Saturday, April 17, 2010

Action Packed Next Week in Store

We have a potentially very eventful next week coming up. The Goldman Sachs scandal on Friday after our markets closed and the RBI Credit Policy on Tuesday set things up for big moves. Lets evaluate in detail all the fundamental and technical aspects so we are well geared to meet the markets.

Fundamentals:
1. Goldman Sachs (GS) have been accused of Fraud by the SEC. This is a very serious allegation and GS will not take it lying down. The clout of GS can be seen by the fact that the previous Treasury Secretary of the US (their equivalent of our Fiance Minister) was the Head of GS.

2. 2 things can happen. It is a storm in a teacup like Dubai, due to which the markets tank for a day or 2 and recover. If it is a prolonged affair, then this might potentially trigger a bigger fall. The timing of the announcement is also suspicious. Friday, after which the markets are closed for 2 days. This might be an effort from the Obama camp to project himself as the White Knight in Shining Armour who takes on the Big Dragon from Wall Street.

3. The RBI Credit policy on Tuesday. It is expected that a Repo and Reverse Repo hike of 50 basis points. Anything more will trigger a slide like a CRR hike of 25 basis points. This will impact the liquidity immediately.

4. The past week, the market has been ignoring good news. Infy good numbers, good IIP data, inflation just below 10 pc and the markets still went down. When markets ignore good news, then one has to be careful.

5. The Results season will be in full swing. Any negative surprises will not be digested as good results are already factored in.

Technicals:

1. The trend line giving support from the Feb low of 4675 is broken. This may been the current up-move is over.

2. The Nifty has been moving in a downward channel for the past few days. Support comes around 5250 break of which opens a target of 5150.



3. 50 EMA comes at 5167 which should provide some support. The 5 week low EMA which always provides support also comes in at 5195.

4. Looking at Retracement levels, supports come in at 5229, 5123, 5038, 4952.

5.As per Elliot, the 5th wave might have been over at 5400. Length of 725 points. (Refer last post).

6. The Entire bull run is only in danger below 4800 where the 200 day EMA is and also the entire upward channel from November onwards ends.

7. Bollinger Band support comes in at 5190.



I would still continue to add Gold and wait for next 2 days to get over to decide next course of action. All shorts should exit above 5274.
5150-5190 is a support zone for the markets.
If any stock is to be added then it has to be Reliance. The reasons are high crude prices and in case of a fall, this stock will fall the least.

2 comments: