of the BSE was above 9,300 points at the starting bell and touched the high at 9,870. However, it pared the gains on selling in heavyweights and shed sharply to touch the low of 9,362 towards the close. The Sensex came close to testing 9,400 towards the day’s close, but ended the session with a gain of 744 points at 9,788. Nifty gained 189 points to close at 2,886.
The breadth of the market was marginally positive. Of the 2,575 stocks traded on the BSE, 1,577 stocks advanced, whereas 916 stocks declined. Eighty two stocks ended unchanged. Of the 13 sectoral indices, BSE Metal surged 10.20% to 5,367 followed by BSE Oil & Gas (up 9.11% to 6,195) and BSE Bankex (up 7.21% to 5,011). The remaining indices also ended higher.
Among the gainers, Mahindra & Mahindra (M&M) advanced 23.09% to Rs372.35, HDFC surged 17.48% to Rs1,764, JP Associates added 16.55% to Rs71.85, ICICI Bank advanced 15.50% to Rs399.35, Sterlite Industries gained 14.48% to Rs282.20, Reliance Industries jumped 13.81% to Rs1,370.75 and Reliance Communications was up 13.76% to Rs220.70. However, Ranbaxy Laboratories dropped 1.97% to Rs169.45 and Tata Consultancy Services declined 0.93% to Rs537.45.
Over 1.68 crore Suzlon Energy shares changed hands on the BSE followed by Hindalco Industries (1.34 crore shares), Reliance Petroleum (1.00 crore shares), Unitech (84.98 lakh shares) and Core Projects & Technologies (81 lakh shares).
The 30-stock benchmark index of the BSE was above 9,300 points at the starting bell and touched the high at 9,870. However, it pared the gains on selling in heavyweights and shed sharply to touch the low of 9,362 towards the close. The Sensex came close to testing 9,400 towards the day’s close, but ended the session with a gain of 744 points at 9,788. Nifty gained 189 points to close at 2,886.
The breadth of the market was marginally positive. Of the 2,575 stocks traded on the BSE, 1,577 stocks advanced, whereas 916 stocks declined. Eighty two stocks ended unchanged. Of the 13 sectoral indices, BSE Metal surged 10.20% to 5,367 followed by BSE Oil & Gas (up 9.11% to 6,195) and BSE Bankex (up 7.21% to 5,011). The remaining indices also ended higher.
Among the gainers, Mahindra & Mahindra (M&M) advanced 23.09% to Rs372.35, HDFC surged 17.48% to Rs1,764, JP Associates added 16.55% to Rs71.85, ICICI Bank advanced 15.50% to Rs399.35, Sterlite Industries gained 14.48% to Rs282.20, Reliance Industries jumped 13.81% to Rs1,370.75 and Reliance Communications was up 13.76% to Rs220.70. However, Ranbaxy Laboratories dropped 1.97% to Rs169.45 and Tata Consultancy Services declined 0.93% to Rs537.45.
Over 1.68 crore Suzlon Energy shares changed hands on the BSE followed by Hindalco Industries (1.34 crore shares), Reliance Petroleum (1.00 crore shares), Unitech (84.98 lakh shares) and Core Projects & Technologies (81 lakh shares).
Election jobs to set tone for US stocks
WALL Street hopes to turn a new page as it heads into November, but next week is littered with hurdles ranging from the US presidential election to a likely gloomy jobs report. Traders were more than happy to see the back of October, one of the worst months in history for the broader market, and took heart from the fact that it ended with one of the best weeks on record.
This week’s strength came as the host of efforts by central banks and governments to ease credit strains began to bear fruit, and volatility abated slightly. Bargain hunting and funds buying stocks to rebalance their portfolios also helped boost stocks.
For the first part of next week, Wall Street, like the rest of America, will turn its attention to Tuesday’s presidential election. Democrat Barack Obama’s lead over Republican rival John McCain held steady at seven points as the race for the White House entered its final four days. Investors will likely assess the possibility of quick fiscal stimulus after the election and the risk of protectionist measures or more regulation.
