Indian Markets - Technical Analysis & Thoughts

2012

2012-01-17T19:23:00.000-08:00

Been a while since my last update. Had a good time off from the markets.

Now several things here when I look at the conventional charts and also the Hurst charts. No low has really been confirmed yet. Even after this much rally. You would remember earlier I was looking for a low somewhere in Nov timeframe - the 80 week low - and then a good rally from there. Now even though we got some rally, I am not sure if this was the real long lasting low. I mean to say I expect more downside this year. I dont think it will be easy to trade this because of the sharp rallies in between.

Bottom line for me is that my weekly mechanical system remains on sell and will until we take out 5400 conclusively on the upside. This will come down to 5200 in March timeframe. So if we manage to go above 5200 in March, a new bull market will be confirmed as per my standards.

I know its big points and long timeframe but I am shifting my trading to this kind of timeframe for now esp because I dont have the time for shorter term trading right now and esp for this reason I will not update my blog as frequently going forward. Weekly signals are what I will be trading going ahead. And from a Hurst perspective, when I get a more reliable view, I will post the same. Right now Hurst is a big mess and like any system it has its good and bad times. Right now, until a good low is confirmed, I will not trust it. And this new 80 week cycle seems to be a bear cycle which is why I expect 2012 will also be a bear year atleast until mid year. Well the market has to disprove this by trading above 5400 in next 3-4 weeks or 5200 in next 10 weeks.

Short term I dont have much guidance to offer except that we seem to be getting into topping range right now and not much more upside is left near term. I think there are many other blogs out there like Kumar Sir's or Ilango's which give much better short term guidance..:) No need to rely on me. I will post from time to time..Maybe a weekly or even bi-weekly update going ahead. Lot of extra responsibilities have come up for me workwise during the past few months - So I really think this is the way to go for now.

Trade Safe.

Best,
Lee

Week Ahead - 2

2011-12-19T18:52:00.000-08:00

For the same of completeness, here is how the cyclic picture looks like now. 80 week low is ahead of us sometime. I think maybe b/w now and first few days of Jan. This is my best guess for now. I am however not trading it positionally. Just hit and run.

When we have bigger bearish cycles like this one, its normal for them to extend and that is what is happening right now. Thats why trading rules are needed - to keep us out of trouble. Run your trading like a business instead of blaming your tools and everybody else except yourself :)

Ok. Thats it from me for a while..Holidays, Christmas, New year all coming up..Gonna take it easy for a while.

Have a great Christmas and New Year..Everybody.

Best,
Lee

Week Ahead

2011-12-18T19:40:00.000-08:00

Well, last Friday was brutal. No questions about it. I thought maybe market might hold and try to move above 4840. But could not and fell strongly down to 4650 area. It looks bad folks..I dont know what to say. Looking at the cycles, I am again thinking the 80 week cycle is extending and we have new lows ahead of us. For the bulls, the market needs to rally here and now else we are going to be comfortable below 4600 and in that case, lower targets open up..First 4450-4300 area and if that breaks much lower. I dont know for sure I am in kind of limbo right now and cannot be sure of anything. We can go much much lower right here or we need to take support right here and rally upward. So I am not trading anything right now - in wait and watch mode for now. I will review again in few days. I dont have any charts to post today but I will do so in next couple of days. Overall my feeling is - if you dont have a clear opinion or no signal, just dont trade until clarity emerges.

Best,
Lee

12/15

2011-12-14T19:12:00.000-08:00

So like I said before..the charts look ugly. But we still seem to be working on that 2.5 week low.

There are 2 possibilities here -

1. The 2.5 week low is still exerting its influence here and cycles are extending. We were supposed to ideally hit this on Monday but today looks like it is extending. Do we see it today? I think it is possible.

2. We saw the 2.5 week low on Monday and had a quick bounce up from there and its OVER..And now we are declining into the 5 week low. If this is the case, then market will break 4600 and head much lower in coming days.

Both scenarios are equally likely right now and since the charts look like crap right now, I am not very comfortable either long or short.

So whats the trade?

Heres the chart -

So now we are playing around with the 5 week FLD here. And I think it even broke it for some time and then got above it. So its quite dicey here. If it breaks again and stays below, it implies the 5 week top is done and market is down from here with small bounces in between.

On the other hand, the 2.5week low is coming in and if we can make it above the white line/5 day FLD and the next higher one the 10 day FLD, then we can go higher till 4900 or so...Above that we can get to 5050 area. These are all very rough numbers. I want to see if we can make it above yesterdays high first before refining the targets. Yesterdays high was 4840. You can see the importance of this from the above chart.

So again whats the trade?

Maybe best thing here is to stay out and wait for more clarity to emerge. I dont think shorting here is a good idea unless we break 4600 conclusively. And wait to go long above 4840 only. 2nd option is ofcourse to build longs here today and maybe tomorrow as long as we manage to hold 4600. And we get confirmation of bull case above 4840 where we can add more to longs. I am thinking of going with the 2nd option today in panic. Let us see.

Best,
Lee

2.5 week low but extensive damage on charts

2011-12-12T16:25:00.000-08:00

I really did not want 4800 to break yesterday. But it did and in the process it has done some good damage on the charts. I mentioned that my stop was 4800, market sliced through it so I got stopped out. Still have some puts(hedge) which I will close today. So not really a loss but I am disappointed with the way this trade worked out. Not because of anything I did wrong - just disappointed. So the setup was there, the risk reward ratio was very good - Risk 100 points, Reward 400 points. So you just take the trade and see how it works out. This one didnt.

So now, we wait for the next setup. I dont have anything clear right now except a risky buy for a possible good bounce. I mentioned before I was expecting the 2.5 week low on Friday or Monday. So did we see it yesterday? Or do we see it today in morning? We shall see. I never expected it to be so dramatic and I think all the data this week has amplified the cycles right now.

So what did yesterday's downmove do? I broke down through the 5 week FLD. What this generally means is that the 5 week high for this cycle has been seen. Ofcourse anything is possible but most likely the 5 week high is in and so we shouldnt exceed it in this 5 week cycle(until Jan2nd or so when we see the next 5 week low). The other possibility is that this is a whipsaw and we regain the FLD today but its not good to trade on hope of this happening. Chart below -

So now the 2.5 week low has come. So its not a good time to short - risk reward will be horrible. Long also is bit dangerous without getting some more clarity. However we can play for a bounce back from this low to setup the next short trade. Bit dicey right now - I will prefer to do short term trades until more clarity comes in and the next FLD trade sets up - More on this tomorrow.

All the fundamental news and events out there are skewing up the cycles but this is expected. It will alter the amplitude but cannot change the timing by much.

Bharat asked some good questions earlier -

1. You mentioned on December 07 that the 5 week FLD has been crossed generating a target of 5350.... So when we look into FLD's, is the time span of 5 week target from the date of it crossing it? i.e. target is within January 14, 2012?

- My ans: 5 week low was on Nov 23rd. So the 5 week cycle will run 5 weeks from that date. So next 5 week low will be around Jan 2nd. So we need to hit the target in this timeframe. This point is ofcourse moot right now with yesterdays price action and this target is now null and void.

2. When you calculate these time frames, do you count weekends also? cause I have seen you counting them at times...

- Calendar days. Hurst says that even on holidays and weekends, the market is trading(in the sense somewhere some market is trading, and some event is happening..what would the market do if it were open at that time?)..so we need to factor them.

Best,
Lee

Week Ahead 12/12

2011-12-11T19:30:00.000-08:00

No change in my earlier updates. 5 week FLD cross is still valid BUT need to be bit careful in here because a downcross is also looking like a possibility here. But still I think the 5350 target is still valid due to the FLD cross. Stop 4800 odd. I know there were many questions and comments. Havent been able to reply so far but I will be doing edits to this post in next 2 hours with whatever updates I have and also charts. I will answer all comments there.

Best,
Lee

5 Week FLD

2011-12-08T18:54:00.001-08:00

As I mentioned yesterday the 5 week FLD is crossed. Chart below with comments added.

So yeah it would have been nice to hold to the shorts for one more day or two. But ok a profit is a profit. What we are seeing right now is action into the 2.5 week low. I want 4800 area to hold as a maximum. Break of this will damage whatever the bulls have built till now. 2.5 week low is expected Friday or Monday as I mentioned earlier and from there we should have another decent rally into the target mentioned in chart. So I started going long yesterday with 4900 Puts as Hedge. I will add more today and on Monday as per the plan.

I read the comments. See the way the FLD works is its sloping down here right? Its an image of price action in the past. So crossing it on one day - and next day a 2.5% drop happening might not be enough to push it below the FLD. The cross is still valid. If you see the chart you will understand what I am talking about.And the FLDs do tend to act as support and resistance lines.

Chandra, not intraday. It happened a day back. See the chart posted above. And its still a valid crossover.

GD, I remember you asked about SPX analysis. While I dont have a latest chart. You can take a look at this analysis. Maybe on weekend I will do one of mine. This guy is very good and is one of the people I learnt a lot from on Hurst. He was earlier looking for the 80 week low same as I was but now he seems to have changed his views a bit looking for a major low next year mid. I can see his rationale so something to keep in mind. But bottomline is, it does not matter right now for short term trades.
2 analyses done below. One for Nov 28th and one for Dec 7th. You can see in the posts the difficultly right now everyone is facing with coming up with an accurate phasing of the cycles.

Link to SPX Analysis Nov 28th

Link to SPX Analysis Dec 07

Best,
Lee

5 week FLD

2011-12-07T23:01:00.000-08:00

Quick update. 5 week FLD has been crossed generating a target of 5350. So I was short from yesterday because of the expected 2.5 week low expected Friday/Monday. I covered most shorts at 4950 Nifty TODAY - I was very clear on this and the rationale behind it. I also started to go long because the FLD has been crossed today and we can anticipate close to 5350 soon. Charts will be posted tomorrow.

Best,
Lee

Wednesday

2011-12-06T19:08:00.000-08:00

I dont have time for a detailed update today so will do so tomorrow.

Bottom line is 5 week FLD is not crossed. And the 2.5 week low is expected around Dec 12th - Which is next Monday. So we might not cross the 5 week FLD instead might try to but fail and then fall down a bit before moving back up.

This is really just speculation but I dont have any action signals yet. I might try some small shorts today via puts playing for the 2.5 week low OR I will use hedged futures to try to play for some downside. Target is however anybody's guess. 5000 seems to be strong support and ofcourse below that 4950-4875 area. 4800 is rock solid as per options data. So I think shorts should be hit and run only. Or be defensive in playing for it. The 5 week FLD cross is near - So we will have to be long from next week onward as per my calculations. Will post charts tomorrow.

EDIT
Changed my mind. Posting a chart here with some comments and showing the current FLD position. Keep in mind no short signal is generated but I am trying some shorts with tight hedges. I will add until bit more higher into the 5200 area. I agree with Kumar Sir - above 5235, then better cover all shorts. Hedges should protect me till then. More comments on the rationale in the chart.

Best,
Lee

Week Ahead 12/5

2011-12-04T17:56:00.000-08:00

Well last week was a pretty great one for the markets. It was also a good one for me. A excellent target based trade driven by FLDs and followed out to almost the dot. So since my target was achieved on Friday, I exited all longs at 5050 area. I know we are higher now and might also gap up today. But my target was achieved and so I took profits. I think we will get a chance to reenter or we can reenter on the next FLD cross.

I have tried to explain things below using charts.

The first 2 charts just show an explanation of things that happened so far and how the trade worked out last week. The last chart shows the next move to look for.
As you might have noticed, ST has almost confirmed the last low at 4650 as the 80 week low. But remember its not up up and away from here. I still think we have major pain coming next year...but just speculation now.

Anyhow back to the last chart. Note that the earlier 2 charts shows that targets of the 20day FLD cross was achieved at 5050. And now we are actually in between FLDs. So at the moment no higher targets are generated. But it will once the 5 week FLD is crossed as shown in last chart. I expect we will have some pullback this week and then try to cross the 5 week FLD. So lets say we cross the 5 week FLD at around 5000. If so, we have a move to around 5350 generated (5000+(5000-4650)). Note that this will also generate a bigger target due to the 10 week FLD cross. And this cross is giving a very unbelievable target even for me - 6050 Nifty (5350+(5350-4650)).
(EDIT: I just read Kumar Sir's update...Funny!..And also makes me a little more confident on this.. :) But still damn skeptical! )

Well keep the last one one the backburner for now. I am really really skeptical about it. First let us cross the 5 week FLD which will generate a 5350 target. Then we see.

Chandra, I dont have good charts generated using Nifty. It might be because of lesser amount of data. This is why I use Sensex. Somehow have to deal with it this way..i.e I think Sujatha used to say - Watch Sensex and Trade Nifty :)

BTW, thanks to everyone for their compliments on last weeks analysis. Its always nice to get appreciated. Things really worked that time. Hope it does this time too.

I am totally flat now..But I will post as soon a the next trade is generated. Till then wait and watch.

Best,
Lee

Wednesday

2011-11-30T11:12:00.000-08:00

I have been very happy with the way FLDs have been working so far. I have explained about FLD's in earlier posts in detail - Keerthi please read the post I did on Sunday night with the charts. I have tried to make it as detailed as possible and also with examples so anyone can understand.

Pilot, 80 week lows, even though we dont have 100% confirmation yet, I think its very high probability we did set the low at 4650 odd. However how long this low will hold is another story. I did do posts earlier on this speculation recently. Hope you did not miss it.

Chandra, if it is the 80 week low, we will have upside - yes - but it does not have to happen very very fast. There will be backing and filling so form a good base. See Oct 2008 - Mar 2009 period to see what I mean. 2nd thing about FLDs..see its a cascade, this is why I was sticking with the 5050 target from beginning. See FLD cross, projects next cross, then that cross projects next cross and so on. So based on my rough calculation, I came up with those levels i.e if we close 4770, its extreme high probability that we get to 5050 with some resistance expected in b/w at 4850 area. This was shifted down from 4865 to 4845 as the FLD lines came down.

The formation of FLDs I described above is called an FLD cascade and it basically projects a good upside in the method I explained above. One by one.

Here is a look at the current view. As you can see, we are at the next FLD cross. So basically it is crossing today at 16100 Sensex (around Nifty 4830). Bottom at 15500. So difference is around 600 points = Approx 200 Nifty points. So adding this to 4830, we get 5030. So 5030-5050 is the current projection for the 2.5week FLD.

Now the market has run around 7 calendar days from the 4650 low. So we need to start looking out for the 2.5 week cycle now. I think we will top in the next 2 or 3 days and then maybe try a consolidation move into the 2.5 week low - this is however not likely to be a major low - we might try to consolidate at around 4850 area - in effect test this area from above. All speculation for now. For now we have the FLD outstanding target of 5030-5050. Then we see.

I might book profits today atleast partially and re-hedge the rest just to be on safe side.

Best,
Lee

FLDs

2011-11-29T23:45:00.000-08:00

Hope you guys have been watching the power of FLDs. I mentioned in last update 4865-4875 needs to be cleared for higher targets of 5050 and little higher. Market reversed exactly at 4865 yesterday. One reason I booked some profits at 4850 as updated and tried to buy back lower.

Anyhow for today, looks like if we clear 4840-4850, we are looking at a 2.5 week FLD cross which will generate a target of 5050+...Wait and watch..I think trading with FLDs have been going well..so far.

I will reply to comments later...

Best,
Lee

4850

2011-11-28T19:57:00.000-08:00

Well yesterdays FLD call turned out to be a very accurate one. 4770 to 4850 - not a bad little trade. But it might just be the beginning in this little upmove. Today we are facing resistance in this area and might be just consolidating before the next move up - but need to watch carefully because as of yet, there is still no confirmation of the 80 week low yet and when dealing with very large lows like this one, flitting back up and down is quite common.

Anyhow, I took some profits off above 4845-4850 NF, hedged the rest with 4800 puts. Now will just wait and watch. Will update if I do anything.

FLD cross 1 target was satisfied yesterday. 2nd is still pending - i.e above 4860-4870 area, we trigger target of 5050-5080. But this might take a few more days to trigger.

