Sunday, February 7, 2010

Sell on Rallies

The Markets had a roller coaster ride last week. It has now become a sell on rallies kind of market. There are several reasons for this. Lets try and go through them. We will try and have a fundamental and technical look at the reasons.

1. The FIIs have been relentlessly selling. One of the reasons for the rise from march'09 was the FII money pumped in. The month of Feb already, they have sold Rs 2500 crores and for this year, almost 9500 crores from Jan'10.

2. The DIIs have propped up the market with purchases of Rs 13,500 crores. How long can they prop the market up?

3. The NTPC issue was a disaster. It got a subscription of 12000 crores against shares on offer worth 9000 crores. 4500 crores were pumped in by LIC and SBI. The government still has mega issues this financial year like REC, Sutlej Nigam which will suck the out the buying power of LIC.

4. The Dollar Index is above 80. The Dollar Carry Trade is unwinding. The easy money is gone.

5. PIGS are getting slaughtered.The problems of Portugal, Greece, Spain and Ireland are undermining the Euro. The sovereign debts of these countries can potentially tear apart the European Union. If the Euro falls, the USD is the only alternative now.

6. The Dollar strengthening makes the Emerging Markets as an unattractive investment class. The FIIs have to sell more shares to get the same amount of dollars back.

7. The Silver lining is India is better positioned to handle all this than rest of the world.

1. The 200 EMA at 4654 is likely to be tested this time. Bulls live above this average, the bears thrive below it. The attached chart is interesting. In bull markets, the markets take support on this level and rally. The behavior of the index at 4650 is key.

2. The 20 EMA and 50 EMA negative crossover has happened.In the bull market, this never happens.

3. The Gann supports are at 4650 taken at major turning point in March'09.

4.Short term Gann Resistance comes at 4850 which could be a shorting level.

5. The Index broke the Trendline support of lows from August which gave us support when the low of 4766. This offers first resistance at 4775 approx now. Next resistance comes at at the upper end of the downward channel at 4850.

6.4850 is also the 61.8% Fibonacci retracement from 4951-4692. In the short term, bulls live above 4850 and bears live below 4850.

7. If the entire fall is complete from 5310-4692. Retracement levels come to 4837, 4928, 5006,5073.

No comments:

Post a Comment