Thomson Reuters data shows that on average the 60 days preceding a new presidential term yield positive returns, suggesting that the lack of uncertainty after elections usually gives the market a boost.
“Once we know what the balance of power will look like, investors can factor that into the equation. The market may not like who wins, but it will like knowing,” said Christopher Zook, chairman and chief investment officer of CAZ Investments in Houston.
But a raft of economic data will be vying for investors’ attention, as will earnings reports in the last heavy week of the autumn results season.
In the week ahead, the main event on the economic calendar is the October US employment report. That data, due on Friday, is expected to show that US nonfarm payrolls shed 2,00,000 jobs in October, according to a Reuters poll, while the unemployment rate is forecast to rise 6.3%.
Other key economic reports include the Institute for Supply Manage-ment (ISM) reports on manufacturing on Monday and non-manufacturing, or service sector, activity on Wednesday. Both are expected to produce readings showing that the economy contracted in October.
Among the major companies set to report earnings next week are Anadarko Petroleum, MasterCard, Cisco Systems and Sprint Nextel. With 59% of S&P 500 companies having reported earnings in the third quarter, on average earnings for companies in the index are expected to fall 23.8% for the quarter.
Meanwhile, the Federal Reserve’s efforts to shore up short-term lending for companies and banks continued to build momentum in the critical commercial paper market with a program the US central bank launched this week. October was a nightmare for US stock investors, with the Dow Jones industrial average ending the month down 14.06%, its worst monthly percent age drop since August 1998. The Standard & Poor’s 500 Index slid 16.83% this month for its worst onemonth percent age slide since October 1987. The Nasdaq lost 17.73% in October, its worst one-month percent age loss since February 2001.
For the week, though, Wall Street wrapped up a rotten month with a Halloween treat. Stocks ended Friday’s session higher, following Thursday’s advance a day after the Fed’s half-percent age-point rate cut. This performance gave the US stock market its first back-to-back gains in over a month.
The Dow finished the week up 11.3%, its best weekly percent age gain since October 1974, while the S&P 500 climbed 10.5%, its best weekly percent age gain since at least January 1980. The Nasdaq rose 10.9%, its best weekly percent age gain since April 2001.
This week’s strength came as the host of efforts by central banks and governments to ease credit strains began to bear fruit, and volatility abated slightly. Bargain hunting and funds buying stocks to rebalance their portfolios also helped boost stocks.
For the first part of next week, Wall Street, like the rest of America, will turn its attention to Tuesday’s presidential election. Democrat Barack Obama’s lead over Republican rival John McCain held steady at seven points as the race for the White House entered its final four days. Investors will likely assess the possibility of quick fiscal stimulus after the election and the risk of protectionist measures or more regulation.
Thomson Reuters data shows that on average the 60 days preceding a new presidential term yield positive returns, suggesting that the lack of uncertainty after elections usually gives the market a boost.
“Once we know what the balance of power will look like, investors can factor that into the equation. The market may not like who wins, but it will like knowing,” said Christopher Zook, chairman and chief investment officer of CAZ Investments in Houston.
But a raft of economic data will be vying for investors’ attention, as will earnings reports in the last heavy week of the autumn results season.
In the week ahead, the main event on the economic calendar is the October US employment report. That data, due on Friday, is expected to show that US nonfarm payrolls shed 2,00,000 jobs in October, according to a Reuters poll, while the unemployment rate is forecast to rise 6.3%.
Other key economic reports include the Institute for Supply Manage-ment (ISM) reports on manufacturing on Monday and non-manufacturing, or service sector, activity on Wednesday. Both are expected to produce readings showing that the economy contracted in October.
Among the major companies set to report earnings next week are Anadarko Petroleum, MasterCard, Cisco Systems and Sprint Nextel. With 59% of S&P 500 companies having reported earnings in the third quarter, on average earnings for companies in the index are expected to fall 23.8% for the quarter.