EDIT: 1.5hrs after open: Now that I got some more time for review, this is what I have. Yesterday first FLD cross - 5day FLD - generated 4850 as target and we hit it to perfection. Next the 10 day FLD - generated a higher target of around 4910-4920. This target is still outstanding. Then the 20 day or 1.25week FLD - this will generate a target of approx 5050-5080 once 4865-4875 is crossed. So basically the 10day FLD and 20day FLD are tied together and they together generate a target of 5050-5080 maybe bit higher to 5100. This is the outstanding target for now and what I am playing for. As I mentioned before, this will not happen in 1 day so play defensively but on the long side. Thats it for today. Questions are welcome.

Best,
Lee

FLDs and the Week Ahead

2011-11-27T18:29:00.000-08:00

Back from a few days off from Thanksgiving Holidays over here. It was a good relaxing time away from everything.

Last week, we were trying to find some sort of bottom. I mentioned before that I have some signals that I am going to use for going long. I am still flat since none of my signals triggered yet. I will outline here now what is this signal so that you have some idea.

Till now, I have barely scraped the surface on the utility of the Hurst model or did not reveal too much to avoid confusion. I have been thinking that I will do that for past few days and mentioned it in my last update as well. Its called FLD - Future Line of Demarcation and is a Hurst concept. Basically it is price line of daily average price moved forward in time by a certain value - this value is determined by the cycle values - like 20 week, 10week, 5week etc. 5 week which is also the 40 day low for example, would be moved forward by approx 20 days. And will be called the 5 week FLD.

FLDs have a lot of utility - Crossing of an FLD confirms that that particular low has been set. And also gives us a target for the price move. See chart below -

I have added some annotations here - The 10 week FLD is offset by approx 34 days here because the 10 week is running 68.3 days right now. This is the light blue line I have shown on the chart. I just gave this as an example but you can see how it worked. Once crossed on downside, it confirmed the 10 week high and also projected a move 1000 sensex pts lower which we got as well. Its uncanny how often this works very well.

You can see several other examples in the chart. Just look at the light blue line - the 10 week FLD and see how it generated a target for the Oct 4th move up. Many more are there. See if you can spot them. When you combine multiple FLDs, it gives a lot of information on what to expect next in the market.

Each FLD cross generates a price target, this price target can generate another price target and so on. This is my trade setup right now. See chart below.

So first for me, the 5 day FLD or the white line should be crossed to the upside. This will generate a target equal to the move until it crosses the white line. Then the pink line and so on. The bigger the FLD line, bigger targets can be generated. And when there are multiple FLDs like this in this position, the move upward can be explosive. Maybe just like the downmove. I will add more on FLDs in coming days.

For now a move above Friday's highs on Nifty at approx 4770 gives very high probability that the lows might be in. And also projects a likely move above 4850(based on FLDs) and above 4850, I become quite confident that the 80 week low also might be in. I will go long today in small quantities with above prices to guide me on where to add and where to cut - Also will have a strict stop at the recent lows of 4650 area - Breaking below this level means the market has more work downside and also that the 80 week low is NOT in. How prices are acting with the FLDs will show me when to take profits or when to stop out the position.

Hope I made sense. This has not been an easy market to trade with all news noise out there. So hope everyone is still 'intact'. Trade Safe.

EDIT: Few minutes after open - 5 day FLD cross at 15800 SENSEX (4740 NIFTY) - Projects 16100 SENSEX (4840 NIFTY) : All approx figures. Lets see if this works out. 4840-4850 cross will give a target of 5050. One step at a time and I will fine tune these values tomorrow.

Best,
Lee

Action into the 80 week low

2011-11-22T18:55:00.000-08:00

I strongly believe what we are witnessing right now is action into the 80 week low. The problem is that this is a longer cycle low hence for it to expand by a couple of weeks or 3 weeks even can be considered normal.

Expect more ups and downs - We should hold 4500-4450 area for this low. I would like it if we can hold the 4600 area but if that breaks, then we should see 4500-4450 area which I think will hold. Oh and I should also mention that 4700 first needs to break before entertaining any bigger bearish targets. Go from point to point and dont get greedy since we are so late in this cycle. Maybe we touch 4720, go up to 4900 and then do the final down to 4600 or slightly below - dont know just speculation for now. But it might happen quite quickly.

I know that there is a lot more possibility of big downs from here - but that is what we should expect in this cycle. But being short is also not easy due to the large swings going on. I am trying to trade here but its going back and forth too quickly - hence not easy. So I am trying to mostly scalp nowadays while we wait for the 80 week low. There are some ways of confirming that the 80 week low is in - I will explain this another day but I am keeping an eye on it.

BTW, I have replied to comments in earlier post.

Best,
Lee

A Review and the Week Ahead - 11/21

2011-11-20T12:26:00.000-08:00

I thought I would start today's post with a review of the past few months, what my thoughts were, what actually happened and then what I think is going on now and what might happen in the future. I think this will be good for me also as I will be kind of thinking out aloud here.

Last couple of months or so have not been easy to navigate..But still there were lot of nice intraday opportunities and nice scalp trades out there.

Going back a bit, I think before Oct, I was expecting the 80 week low to come in sometime in November. But what actually happened was for Oct4th to show some kind of major low and put in a spectacular move out of it. The amplitude of the move out of this low was not expected for a 5 week low because a 5 week low was what I was expecting in Oct first week. The enormous rally out of that low had Sentient also confused and it started to label that low as the 80 week low which means it came very early for such a major low. You may remember the flip flopping and confusion at that time. I was very skeptical but eventually 'turned' and started to count Oct4th as indeed a major low. Once we took out 5200, I became confident that we were going to have a good rally for next few months. But market stalled at 5400 and broke down badly from there. Once we took out 5200 to the downside, I sold all cash positions and started to lean in bearish. And now..surprise surprise..Sentient also has changed its count and is thinking now that the 80week low is dead ahead of us. Infact we are very much in the time range for that low. Below is a screenshot of ST's latest view.

As you can see ST is expecting a major low right ahead. Is it already in last week? Could be..but we do not have any confirmation yet. And looking at how the momentum was last week, I think we might have some more work on the downside but it should be over very soon..Maybe next few days will do it. But price can quickly breakdown in matter of few days. Last week showed us that.

So bottom line..
We saw the last 80 week low around May 25th
The last 40 week low around Feb 11th
The last 20 week low on June 20th
The last 10 week low most likely on August 26th
The last 5 week low most likely on October 4th

So now projecting forward, we are around 40weeks from the last 40 week low and around 17.8 months from the last 80 week low. So we are well within the window of the 18month(80 week) low.

So maybe we can go up retest the 5000-5050 area again before revisiting the lows..maybe 4750 again to set low? Or maybe a bit lower to 4650-4600 area? One thing however need to be very careful here because we are in the window of the 80 week low. And rallies out of these major lows can be pretty spectacular and also very unkind to shorts.

Looking at the higher cycles. If you remember my older posts, I was thinking that along with the 80 week nest of lows, we would get the 4.5yr and 9yr lows as well. But after seeing price action over past 2 months or so, I am rethinking on this. I dont think this is a valid scenario anymore. i.e the higher timeframe longer term lows are not yet in...But we still can see a rally for couple of months in another 18 month bear cycle before it tops and goes for the next leg down. Yes too much to think right now but just wanted to put this out there because its a deviation from my original views. So what I meant to say is even though the 80week low can be bought for a positional trade, we will most likely see lower lows sometime next year. But then let us trade cycle to cycle..The smaller timeframe cycles.

I expect the bounceback to continue and then maybe we can go for one more shot down to set the 80 week low. All this can happen very quickly since we are in the 80 week low window. I will post updates if I see something different from this scenario in this immediate timeframe.

Best,
Lee

Bounce is on...For Now..

2011-11-16T17:21:00.000-08:00

Well what can I say..been a tough few weeks in the market. This is the reason why I havent been posting much. I dont want to say something stupid and cause anyone else to make a mistake. I had suggested best thing to do maybe stay out until more clarity emerges. I am also really confused what is going on bigger picture wise.

Let me just try to think aloud here - We do know that some sort of major low was seen on Oct 4th at 4740 around. Lets assume this is the 80 week low for now. It was quite early but let us go with that for now. If we go with that assumption, then the 10 week low is due around Nov end/Dec beginning week. From there again, we can expect a decent rally. We should continue to decline into that low area. BUT for now however, yesterday, I think we saw some sort of very short term low below 5000 and we are doing the bounce up. For longs the obvious stop is yesterday's low.

Last 2 days, I got rid of most of my cash positions - the drawdown was not looking good on paper. But still its a small loss only because of the hedges. Overall I havent done so good last few weeks - so I decided to get rid of cash and go back to trading in Nifty. Since outlook is uncertain, I will be able to get in and out of positions. Also I am beginning to rethink on my longer term ideas. But I will keep that to myself for now and present them here when I have some more confirmation.

So long for now in NF..hope to get out around 5100-5150 area. From where again will try to build some short positions up into 5250 area.

Charts posted below.

Trade safe.

Best,
Lee

Pullback continues

2011-11-14T18:51:00.000-08:00

So we got a higher open and then pulled back a lot..Today looks like 5100 test might be on the cards. I think its very important for the market to hold 5050-5080 area - worst case should hold 5000 area. Its been very confusing for few days now..I havent been trading much. Using puts to hedge, cashing it when its making some money - this is what I have been doing. Overall like I said yesterday, it does look bearish and expect it to remain this way until last week of Nov when the 10 week low will come in. The problem though is that I see this as the first 10 week cycle after our Oct 4th 80 week low - so we can expect lows to come in early.

After we get the 10 week low, I still expect a good year end rally from there. Problem is how much we will decline until then. We will wait and see. Ideally we should hold 5050-5080 worst case 5000. Lets see what happens. I might not update for few days atleast until I see some more clarity emerge OR I have something substantial to contribute.

Best,
Lee

Week Ahead

2011-11-13T19:18:00.001-08:00

Dont have much time for a detailed update. Whatever I said earlier still stands. But I am seeing a few more bearish signs out there. So maybe we remain rangebound until Nov end or Dec first week which is when we can expect the 10 week low?

Today we should attempt higher and then maybe fallback to consolidate. Last week's lows are important. Breaking will lead to a test of 5080-5050 area. This should hold for the bullish case I think. Overall dicey here. Still holding to cash longs but will hedge them today. I have been buying the big scary declines as I have been saying for a while.

More later.

Best,
Lee

Friday

2011-11-10T17:54:00.000-08:00

So big global turbulence going on while our markets are closed. Dont know why this always seems to happen when we are closed :) I have wondered about this before also on the blog..Its weird. Anyhow, it is what it is.

I still stand with my earlier views. I.E the 80 week low did come on Oct 4th at 4700 and we are unlikely to break that for next 4-5 months(till the 40 week cycle top). Next the 5 week low - I did mention it came likely came in last week. But not very sure now - it could be right ahead of us maybe today. Then the 10 week low likely around end of November. Maybe we will just chop around a bit more.

Looks like today market will gap down below 5200 so 5150 becomes important and below that 5100. But unlikely to get so far - Atleast I think so. But we are at potential supports here and so we might get a good size bounce here and then we can re-evaluate. There is pretty good put support at 5100 and 5000 so I do not expect these to break this month. I can be wrong but just seems extremely unlikely unless something really really bad happens on a global scale.

I mentioned in last time update I will be using these scary declines to buy back into stocks..All with the expectation that the 80 week low is behind us and the next 10 week low end of November will provide a base for a good end of year rally into Jan/Feb timeframe. Will phase out my buying until Nov end. Need to wait and watch.

Hope I answered all your queries here Aly.

Have a good trading day All.

Best,
Lee

80 week low confirmed

2011-11-08T19:24:00.000-08:00

Yeah I know quite late. But better late than never right?..Anyhow I have the 80 week low confirmed on Oct 4th at 4740 odd. And the next 5 week low came up much higher at approx 5200. This 5 week low came up approximately where we expected our 80 week low. So overall since this low came up very early, its bullish in cyclic terms.

Latest ST outlook -

As you can see in the chart, the 80 week nest of lows is confirmed. And so we are cleared for atleast a few months worth of rise. If I have to guess, I would say cleared for upside until Feb end. This is when we can expect the next 40 week cycle to top. But lets take one step at a time.

What am I doing? - After selling most of my longs at approx 5300-5350 range, I accumulated a good portion back as per my earlier post in the 5200-5280 range. So still net long but have more ammunition to add longs if we do get some one or two day scary declines. It will be a good opportunity if we get that.

Next we have the 10 week low around end of Nov. So this can be another good opportunity to add to longs. So buy the dips will be my mantra going forward.

Target wise - I have a very rough target of 5700 based on Hurst methodology. But I havent fine tuned this yet. Sustaining above 5700 can open up 5900 and even a challenge of our all time highs.I will do a detailed post on this tomorrow. This is based on FLD(future line of demarcation) crosses which generates targets per Hurst Methodology..I havent spoken about this yet but will do so tomorrow.

Best,
Lee

Thrown off the bus?

2011-11-03T18:46:00.001-07:00

Looks like a big gap up today. Again I am in a quandary here. Did we get the last 5 week low at 5200? A little early but still in the window. So did the market just throw us weak hands off the bus, consolidate ABOVE 5200 and is getting ready to take off? Funny how that works. And I did mention that possibility a little while back. Nuts!

See the ST screenshot below.

Sentient Trader Software

See those question marks? Its actually ST's way of saying possible low might have been seen and as some more days and price conditions are met, it confirms the low.

I do not know exactly what to do right now. I covered some shorts yesterday when we tested 5200 area. The rest is hedged with 5300 calls. So today likely will just take the pain and wait for more clarity. I might also start buying back into the cash positions I sold few days back. Yeah I know dumb move on my part but this is how cycle lows work..throw most people out of the bus and then reverse.

The other big thing here is the downslopping trendline which comes at approximately 5450-5500 area. Unless market clears that area, we cannot confirm anything at all.
I might not post for few days until more clarity emerges.

One more thing..I mentioned I would address the longer term buy question. I am not very sure but I think if this 80 week low is in which it most likely is, then we should be cleared for upward prices atleast until next Feb-March timeframe. This will be when the next 40 week cycle tops approximately. We will fine tune as we go along. But markets might be bullish into that timeframe..maybe even very bullish once we clear 5500. Then again I am expecting a bear move into the 40 week lows toward end of June timeframe. All very fluid right now and we need to see as we go along. Cannot assume anything right here. I remember someone mentioning Vivek Patil's views which seems to gel with what I am saying above. So I also concur with it..Can anyone post a direct link to his latest views?

As always, comments are welcome. Have a good long weekend all!

EDIT: I just wanted to add one more thing. The most likely scenario here is that we test 5400-5450 range here and then go down again to test the 5200 support again before taking off to the upside. Else we could just take out 5450 and take off. Wait and watch.

Best,
Lee

Que Sera Sera

2011-11-02T19:53:00.000-07:00

So..looks interesting right here what the cycles are doing...If I were not trading or directly involved in the market, I think I might have taken this as a serious academic exercise. Thats how interesting these cycles are playing out right now.

In college, I used to hear, cycles, fourier transforms, spectral analysis etc..But now I see the practical analysis of it. Funny right? Now we see the practical aspect of it!

Ok so now coming to the market, I sold cash positions yesterday. I dont know maybe market will brand me as a fool very soon because I did this. I know most of you will lol..but I have to go with what the market told me to do..So sold cash positions, established shorts at the 5300 area with hedges at 5300 calls. So I will just watch today most likely. We are declining now into the the 80 week low but the problem here is that the US 80 week low is projected toward Nov end while our 80 week low should come in sometime next week. This is the reason why we are more bullish that the US or other western markets.

This is the reason why I mentioned better to sit out and then buy in size when we have more confirmation on the low. I know in earlier post comments, there were questions on longer term buys etc..And what will happen next year..I have some ideas on this..so I will do a post on this a little later. It looks like we are NOT THERE YET.

