Sunday, April 3, 2011

Markets: What Next?

Its a new financial year and what has changed for the markets? Lets take a look at a few fundamental and technical factors at play.

1. The March auto sale numbers seem to be mind-blowing. In spite of high fuel prices and the fact that i Feb a lot more cars were bought factoring in expected hike in excise prices in the Union Budget, the March Car Sale numbers were amazing.

2. The FIIs have pumped in a whopping 8395 crores or almost 2 billion USD. That was a major reason for the Markets rising so much. As long as the FII flow is there, the markets will continue to remain stable.

3. The Markets seem to ignore a lot of negative data like high crude oil prices, inflation, poor governance etc. For how long this continues is anybody's guess.

4. The Wave Count seems to be getting clearer. Wave 1 was from 6339- 5177. Wave 2 will correct this entire down move and the targets could be 5620 (done), 5758 (done) and 5895.

5. Wave 1 down took almost 3 months and Wave 2 would take at least 2 months till middle of April. We have seen Wave A till 5608, Wave B till 5348 and Wave C could have targets of 5779, 6041.

6. Once Wave 2 is done we will have a wave 3 which can be a down move of 1200 to 1800 points lasting 4-6 months.

6. The difference of 5 DMA and 20 DMA shows it to be in overbought zone. The top may have been in or in a day or 2 max.

7. The Stochastic are highly overbought indicating that the next week could be a flat to slightly positive week at max.

8. There are 2 critical trend line resistances coming up. First is the line joining the last 2 tops at 6339 and 6177. This has already been resisted twice and the next one at 5922. This is the channel from Nov 2009 from which we had broken out in Sept 2010, broke below briefly in February 2011 and now re-entered.

Bottom line: Trade cautiously and look to safe havens like Gold and Debt options.

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