Meanwhile, the Federal Reserve’s efforts to shore up short-term lending for companies and banks continued to build momentum in the critical commercial paper market with a program the US central bank launched this week. October was a nightmare for US stock investors, with the Dow Jones industrial average ending the month down 14.06%, its worst monthly percent age drop since August 1998. The Standard & Poor’s 500 Index slid 16.83% this month for its worst onemonth percent age slide since October 1987. The Nasdaq lost 17.73% in October, its worst one-month percent age loss since February 2001.
For the week, though, Wall Street wrapped up a rotten month with a Halloween treat. Stocks ended Friday’s session higher, following Thursday’s advance a day after the Fed’s half-percent age-point rate cut. This performance gave the US stock market its first back-to-back gains in over a month.
The Dow finished the week up 11.3%, its best weekly percent age gain since October 1974, while the S&P 500 climbed 10.5%, its best weekly percent age gain since at least January 1980. The Nasdaq rose 10.9%, its best weekly percent age gain since April 2001.
Monday, September 29, 2008
Fresh yearly lows
The indices opened flat and fell sharply due to consistent
selling among the heavy weights. The fall continued till
mid afternoon (an hour before the last), when the indices
hit the yearly lows. The indices did trim some of their
losses in the final hour, but still ended negative for the
day. On hourly chart, as the momentum indicator is in
oversold region some bounce can be expected in the
coming session, though that bounce is expected only up
to 4000 levels, which is 50% retracement of the fall from
4,207 to 3,778. On daily chart, the momentum indicator
KST is still enjoying its negative trend, which indicates
that the bears will have an upper hand over the bulls in
the near term. Market breadth was depressing with 1,211
declines and only 68 advances.
On hourly chart, the momentum indicator KST is still in
the negative mode, but the gap between the indicator
and the moving averages is getting thinner. We are
revising our short-term target to 3,700 with reversal at
4,000 and our mid-term target to 3,600 with reversal at
4,120.
Sensex and Nifty ended the day with a loss of 506 and 135
points respectively. All the 13 sectors ended in the red
with the banking and consumer durable sectors faring the
worst. Of the 30 stocks that make the Sensex, ICICI Bank
(-13%) Jaiprakash Associates (-11%) and Satyam Computer
Services (-9%) were the worst hit, whereas only Hindustan
Unilever was in the green with a minor gain of 0.3%.
selling among the heavy weights. The fall continued till
mid afternoon (an hour before the last), when the indices
hit the yearly lows. The indices did trim some of their
losses in the final hour, but still ended negative for the
day. On hourly chart, as the momentum indicator is in
oversold region some bounce can be expected in the
coming session, though that bounce is expected only up
to 4000 levels, which is 50% retracement of the fall from
4,207 to 3,778. On daily chart, the momentum indicator
KST is still enjoying its negative trend, which indicates
that the bears will have an upper hand over the bulls in
the near term. Market breadth was depressing with 1,211
declines and only 68 advances.
On hourly chart, the momentum indicator KST is still in
the negative mode, but the gap between the indicator
and the moving averages is getting thinner. We are
revising our short-term target to 3,700 with reversal at
4,000 and our mid-term target to 3,600 with reversal at
4,120.
Sensex and Nifty ended the day with a loss of 506 and 135
points respectively. All the 13 sectors ended in the red
with the banking and consumer durable sectors faring the
worst. Of the 30 stocks that make the Sensex, ICICI Bank
(-13%) Jaiprakash Associates (-11%) and Satyam Computer
Services (-9%) were the worst hit, whereas only Hindustan
Unilever was in the green with a minor gain of 0.3%.