Best,
Lee

Tough Call

2011-11-01T18:13:00.000-07:00

Once again I feel we are at some sort of crossroads here in the market. Today we have to hold 5200-5160 area. Else the trapdoor to lower lows might open up again. My idea of shorting in the 5350-5400 area was correct but I also covered too early I guess when I did yesterday. There are some quite bearish possibilities opening up here atleast for the next 1 month. I think we need to be very careful here over the next 2-3 weeks. Remember I was looking for the next low in the next week but it can extend a bit being a major low. So its time to be careful I think.

So I am wondering what to do today. I do have some long cash positions as I have been mentioning for a while. But today I am again wondering whether it makes sense to close most of them and again rebuy again in a couple of weeks. Its a tough call. I would say if you dont have any positions, better to just sit out the next 2-3 weeks and then buy in size. Break of 5160 opens up 5050. And break of that opens up 4800 and maybe even new lows. But we might bounce about a little today and tomorrow before the market makes a decision on what to do next. Lets go point to point without any preset notions. On upside market needs to break above 5450-5500 to go higher. Maybe much higher.

I am sorry I am not able to make much of a directional call here but market has once again thrown us a curve ball and so need to do our best to navigate it.

Bottom line is I will be taking a very defensive position here for the next few days until more clarity emerges. And we should get this over the next few days.

Comments are welcome. Remember always - I am also just like you guys trying to navigate the market.

Best,
Lee

Bottom Line

2011-10-31T20:31:00.000-07:00

Likely the 80 week low has already been seen price wise. This was on Oct 4th. So the next 5 week low is expected to come in around this week Friday or next week Monday/Tuesday. So shorts should not be taken beyond that and buys are going to be more profitable...Buying the dips that is. Shorts taken yesterday can be covered today and retaken at higher levels or managed with some sort of trailing stoploss. But I still think the big money is to be made on the long side buying the dips into the next 5 week low.

Charts posted yesterday are still valid.

Best,
Lee

Week Ahead - 31/10/2011

2011-10-30T16:43:00.000-07:00

Updates for the week ahead. I have included most of my comments in the charts itself but increased the font size so should not be a problem to read now - right click and open in a new window to see the charts. Let me know still if anyone has a problem reading and I will move all my comments to the text section only.

Bottom line is the nominal lows of this 80 week cycle might have already be seen and we are in an uptrend. However we are close to resistance at 5450-5500 so expect a pullback and consolidation for next few days/week. Infact if you remember, this was one of my preferred scenarios - break out above 5200 and then retest it from above. But several possibilities are there.

See the charts and study them. I have tried to analyse various timeframes and possibilities here. I have included a GOLD chart also. Also the final picture is the portfolio update. I think I will move this to be a bi-monthly update from now on - being a cash portfolio will take time to grow. Posting weekly does not make much sense.

Nifty Normal View - Daily

Nifty Weekly View - Weekly

Nifty Hurst View

Nifty Hurst View - Expert Model

Gold Hurst View

Cash Portfolio Update

Link to Sentient Trader Software

Comments are welcome.

EDITS: 10:07AM - In case you guys are wondering whats going on, there is a major currency intervention going on in the Japanese markets. This is what is causing the turbulence in the markets..Yeah its a reason..but we are going for the cycle lows soon looks like..A higher low as I have been saying..So I have been slowly building into shorts here in futures. Cash positions remain as is. The last time they intervened in Forex was Aug 4th. You all know what happened Aug 4th, 5th and after that also. Play cautiously

Best,
Lee

Update for 28th of October

2011-10-27T20:02:00.001-07:00

Will Update a little bit late..probably 15-20 mins late.

EDIT: WILL UPDATE TOMORROW. NOT MUCH OF UPDATE TODAY. UPSIDE CONTINUES.

Thanks,
Lee

Wishing everybody a very Happy and Prosperous Diwali

2011-10-26T03:56:00.000-07:00

First of all wish everybody a very Happy and Prosperous Diwali!

So looks like this confused bull is maybe slightly vindicated right now with the markets above 5200. So the next thing to see is can we get into the lower 5300 range and then consolidate above 5200 - this is what I will be watching out for. Let us see.

I got up today early morning for this special session. I have few NF longs from the 5050 area which I will be covering today. Its a pretty good profit to take today. Still holding the cash portfolio - To tell the truth its not performing as well as I would have liked but then need to give it more time in the larger scale cycles..We shall wait and see. I am churning it around..cutting down the losers and adding to winners..will be doing this for some more time. Market needs to gain more momentum and confidence. It might only happen after the next 5 week low(and higher scale possibly) expected in the 1st week of Nov. I will post a more detailed view with charts tomorrow.

Happy Trading!

Edit: 5pm: Covered NF after some time after the open and now bought back some. Frankly speaking, not seeing much bearishness. Maybe because its today :) still the Nov 1st week cycle low is looming in there..need to be watchful.I would really love to see some consolidation around here building a base and then moving higher. Anyhow, we will see in coming days how it all works out.

5:10pm - Out again..Thats it for today.

5:20pm - One more add..Buying few 5200 puts now. Not sure if this is a wise move with a lot of big news coming tomorrow but this is in part to protect my cash positions and also because of the upcoming cycle low in Nov 1st week. We shall see.

Best,
Lee

5160-5200

2011-10-24T20:11:00.000-07:00

This obviously remains the BIG barrier right now for market upsides. This needs to be cleared before we can say all clear for higher prices. I earlier thought market might clear it an then retest it from above. But does not look like it at this point. So we might consolidate and move lower here for a few days to set the 5 week low before we can rally higher.

Of course today is a big news day so anything can happen. And together with that expiry. So could be quite a day. I still have some future longs from 5050 area. I think I will close them today to be on safer side and wait and watch. Cash side I have already spoken about before. I will be doing some rebalancing today - removing some underperformers and freeing up some funds for later.

Charts are still relevant from yesterday. And I will post some more thoughts later on the market cycles. Dont miss the comments section from last post.

Best,
Lee

Week Ahead - 24/10/2011

2011-10-23T11:52:00.000-07:00

PS: I changed my profile picture to a 'confused bull' LOL :D

Maybe now the market can go down in earnest!

EDIT: 10:05AM: Looks like my comments have been taken in wrong sense. It was part in joke. See my confused bull comments and picture were just to put forward a humorous view on my mentality right now. I am bullish dont get me wrong. But I am still cautious till Nov 1st week end. After that I think we wont see a lower low so buying is the way to go. So Today I had lot of NF longs from Friday.I covered some today...and still holding the rest FWIW for higher prices..But if I think it wont go higher from here, I will be quick to cover..will post updates.

Best,
Lee

Oct 20th

2011-10-19T18:45:00.000-07:00

So looking at the market action, I think maybe the 2.5 week low came in on Tuesday Oct 18th..Early..but still valid..And now we are in the bounce from there. And likely this will also top soon or has topped yesterday. From here we should have atleast a few down days into Oct end/Nov 4th. Lets see how it plays out.

Another thing I just wanted to show. See this below chart. This is a slightly modified model(expert model in the software) I am using. This one actually says the 80week low is already in. I dont like the 'look' of this due to various reasons..So not favoring it at the moment. But it is however a very good possibility considering the strength over past several days.

Lets see how far the next low comes - depending on that we can confirm. Remember shorter term this doesnt make any difference - 2.5, 5 week cycles are all operating fine.

I have been building into stocks whenever we have been having big bad down days..Its been going good so far. Around 30% into cash stocks right now. Rest I will be building in whenever we get big down days.

I am including a snapshot of what I hold right now..Entry price and current price along with current profit percentage. For obvious reasons I am not including quantity/size here. But I am 30% invested now - will add more on declines. The way I operate is very simple - I will monitor this basket every few days and whatever is outperforming on looks good on the charts - I will add more to them. Whatever looks bad, I will either give it a few more days or cut the position. I will post this snapshot every week maybe Friday going forward. This is to monitor a pure cash portfolio performance using Hurst cycles.

EDITS:
11 AM: Should have updated before..Todays move kind of shows the downpressure. Unless we take some support around here, we will go down to test 4950-4920 range again. I have been adding shorts from 5090 NF since the morning. Looking good so far. Regd the stocks portfolio, like I said, days like these are an opportunity to cherry pick. The key is not to get over excited and do everything in one day. We have till Nov 1st week.

11:45AM: May be overdone for today. Exiting shorts at 5040 and going flat. GN!

Best,
Lee

2.5 week low is close...

2011-10-18T18:43:00.000-07:00

3 charts posted below. Most of my comments are in there. 2.5 week low seems to be coming in...Maybe today or by tomorrow..From where we should have another bounce before declining into our expected nest of lows toward Oct end-Nov4th timeframe.

If you missed it, check out my last post where I have explained how the Hurst software works. And also given more details on its benefits. Also check the comments section.

LINK TO SENTIENT TRADER

Best,
Lee

Some thoughts..

2011-10-17T11:07:00.000-07:00

Charts are there in previous posts. Still relevant for today. Just thought I would add some words to it for today :)

Looks like the 2.5 and probably the 5 week cycles have topped and we are now moving toward the 2.5week low expected this Friday(+or-1day). From there we are likely to have a bounce which can be again reshorted for a downmove into the 80week cycle nest of lows expected in Nov 1st week.

Now there has been a lot of good debate on the extent of the next downmove - some of this can be read in the earlier post comments. We are clear about the direction but its the magnitude that is doubtful at this point to me. Why? Because the upmove we saw from the last 5 week low was pretty awesome. And its not something one might expect from the last 5 week low in this 80 week cycle. So for this reason, the downmove also might not be as big as was initially expected. Now remember this is all speculation - we are sure of direction..so let us play that for now. Let the market go where it wants to go - we will profit from it as we know the time cycles.

Now why do I think this downmove wont be as big as initially expected? Market Internals are the major reason. Sunil over at TIMAMO has given some good studies on it. This is just one thing. Breadth is important - its like looking under the hood at a car's engine - on the surface things can look great or ugly..its only when you lift up the hood and look at the internals that you begin to see things that werent very obvious before. Sunil does some pretty good studies on this.
Apart from this, I track internals of the US market very closely..Better tools are available for this. And things are slowly becoming bullish.

All these reasons are telling me we might get at best a higher low. And for this reason, I do not think we will break 4700 this year. But I still reserve the right to change my views at any point :) I have been wrong many many times before! :D

But remember as I said above - Trading has got nothing to do with these so called forecasts. We trade for money and NOT to be RIGHT - Want to stress this point.

Many times I end up being wrong - but still manage to make some money out out it. As traders this should be our aim. Ego can be costly to any trader.

Now coming to cycles - I have some ideas as to why we might be turning bullish earlier than expected - Its because of sectors. Meaning there are many sectors out there..Oil and Gas, IT, FMCG etc..some of these sectors might have already bottomed out with their 80 week cycles..And so they might be lending upward pressure even though the broader 80 week lows have not yet come in. So...what I would say is be careful either way out there..The fag ends of cycles can be brutal if we have fixed mindsets - So I just say be flexible in your thoughts and positions.

Position Updates - I am short from yesterday open. Will try to cover at the 2.5 week low and reshort on a bounce into the 80 week low. This is the plan. I will also be looking to buy into good stocks for delivery as we go into the expected low. I am starting some pilot positions already just to track them. Let the market decide how far it wants to go in this downmove.

I hope with above post and explanation, my stand on this is a little bit more clear.
I dont really care how far down we might go.

=====================================================================================

Ok, so thats my thoughts on the market. Next, several folks asked me about the Hurst software that I use and they wanted to get some more idea around it. I am going to do a write up here..show some examples of how the S/W works. The trades it generates, projections etc.

The software is called Sentient Trader. I have given a link on the top of this page which will direct you to the home page of Sentient Trader.

About the S/W - It is a great package out there in the market today which sticks to Hurst Cyclic principles to generate cyclic projection both time and price based. So it will give you projections in time and for price as well. And you can use this to analyse any market out there provided you have the data for it. Overall the software package is pretty awesome. It is expensive but worth every cent. I was very skeptical before buying it but have to say was pleasantly surprised by how much it has improved my trading. And whatever it cost me, I easily made that back and more within few weeks. It aids me a lot in all of my trading decisions and views nowadays. Readers on this blog would have seen the calls I made over time and you can judge for yourselves. Sure there have been duds - but that what makes the market. Cannot expect to hit home runs all the time. But on balance the software is an excellent aid to any serious trader out there in the market - Any market. We as Indians are always stingy when it comes to buying software - I know - But believe me this is worth every single cent.

CLICK HERE FOR THE SENTIENT TRADER HOMEPAGE

A chart that shows better what the software does -
(see also the charts from previous post: I think they are very clear)

There are many many other features also in the package. FLD lines which generate price targets..VTLs which will show if a low has passed on not and so on..Too much for me to go into in one post..But I will try to in later posts.

Feel free to ask me questions. I will be happy to answer.

Bests,
Lee

Status Quo

2011-10-16T21:22:00.001-07:00

Best,
Lee

Crucial Juncture

2011-10-13T20:22:00.000-07:00

No other way to describe it. It is a crucial point right now for the bull/bear case. I am not talking about short term here but little bit longer term.

Earlier I was looking for the 80 week low to be a good low..I mean a serious long term low below 4700 maybe closer to 4000 which would give lot of confidence for going long for a longer period of time. However, past couple of weeks action has had me rethinking on this. Now this might just be a way of conditioning by the market where after the weak shorts are weeded out, we just continue the decline in earnest and break all previous supports and lows. Remember this is still a possible scenario. However seeing the strength so far..the strength in internals and so on..Its making me think..that we might not go below 4700 this year. Maybe not even close. I still expect some basing and downward moves till end of this month to set the 80 week low..But am thinking it JUST MIGHT be a HIGHER low. Now this is just speculation at this point. But I am getting ready my 'BUY LIST' of stocks. To buy after this 80 week low..or during it scaling in.

I know market is supreme..prices are king..this is the reason why I have to tone down my bearish expectations at this point. Frankly speaking, it would have just been much better for the market to go lower than 4000 now itself and make a long lasting low. But it looks like that is not meant to be and we might not get much better than 4700 to buy here. So bottom line is expect weakness till end of month but it might be nothing more than a consolidation before the next big move up.

If this is what the market decides to do..I do not think it will be a long lasting low but just a low for this current cycle and the REAL long term lows will only come sometime next year...Preferably after the March-April timeframe - that will be when the next 40 week cycle tops out...And then bottom toward June-July timeframe. So again bottom line is, we seem to be creating some type of bottom here with backing and filling and it will be a good enough bottom until March-April of next year when we might go back to BEAR MODE.

All speculation at this point of time. But I think this is what is happening. So time might be close to buy for a few months to take advantage of those gains. I am not talking about FNO here..But cash..I will post when I start buying but I already started looking for good stocks with potential..Still refining the list. I will post here when I am ready.

Chart -

I think whatever I said till now shows up in this chart. For now indecision and probably and consolidation kind of move lower until the overbrought situation is resolved after which we can move above 5235 and higher. Frankly I dont like it..I wish it worked out differently but the market is what it is..And fighting the market will quickly bankrupt us. Our aim should always be to get on right side of market. Now its indecisive but I think market will show its hand in next couple of weeks. Till then hit and run trades will be optimum. If you know how to trade intraday, do that..else do nothing at all..Covering the few shorts I have today will my aim..I might just change it to puts to reduce my risk..And also I am looking at longer term stock holds toward end of month - I mean buying into stuff. I will post on that when I do..with prices..so that we can track it in a spreadsheet. I used to do this for FNO but it became such a hassle that I stopped. I think I can do it for stocks..So I will be doing the same very soon.

Chart shows last 5 week low came in Oct 4th..so now in last 5 week cycle. So like I said its downward right now..But as of now it looks so far like its not a new bear move but a consolidation before another move upward. Now this is just speculation on my part..Market will show its hand soon. Need to see where this might stop...Important points are 5000 and 4900 areas. Breaking 5000, can get us to 4925 area quickly. Breaking 4900, will get us to 4800 area. More than this at this point I see as doubtful - looking at the strength shown by market so far. I know all this can change in one day..This is why I am waiting till end of October before making any longer term decision. Till then hit and run only. Protection of capital is supreme.

