It was the fifth straight week of losses where the markets ended down 0.7 pc. The markets continue drifting down. This in spite of the FIIs pumping in money.
1. Post the rollback in rail fares and the coal scam coming out, markets have drifted lower.
2. The markets are stuck in a trading band of 5233-5450. A break on either side will give a move of about 200 points.
3. As per Elliot analysis, we are in the corrective B wave to the entire up move from 4532- 5629. Last week I stated,
As per Elliot, we had wave A ending at 5630. B wave is the corrective wave for this up move. B-a finished at 5171. B-b was from 5171 to 5499. Now, we come at interesting cross roads. 1 view is B-b ended at 5499, leading B-c to end the correction anywhere between from 5215 to 5040.
Another view is B-b sub wave a ended at 5499, B-b, sub-wave b is ongoing to end anywhere from 5305- 5236 followed by another up move till 5500-5537 to complete B-b. This will be followed by another down leg till 4950-5040 in the form of B-c.
This view still stands.
4. It has become a listless traders market. The Fuel prices are expected to be hiked next weekend. The quantum of the hike and the roll back will demonstrate the seriousness, the government has on economic reforms.
5. April will see the first set of corporate results coming in. I was analyzing the results of our mid cap picks today, the rally seems to be in anticipation of better corporate results. This quarter at least, the results should demonstrate a uptick, otherwise this rally is riding on liquidity and nothing else. This is because markets typically are 6 months ahead of the cycle.
6. The silver lining is that the global cues are positive. Till the next debt crisis erupts, and the liquidity keeps flowing in, the markets will keep going higher, if there are no negative domestic surprises. Next week is the last week before the Parliament goes into recess.
It is a traders market and I trade in and out of mine and Lakshmi's picks.
Sunday, March 25, 2012
Sunday, March 18, 2012
Budget: 1 more non event out of the way
The budget has come and gone. The markets are 0.3 % down for the week.Let us see where the markets are headed.
1. The markets have risen from December end on the back of liquidity flows from the FIIs and nothing else. The UP results, railway budget, RBI policy all have come and gone, but the flows continue every day. Till the flows continue, the markets will continue to rise.
2. This has become a buy on dips market. Every dip is being bought into. The markets have no events to trigger any major moves till the results around 10th April. The year end liquidity considerations may not induce a sharp rally very soon.
3. As per Elliot, we had wave A ending at 5630. B wave is the corrective wave for this up move. B-a finished at 5171. B-b was from 5171 to 5499. Now, we come at interesting cross roads. 1 view is B-b ended at 5499, leading B-c to end the correction anywhere between from 5215 to 5040.
Another view is B-b sub wave a ended at 5499, B-b, sub-wave b is ongoing to end anywhere from 5305- 5236 followed by another up move till 5500-5537 to complete B-b. This will be followed by another down leg till 4950-5040 in the form of B-c.
4. Net-net around 5200-5250, we come to our buying levels.
5. The Facebook IPO is slated around May 18th 2012. Usually bull runs end with large IPOs. We have seen this with Coal India and Rpower in India.
6. The budget was nothing great. It gave some relief to tax payers but took it back in the form of Excise Duty and Service Tax.
7. The budget was a market neutral event in the sense nothing very positive and nothing very negative.
On the whole, we are in a range for some time to come. 5500-5100 is the broader range. Buy around 5200 levels.
For those interested in individual stock picks, I have picked along with Lakshmi which are good for long term trades as well small trades in them.
1. The markets have risen from December end on the back of liquidity flows from the FIIs and nothing else. The UP results, railway budget, RBI policy all have come and gone, but the flows continue every day. Till the flows continue, the markets will continue to rise.
2. This has become a buy on dips market. Every dip is being bought into. The markets have no events to trigger any major moves till the results around 10th April. The year end liquidity considerations may not induce a sharp rally very soon.
3. As per Elliot, we had wave A ending at 5630. B wave is the corrective wave for this up move. B-a finished at 5171. B-b was from 5171 to 5499. Now, we come at interesting cross roads. 1 view is B-b ended at 5499, leading B-c to end the correction anywhere between from 5215 to 5040.
Another view is B-b sub wave a ended at 5499, B-b, sub-wave b is ongoing to end anywhere from 5305- 5236 followed by another up move till 5500-5537 to complete B-b. This will be followed by another down leg till 4950-5040 in the form of B-c.
4. Net-net around 5200-5250, we come to our buying levels.
5. The Facebook IPO is slated around May 18th 2012. Usually bull runs end with large IPOs. We have seen this with Coal India and Rpower in India.
6. The budget was nothing great. It gave some relief to tax payers but took it back in the form of Excise Duty and Service Tax.
7. The budget was a market neutral event in the sense nothing very positive and nothing very negative.
On the whole, we are in a range for some time to come. 5500-5100 is the broader range. Buy around 5200 levels.
