May has historically seen wild swings in the year when there have been key Election Results. Lets have a look at the data for the past 10 years. Also, we have the RBI policy to contend with on Tuesday.
1. There have been Lok Sabha Elections in 2004 and 2009. Assembly elections in 2006. The results have been declared in May and there have been wild swings. Dips of 28 pc in 2004 and 18 pc in 2006 ad 30 pc rise in May 2009.
2. We have the election results coming in on May 13th 2011. Tamil Nadu looks a lost cause for DMK and Congress, Assam and West Bengal in Congress kitty and Kerala is undecided. If the Congress look more than Tamil Nadu, then the ruling party looks to be shaken. They have frittered away the legacy of the win in 2009.
3. The April close of 5750 becomes a key level now. Long above it and short below it could be 1 formula one can use.
4. The 200 DMA at 5748 and 200 EMA at 5632 are key levels.No longs below these key levels.
5. Even in the years, the markets have tanked big time in 2004 and 2006, the highs have been substantially above the closing price of April.
What do we infer from all this? The falls have all been electoral news driven. Hence its better to be short only below the April closing and hedged shorts on the election result day.
Gold has been rising and has given a breakout from the key 1500 dollars and ounce levels.