I know someone asked me about INFY cycles..I tried so much couldnt get clean data for it..so many splits and bonuses that prices are skewed. If anyone has clean data, please feel free to share with me..CNXIT data is preferred rather than INFY..I will post an analysis after that.

EDITS: Market open: Covered all shorts. I am just going to trade intraday from now on. Atleast until some more clarity emerges. Did some longs..now covered and doing some shorts..Will keep doing this for some time

10:00 AM: Interesting..Looks like intra resistances are starting to kick in..Back in short like I mentioned..But I am doing intra for now..So I wont be posting updates on trades from now. But my broader view is posted above.

Best,
Lee

Oct 12th/13th

2011-10-12T18:17:00.000-07:00

Well after I well and slept yesterday, the market just took off and looks very strong right now. Even I have started questioning my earlier views - have to say looks damn bullish. I am still holding the shorts with the hedges. Today I will roll the hedges upward. Oct 12/13th - this is the timeframe I mentioned for a top. We are there. Now who has the guts to short? lol :)

I will be back a little later with more thoughts. Today we have to see how the market deals with 5150-5200. Above this and I think game changes.

Best,
Lee

INFY..

2011-10-11T19:32:00.000-07:00

..Thats what will drive things today. And well the IIP number also although to a much lesser extent. We can speculate a lot about the results - IF it will be good or bad..But ultimately its the markets's REACTION to the results that will matter.

I dont have much more to add to yesterday's post. Except I am beginning to see a lot of bullish signs but my timing model is still saying low at end of October. So I will respect my system. Will continue to try and short but I will be reducing my aggressiveness on this for the time being. Its better to live and fight another day. Things are murky right now. Hit and Run trades seem to be the best option for now.

EDIT- 11:15AM IST: Well 2 big new items are out. Not so impressed with action so far. My earlier call was for a top today or tomorrow(Oct 12th/13th timeframe). So far it is looking quite possible. Reshorted today back at higher levels. I have hedged with 5100 calls. Now will wait and watch. We need to get below 4900 area to start feeling comfy on bearish positions.

Best,
Lee

Dicey here...

2011-10-10T18:49:00.000-07:00

...Have to admit yesterday's rally was a good one..I dont care much for rallies that show a big gap up and then do nothing for the full day. Yesterday's was good..Went and tested support at which I covered a big amount and then tried to reshort as we went higher. I say it is good because this is how a strong rally is built. Test support and then try to make a move higher.

Not that it makes much of difference. Today also looks like a gap up. So now I am uncertain how to deal with this. Do I cover? Do I hold and watch? Do I add to shorts? Dont know. Dangerous here either position. As I mentioned before, the Oct 12/13th date was when I was expecting a top to come. So still on target but price wise this is going much above what I expected. Today if it clears 5030 and stays above, it opens up the 5150-5200 range again. So lot of pain to take if you are short. So I am confused :) Whats new. If we go above 5200 without much of correction, then have to admit we might be going much higher. However I still think we have one more downmove lurking in the shadows which will come once majority is once again bullish. Too many unknowns out there..Infy results is another one..I have posted some thoughts on this in earlier post's comments section.

However, for today, will wait for clues after opening and act accordingly. Will post updates. I am holding some shorts so its a toss up as to what to do at this point. Will watch price action and make a decision.

EDITS:
1. Looks like going up..Covered almost all shorts..Will look to readd back later. Intraday scalping till then

2. Very uncertain here..Shorting back in slowly. They never make it easy do they?

3. Part booking and reshorting higher might be a good plan of action here. Will add back later. INFY results is also a wild card here.

Best,
Lee

Market Updates - Oct 10th

2011-10-09T18:45:00.000-07:00

So its pretty sure now I think..That we got the 5 week low on Oct 4th. And that we are in the last bounce from there. I think this is an ABC move from the lows and I think I mentioned last week, we have done the A looks like and in a B now after which we might get a small move high in a weak C. I mentioned Oct 12th as an important date. I see this bounce or sideways move will continue into then. Price wise I already mentioned - 4910-4950 range and then 5030. On Friday market couldnt sustain above 4900 and came down from there. So shorts in that area did well. If we get some more down from here, part booking and reshorting higher will be good. Trade management is important to reduce risk and also remain on right side of the market.

Ok so bottom line is - 5 week low came on Oct 4th. This is the last 5 week cycle before our expected 80 week nest of lows(nest of lows means its also the 40, 20, 10 and 5 week lows). So its an important low. And it will come around 5 weeks from Oct 4th. So around the Nov1st week-Oct 31st timeframe. Will be watching closely in this timeframe for a low and also a chance to buy into some good stocks on cash side. I know there were some comments and questions around this - remember I am waiting for broader market to bottom before looking at stocks. So we will start doing that in Oct end.

But first more work to be done on the downside. Lets watch Oct12/13th as a possible timeframe for topping out this 5 week cycle and heading down. Why does it top early? Because its a bearish 5 week cycle being so late in this 80 week cycle. So it tops early and should head down for 3 weeks or so after that into our 80 week low. Price might remain in this range until Oct 12th before heading down hard OR it might have started already - I am not very sure. But risk reward favours short side greatly right now until a clean close above 5030-5050 range. Keep shorting the rallies till then with some trade management.

A note to all - Please dont ask me questions about you personal trades. I will no longer answer. I did not ask you to get into any trade - then why consult with me on getting out? Is it fair? Also dont ask me questions like - is market going up? Is it going down etc etc. I am posting my clear cut views here daily. If you cannot get that info from here, then I cannot help you. Sorry for being a bit brash. But I have been getting some tiring mails and chats. See its technical doubt or a genuine question, I will answer. Just cannot spend time and energy to try and help with others trades at this point of time.

Will post edits if anything new comes up today.

Best,
Lee

5 week low is probably in

2011-10-06T19:37:00.000-07:00

Yeah I know. Sucks doesnt it? Holidays in our market..And then the GAP from HELL when we reopen..LOL..I have always wondered why we dont have futures trading after hours. Kinda sucks when all the US markets have derivatives of our indexes and stocks. Kind of dumb if you ask me. But its what we have to work with right now.

Market will always throw us curve balls and bouncers. That is the aim of the market. To separate you from your money.

So looks like a big gap up today. I alluded to this possibility a couple of times in earlier posts. I.E that the 5 week low might be in. This is one reason why I covered shorts on that day I missed the 100 point downswing. Yes it happens. I tend to get these intuitions and signals a few days early. I had a feeling the 5 week low was coming in that day which is why I covered the shorts. What use? :) Still went and entered some shorts past 2 trading days. Nowhere fully as before covering but still around 40-50% short. Still the very good thing here is because of this conflict in my mind, I hedged up nicely..almost too much I think..So today's possible big gap will not injure me..maybe slightly. So I cannot complain.

Updated Hurst Chart -

Ok I mentioned in the last post that it is possible, the 5 week low has already come in. And this chart kind of puts lot of evidence to this view. I earlier thought the 5 week low might come in the Oct 10-14th timeframe as I had posted before. BUT when we talk about lows and cycles we need to give some allowance to the timeframe. So it looks like the 5 week low might have come in on Oct 4th. Ok now coming to possible upside from this low. Remember, this is the last 5 week cycle, so its a bearish cycle. So this is still a bear bounce. Quick and sharp. But it will also quickly roll over. Need to wait for it thought. Price points are 4910-4950 and 5030 levels. One of this areas should provide the rollover and return to downtrend. Before that we have 4860. So lot of points but short covering in atleast first few hours will happen, after which we might get back to the trend.

I think until next week mid. Oct 12th i.e, we might not see major downmoves and will be in a corrective sequence..i.e an ABC move..So A might complete today, B down will come and then maybe a weak C..I feel it might not get above 5030 level for this full corrective move. We shall wait and see.

Another thing what this new evidence does to us is it puts the 80 week low that we were expecting in Nov mid to come a bit early maybe in the Oct end timeframe to Nov 1st timeframe. So need to watch out for that. Either way since we are so close to a major low, caution is advised on bearish positions and we need to start looking for evidence of a more sustainable longer term low very soon.

I will post updates. I have some shorts. I might close them on opening and just keep the hedges I have. This in itself will put me in profit. Have some puts and NF shorts and more than 150% hedges on them because everything was uncertain. So will close/play with them accordingly.

EDITS:

1. 10:00AM Update - Covered all shorts at open. Holding the hedges which are in good profit right now.

2. 11:30AM Update - Covering the hedges..And slowly building into shorts..I might keep some higher hedges just in case. Just remember I think the bounce can go up to the Oct 12th timeframe.

Best,
Lee

No Update Today

2011-10-04T20:50:00.001-07:00

Very tired..Going to sleep early. I will try and put up a detailed post tomorrow. Position update is short(40% only) - I plan to hedge today and also add to the shorts over time. I am expecting some sort of possible bounce(small chance only but it is out there) over next few days(did the 5 week low come in early?)..And then the downtrend to resume heavily. Not sure on this as I havent done any analysis yet. Will do so tomorrow.

Best,
Lee

Not Much..

2011-10-03T21:02:00.000-07:00

...of an update today..Same as yesterday..Looks like market is trying to bounce..However I really doubt it gets much far in this bounce..4900 is a good point to watch..If it gets there..And if it can sustain for atleast 1 hourly close. Till then downside risks remain and risk reward favours shorts. Remember we are trying to build a bottom but until we do so...Sudden downside moves will keep coming in..Atleast until the 5 week low expected in Oct mid and the 80 week low expected in Nov 1st/2nd week.

EDITS:
1. I am covering some shorts here to reduce risk..and also like I mentioned before to sleep well..It removes lot of pressure to book some profits and let the rest ride..And if market does bounce back from here, we can always add back them shorts. Still short in the range of 60% or so. Whatever I booked now are shorts from the 5000 area - so excellent profits also.

2. Not sure anymore..Today's action is quite uninspiring from a bearish perspective. I am reducing shorts even more to just a bare bare minimum(just token position) at around 4840..Earlier shorts were cut at around 4830 and below. For now market is looking strong. I will readd based on market action tomorrow. Going to bed.

3. Gotta love it. Has it topped for today? I am readding shorts again..But in a very phased manner. I want to have shorting power till 4950-5000 or so. So going slow and steady. Started from 4860 NF.

4. Definitely not looking like it wants to hold 4860NF..Added some more when we got there just now..Market not letting me sleep!

5. Stopping out again on the shorts since its sustaining above 4860..Shoulda gone slept lol..Will come back tomorrow fresh!

6. LOL this is too much...As soon as I cut the shorts, market goes down :(
Yeah I got up just for this..Shorting back in slowly on this pullback. Gotta love the market though for the conditioning it does.

Best,
Lee

The Next Two Weeks

2011-10-02T19:41:00.000-07:00

So last week was quite a tumultuous week with expiry also thrown in. I have posted my thoughts on expiry in earlier posts. There is no doubt that some kind of manipulation always comes in on expiry which will throw us off.

So now we are back to the trend which is down. Important price levels are at 4900 which I have been saying for a while. Break this and interest goes down to 4800 which we should do today. Break of this and a 3rd test of 4720 is assured and we should break that this time. Bottom line is I believe the past few weeks consolidation and breakdown level of 5200 test is complete and we will break 4720 soon.

As you can see from the chart 4720 is an important support cluster. More accurately 4720-4675 level is support. Break of this and a test of lower levels like 4400 will be on the radar. One step at a time.

Hurst wise, the Oct 10-14th timeframe should give us the 5 week low. And I expect this to be a very very weak low being the last one in this cycle. We might have a couple of days bounce from there before continuing along the primary trend into our 80 week low. Expected Nov mid timeframe. Again lets go one step at a time.

I shorted last Friday..Not fully but ok enough. So today if we gap down heavily it might not be a great time to add to shorts but we should have bounces which will give us that. Will post updates.

I will do a long term post sometime within the next few weeks. Because we are getting closer to an important low which should offer some safe tradable opportunities on the long side for several months.

EDIT:
1. Is that a bearish island formed on the charts? I can see it on the intraday chart on Ilango's site. If so, the its going to be bad for the bulls for the next few weeks I feel. For now a bounce seems to be on. Use this bounce to build into shorts if not already short..If already short, then can add a bit more which is what I will be doing.

Best,
Lee

Expiry Sucks!

2011-09-30T13:10:00.001-07:00

Well what can I say..expiry really does suck and throws us off our game. I wanted to do a more detailed post yesterday before market opened but could not due to other committments. Anyhow like I posted yesterday at around market open, I kept on adding shorts throughout the day. And got an average price of around 4995. So not bad for a days work. Also got into Oct 4900 Puts. Overall size is not as great as I would have liked - around 75% short. I could have gotten more in but wanted to wait and watch a little.

Coming to expiry. All my observations were correct but this is what expiry does. Option players are the big guys..In the end, market will end up where they want it to be. When we started taking off above 4940, I started covering as I outlined in earlier post until I had just a little left..So I closed that also..Overall got out around 4950-60. So all in all not a bad thing since got to reshort again higher.

There were several important signs on expiry day.
One is the rupee still went weaker.
FIIs still sold.
Advance decline numbers were poor - showing that just few stocks pushed up.
And still market went up.
These were all signs that Friday would be weak. I wanted to outline all these before market open but didnt get time. Still thought I would mention now.

And really above were the reasons I shorted back into the market in the 5000 range. All in all a decent week. We shall review some charts and setups over the weekend.

Have a good weekend!

Best,
Lee

New Shorts

2011-09-29T21:32:00.000-07:00

Not much of an update today. All relevant charts are there in last post. Today as per my last comment in last post, I am building shorts from open till now both NF and 4900 PUTS.

Best,
Lee

Top in?

2011-09-28T17:56:00.000-07:00

I really think so. For this particular move. There are various portions of evidence supporting it. I think unless we manage to get above the 5030-5050 range, I think it makes sense to sell all rallies. And cover on declines partially to reduce cost.
Today we should see sub 4900 for atleast some time. Whether we can stay there is the question. If we can, then below 4870, we can see more declines.
If we get to 4720 area this time, I do not think it will hold. We will slice through it and the next level to respect would be 4650. Still once step at a time. Its always easy to think oh we are going to 4650, 4200 etc or even 5500, 5700 and sit on a losing position. Take one day at a time.

OK enough of today's rant :)

Coming to markets, like I said, 4870 level is crucial. And above 5030-5050 level. In between kind of no mans land but still lot of opportunities to go in and out to get a better price on your positions. This is important. I mean if you are in profit, just book 1/3rd of position. Hold the rest. While this reduces your profit potential, it is a great psychological boost - to hold the rest of the position until target. And as it gets closer to target, cover one more 1/3rd. Then ride the rest of it. I cant tell you how much of a difference this makes!

OK thats it I promise :)

So I did cover a little yesterday..might just sit tight today or cover a little bit more..Reasons are as given above. Just balancing. Rallies will come to re-add back.

First the cycles chart -

Ok next a normal chart look. I have commented on the chart this time -

Another look. This is interesting. This is the Nifty Dollar Index - Defty - Are you able to spot whats interesting?

The DEFTY had already broken the lows corresponding to 4720 on Nifty. So basically the Nifty in Dollar terms is much more bearish that Nifty in Rupee terms. So what do you think FIIs are doing or will be doing? Think about it a little.

Ok thats it. Trade Safe!

If I do anything today, I will post. One thing I didnt post yesterday was that I reentered by NOV 4700 PUTS that I was trading with on the last big fall. I had sold them to buy back and I did that yesterday in preparation for the next leg down.

I also posted some comments in earlier post(s) - you may read them if you missed since I think some good info is there.

EDITS:

1. Not exactly sure what is going on. So stopping out of several of my shorts. Covered few in the morning like I mentioned I might. And rest at around 4936. Better be safe than sorry and live to fight another day. Unfortunately too much of news is coming out tomorrow..so another wild card. Probably around 40-50% short now. Above 5030 something else is happening so will likely stop out fully. Shall wait and watch.

