Sunday, November 4, 2012

Some signs of Green Shoots

Over the past week, some data coming out has been encouraging. Auto Sales are on the rise again, retail chains are logging in good festive sales, so are we out of the woods yet?



The period from 2008 to 2015 was predicted to be a great period of strife for the world economy, a period of hardship and suffering which was only rivaled by the Great Depression.
The Great Depression began in 1929 with a stock market crash, the same as in early 2008. People lost jobs, banks closed, great institutions faced extinction and it was a time of great economic hardship.
Similarly, the period from 2008 onwards is a troubled time in the global economy. There are periodic bright patches of sunshine amidst the gloom.
The Auto sales have risen in October, there are long waiting lists for several models of cars. Retail sales have gone up but at the same time the hiring is at its lowest. Companies are doing all sorts of ridiculous cost cutting.
It will take time to get rid of all the problems facing the world economy, but I strongly feel by 2014, the global economy would have entered into a new growth phase. The Indian elections also would be out of the way by that time.
Between now and 2014, there should be 1 major dip in the indices which would be the last opportunity to stock up on good quality equities.
We are more than halfway through the tough economic period and the light at the end of the tunnel appears to be closer.
Coming back to the markets,

1. The range bound trading continues. We are still stuck in that trading range, though we did have a breakdown below 5630. One could go long only on a break of 5726 and if the market sustains above it.
I do not foresee any major downside except maybe about a couple of 100 points. 5450 - 5526 should be able to provide good support.

2. The US Elections will provide further direction to the markets on Wednesday. If there is a clear cut winner, the markets should rally.

3. The Results season is over and the markets will look now to Global Events. If Romney wins, there may be a short term blip as he is opposed to the loose monetary policy. If that happens then, gold prices should correct now.

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