For those interested in individual stock picks, I have picked along with Lakshmi which are good for long term trades as well small trades in them.
Sunday, March 11, 2012
Elections done with, Budget on the horizon
The UP election results have come and gone. What do they portend in the future for the markets. For the week, the markets were down 0.5 % which hardly tells the story.
1. The results clearly show that the Congress position is weakened. Punjab, they were expected to win and UP to do much better. The government will not be in immediate danger for the simple reason Mayawati needs support from the Centre. Her band of 21 MPs are there.
2. The problems arises when both Trinamool Congress and Samajwadi Party play hardball. Both would love an early election to cash in on the popularity wave.By 2014, both stand to lose a lot. This also means Petrol price hike and other reforms take a back seat.
3. What does this bring for the budget. The budget can be very aggressive or a populist one. A populist one if the government feels it may not get a chance to present another budget and an aggressive one if the government feels it can last the full term till 2014.
4. The arithmetic favors the government. It has 206 MPs, NCP 9, DMK 18, NC 3 bringing a total 236. Add to this Mayawati's 21 taking it to 257 just 15 short of a majority. Add Ajit Singh's 5 and Laloo's 4 to it, we come to 266 just 6 short of the majority mark. What will happen is the government's decision making capability will be limited. The government will continue to muddle through.
5. The up move from 4532 to 5630 is about 1198 points. This marks A leg of up move.B leg down will correct this entire up move. B-a was 5630-5171 = 459 points. Expect B-b upwards anywhere between 5400-5540 followed by b-c till 4950-5100.
6. The above count will get negated if the markets go above 5540 and then we will have finished the down move and next leg up till 5750-6000.
7. The next leg of the up move will have the mid caps rallying. This rally has been on the back of FII inflows. From December till ow the government has not done anything on the reform front. Post a lackadaisical budget, the markets may correct as a knee jerk but that will present a buying opportunity.
8. Our strategy should be that if we near the 5500 mark before the budget, move at least 50% in cash and wait for the budget outcome. Re-enter only above 5600 or on sharp dips.
The fact that the CRR rate has already been cut, takes away 1 more reason for the markets to rally after the budget. I expect a rally to 5450-5500 immediately.
My strategy has been trading in the mid caps and large caps, I and Lakshmi picked out. I believe that the current is a bear market rally till 6000 and we should still test 3800-4200 before we end this bear market some time in 2013. I trade i stocks and bring their cost price to about 5 % dividend yield. I leave these stocks for the long term and will be happy with the dividend income from them. If I am wrong and a new bull market has started, these same stocks will give me the required returns.
1. The results clearly show that the Congress position is weakened. Punjab, they were expected to win and UP to do much better. The government will not be in immediate danger for the simple reason Mayawati needs support from the Centre. Her band of 21 MPs are there.
2. The problems arises when both Trinamool Congress and Samajwadi Party play hardball. Both would love an early election to cash in on the popularity wave.By 2014, both stand to lose a lot. This also means Petrol price hike and other reforms take a back seat.
3. What does this bring for the budget. The budget can be very aggressive or a populist one. A populist one if the government feels it may not get a chance to present another budget and an aggressive one if the government feels it can last the full term till 2014.
4. The arithmetic favors the government. It has 206 MPs, NCP 9, DMK 18, NC 3 bringing a total 236. Add to this Mayawati's 21 taking it to 257 just 15 short of a majority. Add Ajit Singh's 5 and Laloo's 4 to it, we come to 266 just 6 short of the majority mark. What will happen is the government's decision making capability will be limited. The government will continue to muddle through.
5. The up move from 4532 to 5630 is about 1198 points. This marks A leg of up move.B leg down will correct this entire up move. B-a was 5630-5171 = 459 points. Expect B-b upwards anywhere between 5400-5540 followed by b-c till 4950-5100.
6. The above count will get negated if the markets go above 5540 and then we will have finished the down move and next leg up till 5750-6000.
7. The next leg of the up move will have the mid caps rallying. This rally has been on the back of FII inflows. From December till ow the government has not done anything on the reform front. Post a lackadaisical budget, the markets may correct as a knee jerk but that will present a buying opportunity.
8. Our strategy should be that if we near the 5500 mark before the budget, move at least 50% in cash and wait for the budget outcome. Re-enter only above 5600 or on sharp dips.
The fact that the CRR rate has already been cut, takes away 1 more reason for the markets to rally after the budget. I expect a rally to 5450-5500 immediately.
My strategy has been trading in the mid caps and large caps, I and Lakshmi picked out. I believe that the current is a bear market rally till 6000 and we should still test 3800-4200 before we end this bear market some time in 2013. I trade i stocks and bring their cost price to about 5 % dividend yield. I leave these stocks for the long term and will be happy with the dividend income from them. If I am wrong and a new bull market has started, these same stocks will give me the required returns.