2. Wow..that was some spike..toned down on shorts again..When in doubt better to stay out or reduce exposure..Maybe around 20% short only now. Will reevaluate tomorrow. Yeah I know I might regret this tomorrow..But still better safe than sorry.

3. Dont know. I am out fully. Hope the market does not crash tomorrow. Will reevaluate and come back. For now, bulls look very strong. Expiry sucks! :)

Best,
Lee

Quick Update

2011-09-27T20:10:00.000-07:00

Ok..now I suppose everyone is feeling slightly to raving mad bullish and not at all bearish..cursing themselves for taking those short positions hehe..Its good. This is how everyone is feeling..and is a natural cycle of market psychology nothing else.

So as I mentioned..Options were disintegrating yesterday so I covered them all..I had OCT PUTS...did not want to hold against the obvious decay in price and this turned out to be a good decision.

SO...I am holding shorts today..October NF..hedged with 5000 calls which I entered yesterday around 17-18. Its 33 right now. So it offered me some sort of protection. Not much but something. And also in these kind of situations, I hedge at the ratio of more than 1:1..Means if I have 2 lots NF short, I might have 3 or 4 lots Options 5000 call long..This is because of deltas. A google can help you understand this better. I am not the best person to explain.

So coming to the crux of the matter, I dont think we are entering a new bull move. This is just a squeeze of the shorts. And this is the same game thats played always..over and over again. Once all the shorts have covered or have been squeezed, the next move down will start. Is it ready? Are we there yet? Maybe..But definitely close.I will be trading today according to this principle.

Updates will follow with charts. Havent got a chance to look or analyse them yet.

EDIT:

1. If you have been trading/adding short like me since morning, now maybe a good time to take some off just to be on safe side and also to reduce shorts cost. I have done this and will be going offline in a little while.

Best,
Lee

Bounce back continues..

2011-09-26T22:22:00.000-07:00

Sorry for the late update guys..dont have anything more to say from yesterday or from what I posted comments section yesterday - If you missed it, I would urge you to read it now.

Anyhow I am shorting into these levels here. I dont know if it can clear 5050 but I think until it does so, downside pressure remains. Take it for what its worth. You know my bias. 4925 upward till 5050 are good areas to short gradually.

EDITS:

1. I have to mention..I have closed all my NIFTY PUTS at a loss of around 25%(just quantifying the loss on the option values alone - if you look at my full account, this is just maybe 0.5% loss or less. Its all about money management..which is why I mentioned before its not about being a rockstar or owning the world in a few days..just to make profits consistently - Anyone who is a full time trader or experienced trader will understand what I am talking about here...Atleast I hope so.). Full disclosure - Just mentioning openly. I mentioned my profits so mentioning my losses. I am closing all options today. I do not know. This is going too fast and too strong for now. Still holding my NF shorts and earlier updates still stand. Remember - do not trade beyond what you are comfortable on.

2. Just wanted to be clear here - Reason I closed PUTs is coz of time and time alone. Options always have a clear expiry date. Cannot hold hoping for something - similar to holding some milk close to expiry date lol. What I wanted did not come, so closed..Nothing else. After I closed I have been adding nicely in Futures(OCT) with hedges on 5000 calls. Coz I am still bearish.

Best,
Lee

Market Update - Sept 26th

2011-09-25T16:41:00.000-07:00

So back refreshed for another new week of battle :)

Last week was an excellent week for me as you can see from the posts. So it was a nice weekend off away from the market without having to worry about any open positions. And I think it was a good decision on my side - got almost low tick and almost the absolute bottom to cover the shorts. And maybe today we will get a rally to start re-initiating shorts.

I want to be clear on this. Re-initiate does not mean all in at once. I will go in small increments so as to reduce risk and also hedge a little so that if the market moves up some 100 points extra than what I expect, I will still be ok. OK - so the shorting range is around 4950+or-25 points - can use your own discretion. Also maybe hedge with 5000 calls. Will get rid of this as the situation arises - will post updates. Thats the plan for now. Still bearish for now. This will be just a dead cat bounce in my viewpoint. The 5 week low is expected in the October 1st week timeframe. So maybe around Oct 7th plus or minus a few days. Will tone down on bearish positions before that. But till then the downside pressure should be on. After that another dead cat bounce.

As I have preaching for some time, the 80week(4.5 and 9 year) nest of lows is going to come in November mid timeframe only. Till then its a bear only punctuated with bear rallies. If something changes in this view point which I think is unlikely, I will alert in advance.

Now price targets - I generally dont like to do this. Because it ties up our mind in one expectation. But still a wild guess for me would be around 4400/4500 for the 5 week low and lower that than for the major 80 week low. Still one day at the time. Dont want to go with targets. Will go with my timing model. If price also works out, then great.

Charts below. Just in a picture what I wrote about above.

http://www.sentienttrader.com/

So like I was saying the last major low at 4720 was likely a 10 week low(this software shows it as 20week but I think this is unlikely), and then the 2.5 week low came at 4911 on Sept 13th. So we are now 28days along the 10 week low and 10days along the 2.5week. The software is expecting the 5 week low around Oct14th(I think it will come in earlier because the 2.5week low came in early). Also the 80week low is showing as expected in last week of November(maybe might come earlier as I mentioned above but bit early to say right now). Just explaining so you can understand better what is shown in the chart. If you have questions, please shoot.

There are also some good comments in the previous 2 posts. You may read if interested.

Ok there were some questions on the Hurst material. I have mentioned before. Its not for the faint of heart and its expensive as well. But if you are really interested and really dedicated -

https://www.traderspress.com/detail.php?PKey=99

Alternatively, read what I write here and try to understand for yourself. There is another book that Hurst wrote initially - I will not recommend this one. Its confusing and Hurst wrote it when he just started developing this concept. The above link is best if you are interested and dedicated. Its not going to be easy.

Also here is the Jessie Livermore Audiobook I had promised. Download when you can. I will deactivate the link in few days -

Reminiscences of a Stock Operator - Edwin Lefevre.rar

One more thing - please refrain from asking me about your specific trades. I will not answer. I think I am providing more than enough thoughts and guidance here to be able to figure out for yourself what to do.

One question to readers - Whats the feedback on ZERODHA if anyone is using? Indiabulls is really eating into my profits because of brokerage. Really eating.

Okay - updates later during trading day. As I tried to explain above, my aim will be create shorts as much as possible toward the 5000 area. If we can get close enough.

EDITS:

1. Hope everyone shorted atleast partially at open..I just started a round(20%) at around 4872 NIFTY OCT FUTURES. Will add if we go higher. Also a small round of OCT PUTS 4800. Hedged with 4900 calls of current month.

2. Continuing to add as we go lower..boths PUTS and FUTS..I might go up to 75% allocation for now provided we do not break back above 4850 on spot. Looking very weak to be frank!

3. Trading trading, enjoying ;) Lots of shorts taken from 4870 down to 4840..now covered 50% at around 4765....Will add back as we go up..Keep trading to reduce cost..No longs at all for now..My view..just my view..you are always welcome to do hit and runs!...enjoy ;)

Best,
Lee

Staircase UP..Elevator DOWN...

2011-09-22T08:54:00.001-07:00

Thats it. Nothing else can describe past few weeks move. Just in one day, gains of several days were wiped out..In a few hours infact.

I just wanted to put up a quick update before going out. Once I am back I will add more details and charts as well.

Now, as I mentioned, I covered 25-30% of shorts..covered a bit more also but couldnt post. Idea was just to be safer - and also its a psychological thing. Once you cover few, you reduce your cost and things become much more easier on you. Thats what I did and slept very nicely.

So now, today a gap down open is very likely..And I expect over next few days we MIGHT try to consolidate here before breaking the 4800 level - After which we should see another free fall. I think the market might give one more opportunity to others to get short again over next 2-3 days. This is what I think. However I would never recommend going long. Shorts can either sit tight. Or part book and wait for more opportunities. The next major low is only around Oct 1st/Sep 30th timeframe. So there are quite a few more days before any sort of good playable bounce can happen - Unless ofcourse you do intraday hit and runs.

This has been an awesome trading environment. And Hurst has helped me a lot. I want to thank everyone for their comments in the earlier post - it means a lot to me. I have also replied over there to everyone..So dont miss it.

EDITS:

1. A very quick update..covered 10% more shorts and hedged the rest with 4900 calls..so now only 50%(or less) short. I will post more on this psychology later. Should have mentioned price.I did this around 4854.

2. Ok Folks. I think action so far tells us it might be a quite day - I mean relatively - i.e we might not break 4800 today. As I said before and consolidation move for a few days. Look at the fractal posted somewhere before and you can see this. Market needs to digest this move. Without that, it cannot move lower..Or even higher for that matter..You know my bias ;)

3. I dont know guys..I am taking profits here in this area on almost all shorts. 4825 Nifty. The profits are too much to ignore. So I am booking here to refresh and come back. Its good to do that. As I said I do not think it will break 4800 today. If it does, there its another quick elevator ride down to 4700 area and lower. So I dont know. I want to relax a little and take my profits - well earned I think. We will come back with a fresh mind tomorrow.

4. Oh yeah for the record. My trades since I closed them and also since I was talking about these for a while -

- Nifty Futures short from 5150(higher due to trading but for the record lets take this figure) down to 4825.

- Nov 4700 PUTS from 100 up to 205 today.

Yeah I will sleep good and relaxed today..Totally FLAT ;) Let the market crash without me if it wants to LOL.

Happy and Safe trading to all!

Best,
Lee

AND we're there!

2011-09-21T17:12:00.001-07:00

Most Probably Yes..Action in US markets today was very clear. Almost half of the uptrend was wiped out within less than couple of hours.

I had been calling for past 2 days or so for 5150-5180 to top out this current upmove and for the next big wave down to start. In Hurst terms, for the 2.5, 5 and 10 week cycles to top out and the next big move down to start into the expected November lows(with a small pause October 1st timeframe).

So likely we started that yesterday.

Now price - Like I have been saying. 5000 first needs to break. Then 4900. Then only we can confidently say we are going to break the 4740 area also. But you know what my bias is :)

So I am short..probably too much..So as usual, I will book some as we go lower..And ofcourse then ride the rest...Hopefully into the abyss.

I am surprised guys..no comments around here..Is it that you dont understand what I am saying? If so, maybe I need to revisit the way I present things..OR is it that you fully agree with my analysis and dont want to comment and add anything more? :)
Or is it that you fully disagree with what I am saying..And dont want to argue with a crazy raving madman speaking gibberish..lol :D Well whatever it is, I always appreciate comments guys..Even if I dont reply directly, I appreciate it and if its a question, I always try to address it in upcoming posts - The last few posts are clear examples.

Ok nevertheless, back to business. A small note about cycles. Its funny. If this same news had come out lets say at a different point of time, the market would not have reacted this way. If you think about it, there was no need for such a big selloff but that is where cyclic pressures come into play and exert themselves. Bottomline is we dont need to worry about any news events. I was calling for a big top for past 2-3 days just like I called for a bottom around a week back.

Same ol game. Just need to be able to read it accurately and MORE IMPORTANTLY, be positioned for it in the right way with least amount of risk.

Wish you all a profitable trading day..And expect a bounce back from some level today..most likely around the 5080/5050 area if we can get there. If that doesnt hold, then 5000.

And as always, comments are welcome!

OH and EDIT: One thing more - the fractal I posted yesterday. Looks like its playing out. If so, close down the hatches - we are in for a bumpy ride down. Those who know me from 2007/08 know the amazing fractal I posted and traded at that time. This also has the potential to be something quite spectacular. Wait and watch. And as always trade safe!

One more thing is the USDINR pair - I was telling all my friends when we were at 42.XX that this is going to 48.XX first stop and probably above 50.XX soon. I think the call is already justified. Right now IT is rallying anticipating increase in profits but sooner or later a mean reversion will happen there are well..As I said, wait and watch. And dont forget to take profits periodically.

EDIT:

1. Booked around 25% shorts..Just to be on safe side. And also to sleep sound. Now my effective short price is way above 5200 - so I am safe for now. Its just good trade and money management. Cannot afford to be greedy in this profession.

2. Hmmnn...ever since I covered a portion, market seems to be building a base for a small move higher. So expect this. Maybe 5080 or 5050? Possible but I think not worth playing for - the big move is still short and stay short. But if you want to, covering here and reshorting higher might be prudent if you are awake and trading. I on the other hand dont have such luxuries. So I will sit tight.

Jesse Livermore once said "After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting"

Will go to sleep and see tomorrow what happens. Whatever it is my avg short price is way above 5200 like I mentioned due to trading and covering some portion right now. So I will hold. Wait and watch. I think this is JUST the TRAILER. Full movie will be released soon ;)

3. WOWZA..so much for the so called 'bounce'..LOL..Bye goodnight going to sleep..Still short and strong. ;)

Best,
Lee

Are we there yet?

2011-09-20T19:17:00.000-07:00

I think so. If not, then close. Sorry I couldnt give an update yesterday..somehow got pretty busy :)

So yesterday..no denying it..Was very strong. Almost unbelievably strong. BUT now we are bang into the resistance or supply zone. I will be watching very interestingly over the next few days to see how the market reacts here. I think this is a very critical juncture here. Be very clear about this - I have been saying for a while we can get into the 5150-5180 zone and thats what we did yesterday. Honestly I did not expect this to happen yesterday but thats what happened. I had been saying for a while I will trade my shorts intraday to reduce cost and thats pretty much what I did yesterday - not an ideal situation but need to work with what we have.

So now we are in the topping range. As long as we do not get a strong close above 5200-5220, I will remain bearish and continue to trade like that. However a close above this and holding above this, we will have to admit something else is going on. But lets see. I think next few days should give us a concrete resolution.

I know its tough at times like this to hold the fort and trade believing in yourself. But need to do that. I know it was tough for me. But after a lot of study today, I see nothing to change my plans or ideas or market outlook. Still believe we are topping working for the next move down. But close above 5220, I will have to admit I am wrong. We shall see.

If you are not comfortable trading, my advice is - sit out for the next 2 months or so till November mid when we will be buying into some good stocks. This is safe to say the truth considering all the unknowns out there. But if you are into trading, then I would say these are one of the best times to be trading intraday and for a few days purely hit and run irrespective of whether long or short.

OK a look at a chart. I am not posting the Hurst charts because nothing has changed from last time. I.E topping for this current 2.5, 5 and 10 week cycle before the next move into first the 5 week bottom expected b/w Sep end and Oct 5th or so. And then a bounce before the final move into November 1st week. Rough guidelines for now..But we will refine.

Chart -

Ok I posted this a little while back mentioning its a probable fractal for the market. Looking at it right now, it has done exactly as projected - so likely we are closer to a top than ever. You can compare each move within the circles to verify whether what I am saying is correct. We shall see what the market says though!

Best,
Lee

A Look at US Markets - SPX

2011-09-18T12:56:00.000-07:00

Been promising for a while that I will post my analysis and phasing on the US markets. So here it is - I have presented SPX here instead of DOW - I somehow have been following that index for a long time rather than DOW or NASDAQ.

Anyhow here is first a very long term look. Its a monthly chart.

You can see the longer term cycles here - First 9 year nest of lows shown here is in April of 1994. Next 9 year nest in March 2003. And now the next 9 year nest of lows sometime toward Dec end of this year? There is always a chance it can come a little bit later. Jan or Feb? This being such an important low chances are there it will extend.

Now I have been mentioning for a while that our Indian market lows will likely come in November 1st week because we have been leading the US market by few weeks. I think by around 7.5 weeks or so. This will also be similar to Oct end 2008/Mar 9th 2009 lows where we bottomed ahead of the US markets. But looks like the gap has reduced considerably right now :)

Anyhow now a look at the shorter timeframe.

The last 18 month nest of lows came in June end. And the last 40 week low came in March mid timeframe. And the last 20 week low came on August 9th. Right now we are in the last 20 week cycle within this 80 week cycle and also with the 4.5 and 9 year cycles. Timeframe for the projected 9 year nest of lows shows as around the last week of Dec. But it may extend also. Will see as we get closer.

A bit more of a closer look.

Monday 12th Sept likely made the first 5th week low within this last 20 week cycle and we had a good rally out of it. This is also the same timeframe that the Indian markets made the 2.5 week low. So we are just 1 week out of the 5 week low in SPX. So still quite early but likely we are closer to a top in both this 5week cycle and possibly the 10 week and 20 week cycles.

=====================================================================================
An update on the Indian market -

As mentioned before, we got the first 2.5 week cycle low last week Monday/Tuesday in this last 10 week cycle before a major low which expected in November mid timeframe. This 2.5 week cycle has run around 1 week now so we are in the topping region. And likely it will also be the top for this 5 week and 10 week cycles. The only question is - Have we topped already?

I think its a very high probability that we might have. If we havent then we might have one more push higher into the 5150-5180 range. As I mentioned before stops for shorts have to be somewhere in the 5200 area. If we push above it, have to accept its going much higher. But for now, lets go with the assumption that we have topped or are going to this week.

This week and the next has the potential to become very bad very quickly - the way I see it. But still lets go with levels. First 5000 has to break for the bearish case. Then the 2.5 week lows has to break next at around 4900. If both of these are done, then we can safely assume that this thing is cooked and we will soon go below the 4750 lows as well. But take a deep breath..and lets go one step at a time.

Friday was quite a whipsaw day..Got whipped a bit on my positions but still held on to most of the shorts I had with some exits and re-entries. Might reduce some today if there is some weakness just to reduce basis costs. I think I already mentioned that I have been scaling into 4700 NOV PUTS. Still have been doing that little by little. NF shorts have been trying to trade in them to reduce basis cost...Will continue to do the same intraday as long as we remain in this range.

Best,
Lee

Upside pressure

2011-09-15T19:28:00.000-07:00

So the 2.5week low came and went by. So what we are seeing right now is intense upside pressure. I could have traded this much better in hindsight but I have to deal with things as it is right now. Frankly when talking from a trading perspective, we need to always go with our gut. But once a wrong decision is made, its tough to backout to the right trade.

Frankly, the last 2 weeks before this one were probably one of the best in my trading life. But last week was bad. The point is that I had the tools but chose not to trade according to that.

Most websites like mine will say they knocked the ball out for sixer..they will rarely tell you that they made a booger trade. But I am saying that past few days, I did that...Could have done much much better.But hindsight is always 20/20. I dont believe in that. So that last/this week was bad - I ll say - but still its just 30% of the profits I made couple of weeks before that.

I am not superhuman..just plain human like you guys..so a loss is a loss. Need to deal with it. Above 5050 yesterday, I stopped out lot of shorts. but still have quite a few. So need to deal with it today.

Its also the RBI day. And I frankly think the news will be a non event unless these guys do something very very extreme. Right now its 25bps or nothing. I think either of these and market expecting this..so its likely to consolidate. If they cut..which I think is unlikely, we might have a spike out!

Ok coming to price levels. 5180-5200. This should be stops for shorts. Above this, it can go much higher. But it will still fail later. But we need to respect it. We shall see how things turn out today.

Best,
Lee

2.5 Week low confirmed

2011-09-14T17:48:00.000-07:00

No other way to read it now. Looks like we confirmed the 2.5 week low at around 4900 - This also came up in the timeframe I was expecting - Wednesday/Thursday. So its done now.

What next? We will likely rally for the next few days - until we get to a top for the 5 week cycle. And then again decline down into the 5 week low expected toward end of this month. Wild card is how high we can rally in this current bounce up. Will it be a double top? Will it stall in 5080 range? Will it get to 5175? Lot of questions but no way to know for sure. We have to observe market action for next few days.

Either way it looks like it would have prudent to atleast take off 50% of my shorts yesterday near 4900 - I was expecting the low - So could have definitely reduced the risk. Problems with having to trade at odd hours in the night. Well its done now. I have double hedges in place for the futures but the puts might lose some value today. So not quite sure how to handle. I might just close all and try scalping intraday until I see opportunity to put the shorts back on. Very fluid here right now - need to see how the trading day goes. Will update here.

Charts with a few more clues below -

EDITS:

1. Well I dont know. I expected a better performance today. Not to be. So it bounced but quickly went down. SO..Who knows. I think its better to go by levels..So 5040, above that 5150-5180. I think better to think about shorting in these areas. The Indian market is turning into a great deceiver nowadays lol. If world is up, India goes down and vice versa.
I covered lot of shorts initially..and then put them back on..so essentially still a status quo. I hate it..really hate it..but dont know what else to do. Lets see if this guy can trade above 5050. If it does, then I might cover some shorts. Right now looks damn weak. I will offer some more thoughts around this psychology tomorrow.

Best,
Lee

Quick Update

2011-09-13T22:14:00.000-07:00

Just a quick update - I am sorry didnt update anything till now..was busy..anyhow whatever I updated before in posts and comments still stand. We are trying to bottom for a 2.5 week low but this is ofcourse bound to be weak being so late within the bearish cycles SO whatever rallies comes, it will be short lived and we will go down toward the 80 week lows expected beginning of November timeframe. I have given more details in my earlier post - dont want to repeat them here.

Rangebound action is what we are seeing right now. 4900 needs to break for bearish case and 5040 and then 5175 needs to break for bullish cases. I think by this itself you can understand which case is stronger. My bias is also very clear I hope.

Trade Safe.

EDITS:

I am maintaining a status quo for today. Basically not doing anything from yesterday. Am short heavily but also have hedges in Nifty futures. Probably only a matter of time before we break below 4900-4875. Then it might be a bear party.

Best,
Lee

Minor Squeeze might be ON - Is the 2.5 week low in?

2011-09-12T19:01:00.000-07:00

So market took support at around the 4900-4920 area I mentioned yesterday in the final comments and bounced from there. Today this should continue for atleast a little bit in an effort to squeeze out some of the late shorts. Dont be fooled by this. Always remember the larger term trend is down and all longs should be hit and run affairs - Intraday longs only is best.

From a cycles perspective, it looks like the 2.5 week low came in early - this was always a possibility - one of the reasons I reduced on shorts yesterday/booked profits and also hedged the rest. I had mentioned this clearly in the comments and the edits section. With yesterday's trading day, we have run approximately 15 days in this cycle off of the 10 week low which also translates to 2.14 weeks - Close enough for government work. Lows can come early especially in very uncertain situations in the geopolitical front as we are seeing today.

5080 area on the upside - Might not even manage to get there - this is what we need to watch today and also next few days. I will be watching closely to see where I can reestablish the covered shorts. But initially I might cover some more at the open to re-add later. But not sure. I will update on the edits sections if I do anything. As of now almost double hedged and also covered more than 50% of the puts. Still have opportunity to reduce and re-add higher. We shall see how it turns out.

2.5 week, 5 week, 10 week - These are the cycles running right now in this 80 week cycle before we bottom in Oct end/Nov mid timeframe. The tops of all of these might have already come together last week at 5175 odd. But there is always the chance of the 5 week top coming in which could be a double top or a lower top at 5125 odd. Keep your thoughts and options open. If the market decides to rally from here, I expect it will still top out in few days which will be the 5 week top and we shall go down toward Sept end for the 5 week low. If we bottomed the 2.5 week cycle yesterday, calculate 2.5 weeks more to get the projected 5 week low - this gives approx Sept 27-29th timeframe for the 5 week low - You may calculate this for yourself and see how it works out. From here, you can also easily project the next 5 week cycle and so on - This is the basic tenet of the Hurst Method! So we are in the first 2.5 week cycle of this 10 week cycle. We will have 3 such 2.5 week cycles left. Calculate it and you will get approx Nov 2nd for the 10 week low, the 20 week low, the 40 week low and also the 80 week low. Also quite possibly the 4.5 year and 9 year lows - as I have explained before. If you want to understand this better, read and reread it again and ask questions if you need any clarifications.

EW wise, if the corrective is still running and what we saw recently was just the 'b' of the C wave, then more upside is pending toward maybe a double top kind of situation. Its quite possible and so we need to be open toward it. The preferred count is ofcourse that we have completed some sort of motive move down and we are now correcting it. So more hard down should come after a small corrective rally - This is obviously what I prefer bounces or not.

But whatever happens with short term bounces, the medium term mantra should be to short the rallies because downside pressure will be there until the Nov low which is expected by Hurst methodology. In between this we will have some intermediate lows as I have outlined above.

EDITS:

1. Added back some shorts here...I had covered a few lots at the lows of the morning and the rest what I had covered yesterday. Also rolled up hedges from 5000 calls to 5100 calls. Moving to more of a bearish allocation. Lets see..Can we get to 5025? 5050? Looks quite weak for now.

Best,
Lee

Topped?

2011-09-11T18:08:00.000-07:00

Probably yes. I think it is more or less confirmed that we have put in the 5 and 10 week cycle highs last week. So now what next? The 2.5 week low will come first off of the 8/26 low(which was the 10 week or the 20 week low - doesnt matter right now - I will take it as the 10 week low for now even though my s/w thinks otherwise). The 2.5 week low will run approx 18-20 days - Of which we are done with 14 days from the low - So we should expect this low this week maybe Tuesday/Wednesday. Could extend to Thursday also. But in that approximate timeframe.

Remember that these lows include market holidays ALSO - Hurst methodology says that even on the days market is closed, we should count it as an actual trading day - Which makes a lot of sense to me - Because we are having market moving events all the time! Even when our markets are closed. A couple of weeks back is a very good example. Even on weekends lot of things are happening. So notionally our markets are trading all the time. So when I say 2.5 or 5 weeks, it includes all non-trading days also.

Ok coming back to market, expect some sort of low in the next 2-3 days. But it might be a weak low and we might just continue on to the next 5 week low expected beginning of next month. One step at a time though.

So last Friday I think was an excellent opportunity for discerning traders to add on to shorts. Break of earlier supports at 5100 and 5090/5080 was good for even conservative folks to add on to shorts. I kept adding on and on and now own a big amount of NF shorts and Index puts. Today I will roll that down to lower strikes essentially making them free and also will reduce exposure - Think I am bit over leveraged right now. So will reduce risk a bit. And ofcourse taking profits is always a good thing. I have NF shorts from 5125 avg price, 5100 puts(sept) and 4700 puts(Nov) probably overleveraged way above my comfort levels. So will reduce them today. Just trying to explain my trading strategy a bit. 5100 puts rolled down to 4900 puts essentially make them free for me and also puts some profit into the pocket. NF shorts hedged make them also protected - will book few lots profit also. 4700 puts(Nov) - These I will likely reduce by 30% just to reduce basis cost. All ideas for today. Will post updates. Also will add charts and more learning matter a little later today.

I mentioned last week - Worldwide things are looking real real bad. A crash cannot be ruled out. I just wanted to remind everyone to be really careful with how you manage your trades out there. Expect the unexpected.

Bharat, I will address your question shortly. You might have got some ideas from above.

EDITS:

1. I executed all trades as per plan above - reducing risk here - hedging the rest - basically what I am doing is locking in profits. I am getting risk free/very less risk right here. I dont know what will happen tomorrow - well lol not that much - I know a low is coming next few days - can be a weak low - can be lot of price destruction before that - but still want to be safe here. Hurst methods have guided me a lot here so I have to mention the same here.

2. Golf Dude said - "Cool blog. I like the fact that you also mention your trades. I think we are in wave 5 now ( 5170 to present ). I expect a turnaround 4950 for 2 of 5"

My reply - Thanks Golf Dude - Do you actually play golf/are you a golf fan? Lot of my friends over here in Houston play golf..They are trying to pull me into it...I am skeptical about it/worried about if I can get even time or energy to play it...But I might still go ahead and start playing it soon. I do know a little bit about the game.

Wave5 with 2 up - yes quite possible. I am not sure. I do do a lot of EW. But nowadays give less importance to it. I see the possibility. But will wait and see.

3. Bharat said - " Dear Lee,

Considering that Nifty is STILL above the week pivot(4970), do you think there is a possibility that Nifty might meet R2 of the week (as said earlier), i.e 5229 in the coming week? Would it be wise to buy around 5000 levels if there be further downside of about 50-70 points?

AND SECONDLY, when do you think the downside cycles start again? You had earlier mentioned in your blog that we 'might' see 4000 some where in november... considering that, do you feel the 'corrective bounce' ends at 5177, w/o fillinf the gap and meeting 5229?
I have been following your blog and Ilango Sir's blog and the views that both of you present to us are excellent!
Actually the reason WHY I am asking you specific questions is because despite both of you use different methods of analysis, the outcome is similar and very accurate!"

My reply -

Always the possibility is there Bharat. We try to forecast the market. But trading is a totally different animal to deal with. Thats why you see so many blogs/sites tell you what the forecast is but dont tell you HOW to trade it. Trading is tough because that is when you deal with your most primal emotions - FEAR and GREED. Tough. We need to have some kind of pre-made plans but also need to have the foresight and planning to be able to modify that according to circumstance.

The downside cycles as you call them might have already started. We might get a bounce from somewhere around here to 4875 upward which should offer some opportunity to reestablish shorts. But either way I think the 2.5, 5 and 10 weeks cycle may have topped already last week. So this gives us some big downside targets. 4500 first, then after a bounce even sub 4000 to 3600 levels. Quite possible very soon. This is what will give us a platform for the next bull market.

As I have been saying for a while, the 80 week low is coming soon. As early as October end to November mid timeframe. So its close. Price destructions happens always as we get toward the low - this is why I have been warning for a while about crash scenarios and to tone down on bullish expectations.

Need to be flexible here. The reason I reduced shorts and reduced the risks is because I want to be safe here and also sleep well.

3. More comments coming soon. Just wanted to say, if you guys have any questions, feel free to ask. I wont bite lol..Its through comments only that this blog will get active again.

Read these 2 posts I made earlier - Read it, study it, I want to build on it. So this will form the first part of your Cycles Education -

http://theindianmarketblog.blogspot.com/2011/08/hurst-cycles-872011-backup-from-vfm.html

http://theindianmarketblog.blogspot.com/2011/08/nifty-hurst-cycles-815.html

After this is done, I would still recommend reading the posts after that. Remember guys - No Pain, No Gain!

4. I think its all looking really bad now. 4920-4875 needs to hold. Else good bye to bulls and we will break recent lows..Then its 4500 coming soon. Enjoy!
On the other hand, what I will say is looks like it is taking some support in this range 4920 I mean. So for more downside this needs to break. I am going to sleep guys..enjoy the rest of the trading day!

Best,
Lee

Topping Process

2011-09-08T20:02:00.001-07:00

I can only view this current market action as a topping process. Nothing else. As I have been saying for a while 5200-5250 is rock solid. Can we do a little more than that? Yes possible. Probably around 5300 and above is when we need to reverse to fully bullish. Till then sell the rallies is the mantra for now.

I did enter some shorts yesterday. I will add today and continue to add as long as market remains below 5250. One thing I will say - The way I operate is I keep my initial positions very very low. And add as the situation arises - this may be break of certain pivot levels or it may be on rallies toward certain point on negative divergences. Setting a position is not easy and almost is never popular - because we are always going against the grain. I mean to say a short term trend follower thinks everything is quite bullish now. But a longer term guy says this is just a bounce in the downtrend. So a conflict arises. It ALWAYS about timeframe. As a trader we always need to decide what is our timeframe. Different people are comfortable is different timeframes. Has to do with your frequency and timeframe. Find that out and you will be so much more in sync with your trading.

So many people emailed me around learning Hurst methodology. What I will do is over next few weeks is probably present some material around that because I know its very expensive to learn this by yourself. What I will suggest is going back and looking at some of my earlier posts first..I mean to say there is one called 'backup from VFM' sometime this year probably couple of months back. Start from there and few posts after that. Then from next few weeks I will post more around learning and understanding this. Please understand this is not a simple thing for me to do. So it will take some time. But I will still do it.

Trade safe. Keep emotions out. Run your trading like a business.

Best,
Lee

Dejavu?

2011-09-07T19:30:00.000-07:00

Extremely strong US market. Will our market remain true to form and take that as an excuse to take profits and sell off? Quite possible. Either way expect the unexpected and remain vigilant.