Sensex at a critical level
IN THE continuing intermediate downtrend, the 13200 mark — a 62% retracement level of the previous rally of 12558 to 14222 — was breached on the downside. As a result, there is a high probability that we may see a kink in the index again to the level of 12500. Though this will form a triple bottom structure, rallies like the ones seen before, it may just not have the momentum to inspire confidence among bulls. Till the Sensex tops 14000, buyers are likely to remain sceptical. On the other hand, if the Sensex does not find support at 12500, the ensuing fall may be far severe than what we have seen so far. So, 12500 remains a critical level, as most short positions are likely to be covered at that mark, in anticipation of triple bottom formation.
In this intermediate downtrend, stocks that had been outperforming so far, like banking for instance, will also attract profit taking. On the other hand, stocks from oil & gas and realty are already in an intermediate downtrend. These sectors will fall steeper than the main indices.
There can be two ways to deal with the situation. One is to start buying only when the trend has reversed. That is above 14000, if 12500 is not breached. If the 12500 is breached, one should start buying below the 11500 to 11200 levels with appropriate stop loss. Markets could turn before 11500 level but below 12500, we are in an uncharted territory. Hence, it is difficult to predict new supports.
Why 14,000? It is the level of the highest closing on the daily charts from where the current downtrend started. The breach will not only stop the lower top-lower bottom formation, but will also give an early indication of possible trend reversal. A prominent technical analysis indicator called ‘Fan Angles’ connects the high with all the lower tops and when the third fan line is breached upwards, the trend is supposed to reverse. Connecting the high of 21207 with the lower tops of 18895, 17735 & 15579, the third Fan Line will be breached at the level of 14500. A breach of 14000 creates higher tops and hence, increases the chance for Sensex to go up to 14500, a crucial upward trend reversal level as per fan lines seen on the weekly charts.
Market participants are awaiting signs of strength in the rallies. The rally from 12500 did have the momentum, but could go only as far as 15580 by mid-August. Bulls ran out of breath even before the index reached even near the 200 DMA of 16500. This set off a downtrend with yet another lower top formation and dragged the index to 14000 by the end of August. The index attempted to rally yet again but this time, the bulls were stopped near 15000, just short of the intermediate reversal level of 15200 mark. These movements formed a bearish structure known as Head & Shoulders’, in just nine trading sessions. Hopes of a strong rebound diminished, when the sharp follow through rally fell short by 80 points from the level of 14300, which could reverse the intermediate trend.
In this intermediate downtrend, stocks that had been outperforming so far, like banking for instance, will also attract profit taking. On the other hand, stocks from oil & gas and realty are already in an intermediate downtrend. These sectors will fall steeper than the main indices.
There can be two ways to deal with the situation. One is to start buying only when the trend has reversed. That is above 14000, if 12500 is not breached. If the 12500 is breached, one should start buying below the 11500 to 11200 levels with appropriate stop loss. Markets could turn before 11500 level but below 12500, we are in an uncharted territory. Hence, it is difficult to predict new supports.
Why 14,000? It is the level of the highest closing on the daily charts from where the current downtrend started. The breach will not only stop the lower top-lower bottom formation, but will also give an early indication of possible trend reversal. A prominent technical analysis indicator called ‘Fan Angles’ connects the high with all the lower tops and when the third fan line is breached upwards, the trend is supposed to reverse. Connecting the high of 21207 with the lower tops of 18895, 17735 & 15579, the third Fan Line will be breached at the level of 14500. A breach of 14000 creates higher tops and hence, increases the chance for Sensex to go up to 14500, a crucial upward trend reversal level as per fan lines seen on the weekly charts.
Market participants are awaiting signs of strength in the rallies. The rally from 12500 did have the momentum, but could go only as far as 15580 by mid-August. Bulls ran out of breath even before the index reached even near the 200 DMA of 16500. This set off a downtrend with yet another lower top formation and dragged the index to 14000 by the end of August. The index attempted to rally yet again but this time, the bulls were stopped near 15000, just short of the intermediate reversal level of 15200 mark. These movements formed a bearish structure known as Head & Shoulders’, in just nine trading sessions. Hopes of a strong rebound diminished, when the sharp follow through rally fell short by 80 points from the level of 14300, which could reverse the intermediate trend.
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