Sunday, May 16, 2010

Markets Next Week : Watch the Dollar Index

This week, Monday we had big up day and rest of the week, it was just sideways movement followed by a breakdown on Friday. We are heavily dependent on FII flows and I did a study for the Month of May on the Dollar Index and FII funds flow pullout.

1. The Results season is out of the way and no major surprises. Honestly, I feel the Results usually get factored in much earlier. The next triggers could be the onset of Monsoon setting in. This not too big a trigger unless the Monsoons fail.
2. The EU mess continues. The bailout does not seem that great a thing as was seen earlier. The ghosts of EU will keep haunting us.
3. The FII outflow continues. It is the hot money outflow which will be a drag on the markets. I did a study on the dollar index. It went from 82 to almost 85.6. The FII pullout of funds increased directly. So, just watch the Dollar Index. Euro weakened to 1.24 levels in spite of the bailout. Eventual target is 1 Euro = 1 Dollar. That will take the Dollar Index to 91-92 levels.

4. If we see the Downward Channel, we have support around 4926 and resistance at 5160 levels

5. Weekly channel supports are at 5008 and 4800.

6. If we see the falls from August onwards we see an interesting divergence this time. Usually, when the market rebounds and goes past 30 and 50 emas it just goes up again. This time, it tested these 2 averages and fell again indicating a larger fall is around the corner.

7. I had show the break of 3 trend lines from the lows of March 09. 1 thing I forgot to highlight was that once breached the trend line it never goes past it again. We came near to violating the trend line but fell off.

8. The BB supports come in at 5016 on a daily scale and 4726 on Weekly scales.

9. Its Open Interest time again, huge Put build at 5000 strike around 85 lakh and at 5200, 5300 calls also. This indicates 5000 will not give way that easily and 5200, 5300 will not breach very easily this expiry.

10. The 200 EMA comes in 4895 ad 200 DMA comes in at 4982. They have not been tested so far.
So in a nutshell, I expect Markets to take support around 5000 levels, a small bounce up of 100-125 points before continuing the fall.


  1. Dear Nishit,

    Really Great seems to have worked very hard for doing such a detailed and focused analysis for the benefit of all.....Keep it up dear !!

    GOD Bless you !!


  2. i have also been following this three fan principle in my analysis and also elliotte analysis and the break of the third fan opens gates on the down side. In my view the down ward movement might be very swift.

    M.Sri Mahidar
    Trend is friend.

  3. Yes Mahiji. I had written to you once. I didnt get a reply, maybe the mail got lost.
    Right now things are not at all looking good.