Replying to comments from earlier post -

Thanks a lot to everyone for your comments in the earlier post.

Sujatha, may have been a bad decision to short yesterday? Early? Maybe...I am not sure..still will work it out. I was very clear on it going to 5150 and above but still could control myself..lol..but its small so I am not too worried..I might also exit them today depending on what I see.

Nov Puts because of cycles only. No other reason. Oct also might work out but not sure how long this current bounce will run. Next week is a good time..cycles view wise..for us to turn down. Price is the grey area. 5200/5250 is still what I am thinking.

Not much more to say today. Same views as yesterday. My favoured scenario had always been a C wave - more bounce - into the 5150/5200 area. But even though I took some advantage of it, I could have obviously done much better. Its funny how the markets plays with our psychology isnt it? Still we are only human. We will make mistakes. The ability to cut it and go for the next trade is what will make a successful trader. I think this is one of the most important things I have learnt over the past 3 years and I think what everyone should learn - never to fall in love with a trade. Cut your losers and let your winners run. After all its just another trade.

Today could be interesting. As I mentioned, I did enter some long term puts and some shorter term NF shorts yesterday..Very small amounts but still I think I am early on this. So I might close some of them today on weakness. I think that might be the prudent thing to do.

If time permits, I will post my reliance and US markets analysis here a little later.

EDITS:

1. Covered all my pilot shorts on the early weakness. Not much of pilots were they? lol. Anyhow will play on intraday longs now..Market may be telling us its not ready to top..not just yet! I will update if I see something differently..For now things do not look too bearish. Market may have a date with the 5180/5200 area at a minimum.

2. Done with intra longs. Those were some good points to scalp. But beginning to look weak again. Will start adding shorts from here as we go higher.

3. I did add a quite a few shorts in there..Not very sure but it looks like this cycle has topped and we are going into the next 2.5 week low due sometime toward mid/end of next week. We shall see.

Best,
Lee

Bounce back continues..

2011-09-06T19:17:00.000-07:00

So for the past couple of days, I have been mentioning that my preferred scenario is for the bounce to continue after consolidation above 4920 - And that is what the market did.

In between however, I began to wonder what if the global markets crash today - what then? There were reasons. Merkel's loss(big big news from a Euro perspective - its going to breakdown very soon), Euro bank issues, US economic news etc..It could have all come to a 1987 style move today - but there were some interventions out there that happened which has prevented this for now - I generally dont like talking fundas but just thought of mentioning this because its important and is going to come back to bite us very very soon. This may be reasons for the next big fall coming soon.

However we are traders and yesterday when the market was breaking out above 4980/90, I covered all shorts almost at breakeven but left the hedges on and doubled up which is showing a good profit today. I plan to cover atleast 50% of this if not ALL of it today. The other option is roll up to higher strike prices to reduce the amount of money at risk(holding 5100 calls..can roll up to 5200 calls).

So now as I have been saying is my preference, we are in a C up of this particular corrective structure - likely some sort of wave 4 or wave B. After which a final wave down is pending into November end timeframe. Topping area? Good question. I have been saying 5150-5180 for a while. If we get there, 5200/5250 area is strong strong resistance(previous breakdown area). So thats the point to build shorts. However if we manage to somehow get above that, we have to reevaluate. But we shall see. I dont favour us going above 5200 by much for now. So I will be playing accordingly.

Oh and one more thing. Today my blog hit 50000 unique views/visitors. Inbetween big breaks and what not. Still I am back and running - I hope better now than before. And also hope I will not ever stop this again.

Thanks to all for their support and encouragement in this journey!

EDITS

1. Booked the calls. Not very happy with opening. Into resistance area now. I also started rebuying my longer term puts(Novemeber 4800,4700 strikes) again

2. So been adding few puts in small amounts only for November series. This is longer term so I am not too worried about small term fluctuations. Also been adding some NF shorts with hedges placed. Again small amounts because I am well aware that this can go till the 5200/5250 range.

Best,
Lee

Market Update - Sept 05

2011-09-05T19:11:00.000-07:00

Yesterday even though the whole world was in red, our market managed to get through without any major injuries..This lends more evidence to the idea that we might have one more wave up pending. However the situation in global markets worsened considerably afterward and today and everywhere is in deep red..And no recovery yet.

So today will be interesting. Will we set another low close by and rally from there? Or atleast make an attempt? Maybe? We shall see. After my update yesterday, there were some good opportunities for intraday longs. Watch out for same today..BUT caution..We have a notorious way of doing what is least expected by most! :)
I still feel we might have a few days of bounce/rally left. But we need to hold 4920/4900..Worst case 4870. Below 4920/4900 itself no longs should be held. Until then we can try longs with appropriate stops.

Ok now a look at the Hurst viewpoint.

Now what is new here is that the software is looking at the 4750 low we had few days back as the 20 week low now. Which is interesting to say the least! Why? Because this means its basically saying the last 20 week low ran very late..Almost 29.3 weeks. Is it possible? Yes ofcourse - basically once we enter bearish periods like now, cycles tend to extend.

Why? Because - in bullish times, lows are early and hence cycles a bit shorter as there is less selling pressure and more buying pressure. Folks can be falling over each other hurrying to jump on the train before it leaves again. The reverse tends to be true in bearish times as it takes longer to get low enough or "safe enough" to allow speculative buying (catching a bottom in bearish times). Hope it made sense.

So till now I was thinking it could have been the 10 week low but lets go with the view that the Sentient trader software has right now. This does not change much for us at this point..Except that there is the possibility that instead of the November timeframe MAJOR low, we can extend into December. But lets fine tune all that later. Now lets look for a top soon. Unless ofcourse its already in at 5050 odd. Tough to say at this point..Need to watch a little bit. Ofcourse the 20 week can top very very early being a bearish cycle as I have explained before..So caution should be excercised here.

I had promised a US market view soon..I will try to put that up asap. I was also thinking of doing an analysis on Reliance soon because I think it might be one of the leaders in the next bull market.

EDITS
1. To tell the truth, even though I expect a bounce still..I am very wary of holding longs now..Why? Because of possible crash like situations out there in the global markets..Lets just focus on hit and run trades only on the long side..Intraday only.

2. Short side. I am going to focus over the next several days on building a core short position with hedges. I will only scale into this very slowly because I still see a possibility of a rally to 5150 area..Hence the hedges as well. So strategy is to start a line..but add only closer to 5100/5150. OR on a break below 4920.

3. As mentioned started my short lines near the open. But this is a possible bounce zone..4940-4920..As I hinted above..Part book and reshort higher? Not sure but I am holding for now with hedges. Break 4920, and we get into a more precarious state.

4. Stopped out of all shorts at 4980 for breakeven..This baby looks like going higher..If it crashes, let it do so without me..Will reshort on retraces then. Good night..going to sleep.

5. Wow what a move after I covered..talk about good timing..WHEW!

6. Nice..couldnt sleep..Making some good money on them hedges..I should've have mentioned that I was still holding them :(...Anyhow doubled up on them also..So carrying a good profit on it.

Best,
Lee

Quick Update

2011-09-04T19:34:00.000-07:00

Dont have time for much of a detailed update today. I am short from Friday..not too huge..so plan to cover today on initial weakness..Might not go long immediately but there is a possibility of a bounce(C within an ABC structure) which might go above last week highs or get close...Play with stops if going long - 4870 might be a good point to watch as a stop. But not very sure. Waiting and watching.

Best,
Lee

Couple of Questions to All

2011-09-03T23:00:00.001-07:00

I had a couple of questions/requests to all...I would appreciate it if anyone responds helping me out with this.

1. I wanted to build an intraday database on Amibroker esp for Nifty but am unable to find good sources of data for this. I have a subscription to desitradermall but downloading each days worth of data and building a DB for more than 2 years is a monumental effort..I know backups are there but even there, the data has differences, is a little bit spotty..so I tried but was not able to get this done..The main reason I am trying to do this is to be able to put EW counts on the whole correction we have got from the last top. So any help in getting the database built up would be appreciated.
The other option is - if anyone has the database already in ami, I could just copy it over and it should work - Please comment if anyone can help me out in this.

2. Tax question. I havent filed anything in my tax returns related to stocks till now. I am unsure how I need to go about this. I started trading back in 2003 mid/end timeframe. So till now no details about my trading operations in my tax returns. But I have been filing tax regularly based on my normal day job income and details. So basically its an omission from the returns.
The main reason I wasnt concerned in the initial years is because I wasnt really making much but now I need to do this to avoid future problems. So I am unsure how to go about this. Is there any way I can account for all the previous trading details in my next return? Will I get in any sort of trouble wrt fines etc if I decide to show all years or just the past one year? Is there any way to avoid this? What is the best way to get everything back to normal and legal? Any help is appreciated.

Comments and suggestions requested.

Thanks,
Lee

Friday - EDITED

2011-09-01T18:56:00.000-07:00

SO..market reopening after 2 days off. Will be interesting to see how we perform today. In my opinion its bit of a toss up today. Since we were closed for 2 days and other markets performed reasonably good in those days, we should have a tendency to catch up. However today US markets were weak. So we might also exhibit weakness sometime during the session today.

Last time, I mentioned that the 10 week low was in and we are bouncing out of it..And what a bounce. Going in even at 4840 levels yielded awesome profits. So it was a good trade and call. Now as I have mentioned several times before, we are in the last 10 week cycle of the 80 week, the 4.5 year and the 9 year cycle. So this is an extremely bearish cycle. Which basically means the top of this cycle will be left translated. Basically that is how the bearish cycles will work - The tops will come in very very early in the cycle - thats how we get left translation. In bull markets - exact opposite - Right translated cycles where the peak is formed very late and then weak and quick declines. Hope I am making sense. This one might be forming the peak already around here or maybe a bit more higher around the 5100-5150 range. This is what I am looking for now to slowly scale into shorts.

I am not sure if I should start today or wait for a few more days. I will take a call as we go through the trading the day. 5100 area and above might be good to start scaling in slowly. The important thing is not to get too confident on this and also to play position sizing adequately.

Now if you look at this chart, the breakdown point is quite clear - 5200. This is where the descending triangle broke down and culminated in a devastating move down to 4750. So this is why I was saying any rallies have a maximum cap of this area. If we do manage to go above and sustain above, then we have to admit that something else is going on. We arent supermen with insights into the future - we are traders - so we have to operate on IF-ELSE scenarios - sorry just grounding expectations here. We have good odds but that does not justify not using stops or stop out points.

So for the bearish case, 5200/5220 is the point where it should not go above.

Over next few days to 1 week is the timeframe I expect for this topping process. We should back in and out toward this. Not sure exactly what structure we will take but let us see. My bias is very clear - I will be looking for a top during the next few days - maybe sometime next week - maybe sometime today. Will wait and see how we trade today because making any further decisions.

Thoughts and Comments are welcome.

Oh and by the way, Chandra, I do have analysis on US markets also. I will put this up over the next few days. I do tie up my analysis b/w India and the US very closely even though I dont mention it here. I will explain more in next post(s).

EDITS

1. Big Gap up..Shorted a pilot position on the gap up and hedged it as well. Now wait and watch if this warrants additions to position.

Best,
Lee

10 Week low IS IN - EDITED

2011-08-29T15:50:00.001-07:00

Yep..sure looks like it. Yesterday before market open and I think even few days back I mentioned that likely the 10 week low was coming in and looks like it did last Friday/yesterday. I remember few weeks back I was mentioning of a likely low around this timeframe. In between I remember thinking it would come early. Overall worked out fine - except for the fact I missed to take full advantage of the shorts I had due to the huge gap up yesterday.

Unfortunately that's what happens at the fag ends of cycles. Still we know its a low...so take what we have and run..See the open yesterday..never even came close to it after the open...What a rally!..shows the power coming out of the 10 week low. So I humbly covered my shorts around 4840 and went long, pyramiding as we went upward so overall did good yesterday. Today, respecting the holidays, I might book profits. 4960-5000 area might be a good area to do this. We will see where it opens.

So like I mentioned yesterday, the last 20 week lows came in likely on June 20th. And now we are 70 days from that low = 10 weeks. So its the 10 week low alright. And what next. As has been the case on the last major lows, the rally and tops have been extremely left translated. This one should also be the same since we are in a bearish cycle and also this is the last 10 week cycle of this 80 week, 4.5 year and 9 year cycle.

So expect the highs to be set in within the next 4/5 days to the next 2 weeks. And the price should be something around 5100-5180(if we can clear 5000 for good). 5250 will be the stop loss for the bearish case to work out. If these work out the way I think it will, we will top around there and move quite lower into the Nov 80 week low..Somewhere below 4000/3800 is what I am thinking for the coming last leg. But one step at a time.

I will post some normal TA and charts next. Along with some more considerations. If you guys have any questions or comments, you are more than welcome. I see lot of visitors but very few comments..I hope people are getting what I am posting..If not, then just ask.

EDITS:

1. Covered 50% longs at 4988 AVG. Hedged rest 50% at same level. Now wait and watch.

2. Covered rest at 4980..Closed hedges also..Totally FLAT now. Just watching. I expected bit more but looks like everyone is scared of the holidays..Still not bad for a 1 day counter-trade :)

3. Got to go sleep. But if I was awake, I would try scalping a bit on short side now..Unfortunately cannot..So cheers all and I will post some more ideas over next 2 holidays. Its past 12:30am here and I need to go to work tomorrow..so GN!

Best,
Lee

Short term bottom in or close?

2011-08-28T20:12:00.000-07:00

Well as I said last Friday, I did short near the top around 4870 and am enjoying some nice gains as of now...I believe we are close to a short term bottom or might set it today.

Need to watch this a little bit. Now we can assume that the last 20 week low was set around June 20th timeframe. I believe there was a question on this in the comments section so yes my answer is this is my preferred possibility. If so, then right now we are setting the 10 week low around now and from here we can expect a short term rally for a few days if not for a couple of weeks. But as has been the case for the past few lows, this one also should be left transalated and we should set the high in a few days and continue down until the Nov low - the 80 week major low.

So a dead cat bounce is all we can expect at this point. Lets see...Around this area till 5000? Possible. Clearing 4960-5000 and staying above will target 5100 around. More than that, is tough.

So today my plan is to cover shorts today..I am not sure, we might get a gap up and then consolidate for a while..a lower low is also possible. So wait for a while is what I think..And when going long, I will also hedge it considering the uncertainty and also the shortened trading week this week. If I go long, 4650 is the area I will be watching with great interest. Holding this is crucial for the short term uptrend. Longer term, I expect the market to slice through this like a hot knife through butter. But lets wait a little bit on that ;)

EDIT: Covered at open and trying few longs...

Best,
Lee

What next?

2011-08-25T20:00:00.001-07:00

Good question right? I am in a dilemma right now. As I mentioned earlier, cycles are very unclear right now so trading this is tough. I was expecting some sort of bounce into 5100 range - may happen or not - need to wait and see.

But, so far, the pressure or money flow has remained on the downside and that is expected to remain so until the projection of the Nov low.

Trading short term has been volatile and full of whipsaws.

This is the problem. And I am not sure how to resolve it unless you are ready to take some pain.

Today, I will look to close the few longs I have and maybe go short in few amounts. Not sure if the market will let me. Its very fluid right here. Need to see how the market is trading before making a decision either way.

The other problem is within US, tomorrow is a big day...there is a fed statement..there is lot of news coming out...So news will direct the trading atleast on a short term basis.

Wait and watch.

Best,
Lee

Trying on long side

2011-08-24T21:32:00.000-07:00

Just started..4800 is support for today..Just started very small..will buy on dips.

Best,
Lee

Looks Corrective - For Now

2011-08-24T19:16:00.000-07:00

Its corrective all the way and may last for some more time. There is an outside chance that the 5 wave down has started but it only gets confirmed below 4800. And then also it can quickly find support.

So for now, its essential to be quick and nimble. Scalping and very quick trades might work. So for some time I am not going to post my trades because it will changes quickly in and out. Yesterday is an example. I couldnt post frequently enough depending on how I traded.

