Wednesday, March 31, 2010

Interesting Chart from Vijay


Here is what my friend sent.

Very Interesting, this implies a correction to 4950-5000 levels and then a final move up to 5350-5400.

Monday, March 29, 2010

Sunday, March 28, 2010

2 years back, we had done a statistical exercise to see how markets traditionally behave during the Jan to April period. We had come up with certain astonishing facts.
I have updated the last 2 years and have found out that the things remain the same.

Please have a look here:

http://nav-files.googlegroups.com/web/febaprv1.0.pdf?gsc=477cWQsAAADZUqpn3M-PPs3SiaA3KRUt

This means that either in April, or May June we will get a buying opportunity.

Sunday, March 21, 2010

Some Correction expected


It was another week of strong gains. Will the rise continue or there would be some correction before the rise continues? Lets try and analyze what could be the next moves of the Market.

1. The RBI announced the a hike of 25 bps is both Repo and Reverse repo rates. Monday, this should have a negative impact on the markets. A knee jerk reaction can take place. Also, the expiry is on Thursday, with the Markets closed on Wednesday due to Ram Navami. This may trap the bulls and lead t take plao long unwinding.

2. Voting on US Health care reform bill is due to take place on Sunday. If the bill goes through, then it involves additional government spending. If the bill fails, loss of face for Obama. This could have a potential negative impact on the markets worldwide on Monday.

3. The NAV of funds for the financial year 2010 falls on 31st March. The Mutual fund managers bonuses are dependent on these year end calculations. Expect the markets to be propped up till then.

4. The breadth has been negative almost the entire week. This means the market has been held up by propping up the prices of heavyweights in the index like Reliance. But, larger market is not moving up which is not a going sign at all.

5. The support lines are as shown in the figure. 5220 is a support for short term, and break of 5065 confirms entire leg of post Feb rally from 4675 is over.

6. As per Jan-march cycle, the market should correct in this period. If this has not happened substantially the there is usually a big fall in May. I would post a study on this next week.

7. Safe bets now would be dividend yielding stocks like VST and Andhra Sugar.

8. The Dollar carry trade is back in fashion. The huge liquidity inflows have led this rally. DIIs have been net sellers in this period. If the dollar strengthens then this rally will reverse.

Thursday, March 18, 2010

Nifty headed to 5450?


Co-relation - Nifty Gann Dates

Co-relate these charts with what's going on currently:

Chart 1
Start - Nov 3 ' 2009 (Nifty was at it's lowest - 4538)
90 Degree occurs on Feb 4, 2010 (Nifty was at it's lowest on Feb 8, 2010 - 4675)
180 Degree occurs on May 4, 2010 (Nifty could be at it's highest - 5450 / 5850?)
Chart 2
Start - Jan 6 '2010 (Nifty was at it's highest - 5310)
90 Degree occurs on April 07, 2010 (Nifty could be at it's highest - 5350 / 5400?)
180 Degree occurs on July 07, 2010 (Nifty could be at it's lowest)
Chart 3
Start - Feb 08 '2010 (Nifty at it's lowest 4675)
90 Degree occurs on May 08 '2010 (Nifty could be at it's lowest again)
180 Degree occurs on Aug 09' 2010 (Nifty could be at it's highest)













Tuesday, March 16, 2010

Breakout if we close above 5215


Watch the trendline. Its the one connecting the highs from Jan 08 to Jan 10. Break of that and away we go to new highs.

Fed Meeting could be trigger tonight.

Sunday, March 14, 2010

Big Move Coming:Up or Down

There is a big move coming in the markets this either up or down. There are several reasons why a big move would materialize. The person who gets the direction right will make big money. Lets try and analyze why a big move come.

1. Periods in the markets where there is low volatility is followed by periods of high volatility and big moves. The ATR (20) which is a measure of volatility has come down to 73.Before the falls in Oct'09, Jan'10 and the rise in March'09, the markets had similar low ATR values.



2. A big move is coming up. But in which direction.The Bollinger Bands are at 5200 and 4700. Since we are at the upper end of the range, this typically favors a downmove to test the lower Bollinger Band. Taking into consideration of time factor, we may test 4600.

3. The rise 14 is at around 65. See the trend line of the tops in recent past. If we continue to move above, we may hit 79 and test new highs. If we break the trend line, we move down.



4. Shorting levels would be break of 5100 and 5092. I would wait to see 5092 broken first.

5. The trend line joining the tops from Jan'08 to Jan'10 comes to around 5200, this is a very good indication of markets moving up.

6. The Bollinger bands have expanded to move outside the Keltner Bands. This is often an indication of a breakdown coming.

7. Huge Open Interest at 5000 puts. This may mean 5000 is a rock solid support or someone is creating a smokescreen.

8. Long term Gann supports come at 4900. 4900-5000 has 20,50,100 emas around it. If it breaks 4900, its bye bye time.



Fundamentals:

1. The Advance Tax numbers would be out next week. I feel they are already discounted by the market.

2. Good IIP numbers, but market did not respond to it.Markets not responding to good news is a negative.

3. Borrowing costs going up. 10 year bond yield at 8 pc. Rate hike is imminent.

4. Monday is 23rd day of this rally.We fell 23 days and we have achieved time equality. We still have retraced only about 75 pc. Monday is also new moon day.If we dont rally, it could be a turning point.

5.NMDC IPO has come and gone. There are slew of IPOs raising money.Signs of toppishness.

To summarize, break of 5180-5200 would signal potential new highs. Break of 5092 and then 5000, 4900 would signify the party is over. Lets wait and watch.

Saturday, March 13, 2010

PPF: Do Not Break that PPF amount just yet

Its is that time of the year where one plans for tax savings.PPF is one of the best schemes for tax savings and planning for retirements. The new Draft Direct Tax Code has some drastic changes from April 2011.Lets see what they are.

Every year one can invest 70K in PPF Account. This gives a return of 8 pc per annum and compounding takes over. The account is initially for 15 years and then extended for 5 years at a time.

Currently it is in the EEE regime. Exempt Exempt Exempt. The amount you put in gives you a tax break( the amount gets deducted from taxable income), interest is tax free and when you withdraw the entire amount is tax free.

The Party is over to an extent.

We now move to EET regime.Exempt Exempt Tax regime. The amount you put in gets an exemption, so does the Interest earned. The catch is when you withdraw the amount you will pay rate of tax as per your tax bracket.

Now, how do you circumvent this. First do not touch this amount till you retire. Then take out only small amount every year (Your tax bracket will change, once your salary stops and you move into Senior Citizen bracket).By that time, the laws may also change.

Now what about the money you have put in till March 31st 2011. That amount as on 31st March 2011 gets different tax treatment. It continues to remain tax free at withdrawal. Let me illustrate with an example.

You have 10 lakhs in March 31st 2011.When you withdraw this 2015, you pay no tax. Under new rules, you would have payed 3 lakhs as tax.

The grey area is the interest earned on this 10 lakhs, post 2011. The draft code does not make any direct mention of this. If this is also tax free (If they water down the bill which is most likely), then the PPF balance turns to gold dust.Even if not, you got a tax free amount at your disposal, when you want.

Now if someone withdraws 10 lakhs now and pays off a housing loan. If loan was a 9 pc per annum and PPF is 8 pc, so they were paying 1 pc more. Over 5 years on reducing balance, this works out to about 30K.But they also get the tax benefits which would offset this at least 2011.

Thats the reason you should not touch your PPF account now.

Wednesday, March 10, 2010

Nifty - Market Direction


We've had a considerable upmove over the last couple of days and I feel that the upmove may not have ended yet. We may see consolidation around the 5000 , 4900 and 4850 levels for sometime (2 - 3 weeks) before any further upmoves. Eitherway, you could choose to take a short position at 5100 (+/-20 pts) and hold those shorts till we reach the levels suggested (5020 / 4950 / 4900 / 4850 or lower - upto 4650) - Your Stop for this trade would be a few points above the previous high (5145).

Alternatively breaking below 4850 / 4650 - we can see moves upto 4300 over the next couple of weeks. This could be our alternative scenario.

This will be a boring market to trade as we can see sideways action over the next 3-4 weeks. Maybe a good time to take a vacation?

Saturday, March 6, 2010

5180-5200 Key Levels to Watch Out


It is an impressive post budget rally. The Market has moved most of the indicators has short term positive with generous help from the FIIs.Does it face any resistance on the upside or is it a smooth ride ahead?

1. The 80 percent retracement of the fall from 5310-4675 comes to 5183.

2. If we draw a trend lie connecting the tops from Jan'08 to the one in Jan'09 the trend-line comes to 5180 - 5200 zone. If we break this, we are likely to make new highs in the region of 5500.

3. The monthly pivot is at 5183 level.

4. On the fundamental side, we have the advance tax payout season. But, in spite of this the markets had rallied last year.

5. The NMDC FPO hits the market next week.It will suck huge liquidity from the markets.

6. The US Markets have rallied and if they rally any further are on the brink of making new highs. The Greece situation has stabilized. Will it be Spain next? Remember Bear Stearns started it all off but Lehman was the catalyst. We may see more cockroaches coming out in May-June.

7. We have crossed all the moving averages on the upside. We have a slew of supports in the range 4930-5000 and resistances around 5180-5200. This may be our range for the month of March.