Sunday, June 17, 2012

Make or Break Week Ahead

Very rarely in recent times have so many events been stacked up together. The early part of the week will decide if the markets will continue their ascent to 5600 odd levels or there will be a dip to 4800 levels and below. Let us try and dissect each event and find out the implications of each.

Fundamentally:
1. The Greece election results should be out by Monday.Why are these results so important? The reason is that the party coming to power will decide whether to stay in the Euro zone or not. If the Greeks decide to exit the euro it may lead to the unraveling of the Euro. There are various parties in the fray both pro and anti austerity. If the radical Syriza comes to power than the markets may tank.

2. The RBI mid quarter review is set for Monday. The markets have factored in a 25 basis points cut. Anything more and the markets may rally. If there is no cut than the markets fill fall especially the Banking stocks.

3. The US Fed meets on Tuesday and Wednesday. There are expectations of a third round of Quantitative easing or fiscal stimulus. If no announcements come, the markets will fall globally.

4. The election of the President of India has seen the announcement of the UPA nominee as Pranab Mukherjee. The next question is who will replace him as the Finance Minister. If the PM keeps the portfolio with himself, then the markets will view it favorably.

The Crude oil prices remaining below 100 dollars a barrel are a great relief to the government. If the trend continues, then the probability of stocks going up greatly goes up.

Technically:
The question is has the Leg C upwards commenced. Leg A was 4532-5629, B was 5629 to 4770. The moot point is correction over?
1 view could be that the last down leg remains to re-test 4770 before the up move. The second option could be that leg C has commenced up. This would be confirmed above 5150 and 5227.
As I see it, any correction between 4900-4950 is a good chance to add up stocks.

Many stocks are going to be ex-dividend in the next few weeks and give an opportunity to load up on. For those interested in stocks, we have the stock picks from Lakshmi and myself.

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