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Well how was my timing yesterday? :)
I for one was very happy with it...Covered shorts near the low and took some very low risk longs in calls...In a notional profit right now. I will likely look to cover it very soon - even before expiry - I am obviously not very comfortable holding longs at this juncture...Markets can reverse back down at any point of time...2850 would be the most aggressive target.
Now why did I cover? Below chart explains it...And I did point this out yesterday also...And we got a doji...Seems to be playing out according to plan...We should also get a big up day very soon if its playing according to the plan.
The other interesting thing - If you pull up the intraday chart from yesterday, we seem to have formed an intraday inverse H&S which projects a target to 2800 if we move above yesterdays highs...So worth watching. (pull up a yahoo 5 day chart and see what I am referring to)
Okay so thats my short term outlook and my trading plan...
Now coming to the bigger picture...MVP asked a very interesting and important question in the chat box...Something I have also been wondering for some time...Simply put...why is there a disconnect b/w our markets and the dow or spx...We have broken the lows in DOW or SPX and nifty is still strong...Why? Well I do not have answers but I can speculate...
Something else worthy of note here is that Nasdaq has not broken the lows and looks more strong...It looks more like Nifty so we can compare ourselves to that index...
But...coming to the discrepancy...There are 2 possibilities...
1. If you remember in Oct of 2007, US already started the bear..Much earlier than us...We waited till January to put in the big move down...Market might be held up right now and stealth distribution might be going on...Before the final capitulation move to a bottom...This is one possibility.
2. The second one is a more fundamental one...I.E India is more stronger and is preparing itself for the next bull market...Hence the relative strength.
I think its a mix of above 2. I expect we will tag the bottom of this chart eventually as I have been calling for a while. It may happen sometime within the March-April timeframe. Sensex Monthly attached below.
And I think this will be a very important bottom for our markets...And we might not breach this in the coming months...You can see we have been in a structural long term bull market...Recent bear market non-withstanding...A tag of 6400 on sensex and moving up from there will have me very bullish. We can expect several tests of the channel bottom before the next bull market begins...Ofcourse all this will take a lot of time...Its not a 1 or 2 day event.
But during this time SPX might might just form another term bottom at 650-600 odd and then mount another rally only to break it later...India on the other hand will become more stronger as time goes by...And as the fundamentals regain strength.
This is my longer term view and should be taken with large fists full of salt :)
Earnings wise, I am here in US, I see it, its bad...SPX might have negative earnings very soon...Do you see that for India? No...Sure we are in a slowdown...even recession...But we will recover within 2 yrs or so...US on the other hand if lucky will recover in 5-6 yrs...If NOT, worst case US of A is going into a depression.
Speaking more on the fundamentals, I am appalled at the way policy is moving here right now...Its not good...US of A is moving more toward socialism when we are trying to move more to capitalism...They are worsening the situation with every new policy step they take...If they had done nothing, market and economy might have recovered sooner...This is why I think USA has peaked...New Policy is making it worse...Sure it will stabilize somewhere but I think the boom here in US of A is over...
The next few decades belong to China and India.
Comments welcome.
Best.
5 comments:
well-thought out nice post,lee.
still I have some points to raise.but not today.. I am very sleepy now.tomorrow... if you permit me.
TC
Very good Post, Lee. Was having a look at your posts for a few days now... You write quite well, jus wats needed and jus so accurate... Good Job Buddy...
TC
Varun Bhai, Thank you...appreciate your comments :)
Sajal(l.s), sure, come out with them...lets make this a debate :)
Best.
I agree the earnings visibility of Indian companies could be better than the western counterparts.Even in the worst times Sensex trades at 7-8 EPS so that would mean around 6-7k levels.
The broader market has already breached the Oct lows,so once the heavywts give way the index can follow.Could the disconnect also be partially explained by the promoters holding a greater stake in Indian companies and also the amount being put by insurance companies in the market.( i read somewhere that LIC alone will invest ~20k crore in first quarter).
Well Lee, at the outset, I have very much appreciated your jesture.
Now coming to the points.
1.What I have understood from your explanation that you are trying to establish a theory where--i) US will suffer a depression in the coming years ;ii)while India and China will shine.I don't know if I understood correctly but at least that I got from your undertone.
Just here lies my problem. If your first premise is true then your second assumption should be wrong.
Rather it seems like the stupid "decoupling theory" that cropped up Nov -- early Jan last year in our market which was ultimately shattered by just 2 back-to-back down circuit in Jan.
My point is --
a) In 1944,Bretton-Wood accord established the US$ supremacy in exchange-rate world over.It is the US economy which creates and circulates US $.
b)Politically US is the super-power and I am not seeing any country who can dethrone US in near terms. So, Bretton-Wood will continue.
c)If US recovers then a mojor contribution will come from this US$ supremacy by Bretton-Wood.I mean other economies will help US to recover by forgoing their own growth.
d)What earnings you are looking today of the Indian Incs, can change dramatically within a quarter or two.So we should not give much importance to the present marksheet of them.
Lastly,in short,my point is If US suffers nobody in the rest of world can avoid sluggishness(at least).Once a French President said beautifully... tying with US is like sharing a life-boat with an elephant.
regards and TC,
sajal.
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