Thursday, March 8, 2012
What do the State Election results foretell
The votes are counted in. The Victors are announced. What do these state results tell us for the future? Let us try ad have a look at the results.
The results indicate that the regional parties have become strong again. The National parties were battered in UP. Also, in Punjab it was the Akalis who swung in the votes. For the Congress party, the down slide is clear. After a year of scams, policy inaction the voters have sent them a message.
The Congress has little to lose now by pushing in reforms. The populist measures have not worked so far.
The results also mean that there would be no run away rally in the immediate term. We may move side ways to down till the budget and then the next course of action.
I still maintain one can accumulate stocks and look for a gain of about 20 pc. The time to sell has not yet arrived. 5000-5100 looks to be next support band. We would muddle through till the budget and then have one sharp sell off or attempt a rise after the budget.
The near term looks down. Corrections are healthy and welcome.
The results indicate that the regional parties have become strong again. The National parties were battered in UP. Also, in Punjab it was the Akalis who swung in the votes. For the Congress party, the down slide is clear. After a year of scams, policy inaction the voters have sent them a message.
The Congress has little to lose now by pushing in reforms. The populist measures have not worked so far.
The results also mean that there would be no run away rally in the immediate term. We may move side ways to down till the budget and then the next course of action.
I still maintain one can accumulate stocks and look for a gain of about 20 pc. The time to sell has not yet arrived. 5000-5100 looks to be next support band. We would muddle through till the budget and then have one sharp sell off or attempt a rise after the budget.
The near term looks down. Corrections are healthy and welcome.
Sunday, March 4, 2012
Election Results may throw a buying Opportunity
The markets corrected about 1.3 pc. The election results will set the tone for the markets. Let us check out the markets technically ad also fundamentally.
1. The best case scenario for the markets is a Congress-SP coalition in UP. If the Samajwadi wins alone it means a fresh set of headaches. Mulayam will start efforts to re-start the Third Front which can eat into Congress votes the next General Elections. If there is President's Rule, it will also be bad for the markets. Congress doing badly means populist measures over the next 2 years.
2. The Congress needs to finish much higher than the projected fourth place. 50-60 seats will be seen as a setback to Rahul Gandhi. The best case is Congress getting 100+ seats and a coalition with the Samajwadi Party.
3. Technically the entire up move 4532 - 5630 can be labelled as wave A with a length of 1098 points. Wave B is ongoing which will correct this entire up move to 5370 (done),5210, 5081 or 4951. Below 4951, the entire up move may be in danger. This means that the 5080-5200 is a buying zone if we get there.
4. Now, this down move from 5630 will have 3 legs A, B and C. A is over at 5268.B may be over at 5459, or B may subdivide into a,b and c. a is 5268 - 5459, b is 5459 to 5298 and c may be till 5500.
5. Which also means the market is decisively going to go up if it sustains above 5500.
6. The Budget and the RBI policy will be up next after the election results. Election results typically produce knee jerk negative reactions which can be buying opportunities. The last election was an exception.
I still believe we are not in a long term bull market yet and this market should be used for trading opportunities. How the market behaves around 5750-6000, if we get there will throw clues. I would use this rally to trade in stocks identified by Lakshmi and me, reduce their cost of acquisition to a 5 % dividend yield and then sit tight on those stocks for the next 5 years.
1. The best case scenario for the markets is a Congress-SP coalition in UP. If the Samajwadi wins alone it means a fresh set of headaches. Mulayam will start efforts to re-start the Third Front which can eat into Congress votes the next General Elections. If there is President's Rule, it will also be bad for the markets. Congress doing badly means populist measures over the next 2 years.
2. The Congress needs to finish much higher than the projected fourth place. 50-60 seats will be seen as a setback to Rahul Gandhi. The best case is Congress getting 100+ seats and a coalition with the Samajwadi Party.
3. Technically the entire up move 4532 - 5630 can be labelled as wave A with a length of 1098 points. Wave B is ongoing which will correct this entire up move to 5370 (done),5210, 5081 or 4951. Below 4951, the entire up move may be in danger. This means that the 5080-5200 is a buying zone if we get there.
4. Now, this down move from 5630 will have 3 legs A, B and C. A is over at 5268.B may be over at 5459, or B may subdivide into a,b and c. a is 5268 - 5459, b is 5459 to 5298 and c may be till 5500.
5. Which also means the market is decisively going to go up if it sustains above 5500.
6. The Budget and the RBI policy will be up next after the election results. Election results typically produce knee jerk negative reactions which can be buying opportunities. The last election was an exception.
I still believe we are not in a long term bull market yet and this market should be used for trading opportunities. How the market behaves around 5750-6000, if we get there will throw clues. I would use this rally to trade in stocks identified by Lakshmi and me, reduce their cost of acquisition to a 5 % dividend yield and then sit tight on those stocks for the next 5 years.
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