As I have been saying so many times - one thing is sure - longer term/medium term is bearish into the expected Nov 80 Week low. Nothing else is certain at this point of time but it should clear up over time.

Now as you can see from above..Its very confusing. The main confusion point is where is the last 20Week low. Unless this is placed, we cannot resolve the lower timeframe lows. 10 Week, 5 week etc. See the questions marks? That shows the confusions. I am hoping things clear up by next week or so. Till then we have to scalp.

Problem is earlier I was thinking that the June mid low is the 20 week low. And what we are getting now could be either a 5 week low and then in few days the 2.5 week and so on. But this picture shows something different. That the last 20 week cycle may have extended - which is bearish - and low we might be coming out of a low point.
If this is the case, then a bounce higher above 5000 into the 5150-80 range cannot be ruled out. So as I said confusion overall. But being bearish overall is safer. If you are bullish, I will suggest, keeping the trades short(timeframe) and safe. Also hedging while it reduces the profits, gives some peace of mind. This is how I will be playing for next 1-2 weeks - both longs and shorts.

If you guys have any questions, please feel free to ask. I sense that some questions are there..I saw a few here and on mail which I tried to answer..but still anything else, please feel free to shoot and I will answer them over a weekend post.

Best,
Lee

Talk about bad timing

2011-08-23T23:05:00.001-07:00

Yeah..I know..should have held on..Its funny how the market works and plays with our emotions..I am back short in very small amounts. Will add if conditions work out.

Meshach, Already posted details of the cycles below. You may check the charts below.

EDIT: Can see a 5 wave move intraday. This may be an A wave of the B wave within this 4th wave move. So means we can add shorts on upmoves today to cover either later today or early tomorrow. Then one more bounce upward lasting maybe couple of days to complete the 4th wave move.

All guidelines only. Trading 4th waves are always tough - Its what separates the men from the boys! :) If in doubt, stay out.

Best,
Lee

OUT

2011-08-23T21:18:00.000-07:00

Got out of shorts on the morning dip. Closed all positions. In hindsight, I should have closed around 4800-4850. Nevertheless I did earn some money through the hedges but not ideal. Will watch for now..And plan to short higher. My biggest worry right now is a possibility of 5150-5180 coming in few days.

There is still chance for dips here..But want to watch for some time.

Thanks,
Lee

4950-5000 range

2011-08-23T18:09:00.001-07:00

Well the rally continues. I did not expect it to do this much. I guess thats why they call it trading and the stock market. Cant expect things to work out all the time.

Anyhow today would be a very interesting day. Because after this big rally in the US markets, it would be interesting to see how we react. A gap up is sure but then what? We have been notorious for spiking on overseas markets and then giving it all back and more..So today will be interesting to see if we stay to form or do infact take support somewhere and rally.

For now 4750-4800 has established itself as temp support. And clearing 4950-5000 range and staying above, we can attempt the 5180 area again. Kpl provides a view on this here-

5180

I am not very sure how to trade around this with my existing positions but I will post updates later today after seeing a bit of the action.

Cycles wise, things are murky again. And this tends to happen in the fag ends of cycles. Once again, taking profits early would have proved to be very prudent. Hurst always mentions on trading short - need to be much more cautious than when trading long. Because as I have mentioned many times - Lows tend to be spiky and fast. Highs on the other hand can be a bit more rounded out giving us more opportunities to get out of longs.

Still over the medium term, nothing has changed. The 80 Week low is still scheduled for Nov mid timeframe.

More later today.

Best,
Lee

Rolled Up

2011-08-22T21:57:00.001-07:00

Rolled over to higher strike calls(5000) in the morning pop up as I said, after booking profits in 4800 calls (from 80s until 136..so made up for any notional losses in the shorts).

Now we wait for a retest of the lows or lower. Maybe maybe not :) Wait and watch!

Best,
Lee

Bounce..for now

2011-08-22T19:36:00.000-07:00

Ok we got the bounce. 4900. 4950 can come. I hedged yesterday with 4800 calls. Today I plan to roll that to either 4900 or 5000 calls. Now why did I hedge yesterday? Because in this intense volatility, it becomes extremely difficult to forecast cycles. Even my software is having problems placing the lower timeframe lows..let alone the higher timeframe ones. So I expect the 10 week low to come in around 6-7 days. But thats not what the Hurst software is expecting. So I have to go with my judgement. So I will go with my expectation that the 10 week low is coming and will coincide with the EW wave 5 down of this full wave 3 structure down. If I am wrong I will give some money back but overall will still be ok.

Today, I will cover the calls I have for a good profit and roll to higher strikes anticipating more bounce.

BUT since this whole month has been weak, expect expiry also to be weak. Longs might need to wait a little while more..maybe for a retest of the lows..maybe a bit lower to set some divergences. Somehow I dont expect a V shaped bounce.

I meant to post some charts but not now..a little later today.

Best,
Lee

4800 Bagged and Tagged - Hurst Updates 8/22

2011-08-21T18:42:00.000-07:00

Excellent week I had last week..was completely in sync with the market..got most of the moves I was anticipating.

Looking ahead to coming week, it might not be as easy to trade I feel. Because there are some changes coming up - most important of which is that we are closer to a temp low than before. Pricewise I am bit uncertain but timewise it should come around this Friday to next week Monday timeframe. Maybe a little bit more than that but in that timing vicinity. This will be the 10 week low as per my calculation and from here we will get a sidewise bounce sort of move for few weeks atleast.

Okay so bottom line as before - still bearish over medium term into the November 80 week low. Bearish also into the 10 week low in the next 6-7 trading days. Slightly bullish after that for couple of weeks and then again bearish for the final move. You can visualize this from the chart above. If we saw the last 20 week low in June 3rd week or so at around 5200 and from there we are in the last 20 week cycle before Nov. So this is a bearish cycle and we have already broken several key lows along the way.

Now we are in the last 10 week cycle in this 80 week cycle so its also a bearish one however some small bounce can be expected soon - this may come in the form of a larger scale wave 4. Ilango gives good counts on his blog around this scenario. Assuming we are in a wave 3 now, we should finish the downmove into the 10 week low and from there start the wave 4 I was talking about.

All ideas only. Does not have to pan out. And when trading we need to remember not to get fixated on any single idea but be flexible.

My trading plan for today is to get some hedges thrown in for my shorts because we are at some sort of support levels and also because my earlier hedges I had closed couple of days back. And then wait and watch. Levels wise, 4800 showed some support, breaking of which will lead to more downsides - 4700 might be another area we test soon. Below that, 4500 also comes into play. But one step at a time. Remember this might be the last portion of this section of the downmove so dont get overly bearish and fall into a trap.

If you arent short, then this is not the time to get into fresh ones. If you are short, take portion of profits off and hedge the rest. If you are long, expect some pain..maybe lot of pain before a low takes hold - Just a guess - Might be wrong on this also.

Wanted to post more charts and thoughts but no time..So will try to add some stuff later.

If you missed earlier posts on Hurst, you might want to read up again my earlier posts.

Best,
Lee

4800 is here..what next?

2011-08-18T21:02:00.000-07:00

So we are so close to 4800..I am feeling an intense urge to cover my shorts. I am not sure. I see some bounce over here but..I feel its only a waystop to lower lows below 4750 next week. Yeah I think next week will be bad as we go into the 2.5 week Hurst low. Normally I wouldnt give much importance to this but consider all longer term cycles are down, we have to give more importance here. So I am continuing to hold the shorts (2/3 only) from approx 5160 area. Covered 1/3 around 5000 yesterday and holding rest.

I think next week will be bad...After some sort of bounce. Waiting and watching.

Best,
Lee

Wow 4800 is really calling now :)

2011-08-18T08:52:00.000-07:00

Even I underestimated the weakness of this market...In the morning yesterday, I was expecting a bounce from 4970-5000 area to a little bit higher - As I had mentioned, a very weak bounce. This is why I covered 1/3 of the shorts I had from 5160...that and money management rules. But market as usual had other plans and continued to breakdown.

I had mentioned in my earlier post about internals. It was a sea of red yesterday in all the broader stocks - I mean mid and small caps. This was the first red flag. The second was the inability to hold the support range. Yeah I wish I were holding all the shorts but I will take what I have. :)

Technically from a Hurst viewpoint, yesterday was bad. Because the market breached the 5 week low implying that the market is breaking down from a cycles viewpoint as well. Now it looks like 4800 is coming quite fast. Like I said before, break of 4950-5000 range will get us to 4800-4750 in a jiffy. And as I mentioned in one of earlier posts, first target is approx 4768 - the 38.2% retrace of the full rally from Oct 2008.

Long live the power of Hurst! :) ..Ofcourse combined with traditional TA and sound money management.

Later.

Best,
Lee

Very Weak

2011-08-18T00:32:00.000-07:00

Looking very weak..Still holding the 2/3 shorts..The hedge lost some money but in excellent profits overall with the shorts from 5160 area. Market not being able to stage a bounce from here shows how weak this market is now.

Will see tomorrow.

Best,
Lee

4800 is calling...Updated...

2011-08-17T20:54:00.000-07:00

Ok..some more thoughts and charts..

Past few days, Advance decline stats have been absolutely horrendous..This is very important information because it shows the market's internal makeup and structure and that is quickly falling apart. Now when we look at the full market not just Nifty, it shows a lot of weakness and lot of stocks are crashing every day. This shows the internal weakness and without internal strength, the market cannot move up from here..Apart from weak bounces that will quickly fail.

Today a small bounce is possible which can extend into end of this week. And then next week might again be bad. Either way, the maximum time I would give this current pause in the downtrend (thats only what it is - pause in the downtrend) is until the last few days of August or by September 1st/2nd..After which we should see a move below 4950 and below that 4800/4750. Take it for what its worth!

Now a chart.

Now what I would say first is my software is a bit confused here. So am I. Its a little bit uncertain now on the smaller term cycles. But longer is very clear..i.e we are going toward the longer term low in November mid timeframe maybe a LITTLE bit early.

Shorter term, uncertainty rules now. My main confusion is whether to place the 20 week low on the June mid low or whether to place it on the most recent August 8th low at 4950. If I place it this late, it shows an extended 20 week cycle which I am not very happy with. Still it will be clear after some more time.

So the next 20 week cycle has started - only question is when did it start?

So this recent low could be the 20 week cycle low OR the 5 week cycle low. Confused yet? :)

Even though this might seem confusing, the picture is clear in the medium term to longer term..Not a time to be bullish or bottom pick - YET!

Trade Safe.

Best,
Lee

4800 is calling...

2011-08-17T20:49:00.001-07:00

...But expect a small bounce of couple of days(?)..Not very sure but we are close to support so its possible for market to try one more time to bounce from here.

Still 5200-5230 is rock solid..Short on rallies is still the mantra.

I covered 1/3 of shorts and hedged the rest. Will wait and watch.

I will update this post in some time with some charts and more thoughts.

Best,
Lee

Intraday - 8/17

2011-08-16T21:58:00.000-07:00

Ok I had thought of covering 2/3 of my shorts..but I am not getting enough signals for me to go ahead or my targets...So I am holding 60% shorts as of now..I will look to reshort if we continue to rally higher. I am not very sure about this since my initial feel was to cover shorts and reshort higher but looking at the moves today, I think we have more downside coming and risk-reward is in shorts favour. If you want to reduce risk, please go ahead and reduce shorts and reshort higher...But I would not recommend going long considering the shape of the cycles right now. If in doubt, stay out!

Best,
Lee

Update - 8/16

2011-08-16T15:43:00.001-07:00

So far downward pressure has been exerting itself as I thought it would and it should as we go into the 80 week low expected in Nov mid to end timeframe. Expect small bounces in between but the longer term trend will remain down until Nov mid/end.

Today/tomorrow, if we hold above 5000, we might stage a small bounce from there. If however we lose the 4950-5000 range, then like I said before, we will get to 4800/4750 in a jiffy.

I am still short from 5160(mentioned few days back)..added on the bounce yesterday..Today tomorrow I will watch to see if we can hold support..I might close most of the shorts if so.

There was a comment from Nagendra on how low we might go into Nov low and how high/timeframe after that - I want to be clear on this - Hurst defines the timeframes clearly. Targets we get hints on how far it might go..In this case, I have a target of 4500 on Nifty by November mid. I think even 4250-4300 is possible. Can we see below that? Its possible but for me the absolute worst target is 3800/3600 range. Not lower than that.

After the low, then what? Too early to say. But I would suggest you to read my earlier 2-3 posts below..There are lots of important information in there..Some stuff will give you clues on what to expect. Crests will be always translated - Since the next 80 week cycle will be bullish, you can expect a right translation. Read my posts from before to understand more on what I am saying here.

I will post the cycles chart in a few days. Not much change in what I posted before.
We are likely topping the first 5 week cycle in the last 20 week cycle of this bearish 80 week cycle. Its bearish all the way apart from small bounces. Sell the rallies and cover/take profits on the panic dips.

Take a look at CNX IT and S&P CNX 500 normal charts for how bearish it looks..IT index shows a breakout of an Head and Shoulders and even target achieved! Anyone trade this? :)

CNX 500 on the other hand shows a clear breakdown as well over past 2 weeks..Target is more than 20% lower! Check it out...

Best,
Lee

Some more thoughts - 8/15

2011-08-15T08:55:00.000-07:00

I see us in a 4th wave now..so backing and filling confusing everyone is the name of the game. 5230-5250 is resistance..If it manages to get above that, 5350 is the next one. I dont think it will get there but closing above that will be very difficult. So a 5th wave is pending to new lows - Break 5050-4950 range and we will get to 4800-4700 range very quickly..Likely lower.

Till the 80 week low is set in the November timeframe, downward pressure will be there - I would not expect any major rally before that. So short the rallies with stops is the way to go. Also make sure to keep position size very less - we can never know when rip roaring short covering rallies will occur within bear markets.

See attached chart. Looks like a descending triangle to me. So 5230 area is strong resistance. Short with stops around that level in rallies. As always do your own due diligence.

The important retracement levels of the whole rally from March 2009 are 4768, 4285 and 3801...Important numbers which may be possible targets for the upcoming 80 week lows. We shall see as we get closer.

Best,
Lee

Nifty Hurst Cycles - 8/15

2011-08-14T09:36:00.000-07:00

Starting an update for coming week.

First of all - Happy Independence day to All!

Had a good question in comments from last week from Chandra..A very good and valid question indeed. I will try to explain to the best of my knowledge -

Question -

Lee,

Thank you for sharing this method in detail. Very interesting indeed. But one question, from your picture, May 2010 seemed like the period where multiple timeframes were converging. Why wasn't that an important low and why should the another 18 month cycle from 2010 may leading into 2011 oct/nov should be given higher importance?

Yes May 2010 period was the last 80 week/18 month low but it was not as pronounced as expected. Why?

While we can never be sure about anything, I think there are 2 reasons for this.

1. Like I explained in earlier posts, always there are multiple cycles running in the market, the combination of which makes the complete composite movement in the market price movement. What we are trying to do with our Hurst analysis or phasing is trying to determine which cycles are present and trying to determine what might be the important possible lows in the market. At certain periods of time, a larger cycle might be pointing down while a smaller one may be pointing up..Hence the larger cycle will dominate the smaller cycle and push the market down. Now take this to the next level; Imagine many cycles acting together in concert - this might not give the expected results and instead we will get a sidewise movement. I believe this is what happened in May 2010.

Take a look at this monthly chart. Now we have the 40 and 80 week and the next highest cycle, the 4.5 year(or 54 month) cycle shown here. 3 80 week cycles make up the 54 month cycle. (there is an important point here - lets see how many spot it)..So in May 2010, we were in the 2nd 80 week cycle of the 54 month cycle. And now in the last 80 week cycle of the 54 month cycle. So now you might be able to get the importance of this particular low - its not only the 80 week low but also a 4.5 year low and also very possibly the 9 year low as well(not shown here)! So the importance cannot be understated here. Watch the falling and rising of the arcs shown here and you can understand..The 54 month and the 18 month and possibly the 9 year are exerting downward pressure here - hence the importance. While in May 2010, not so much.

2. Next, fundamental pressures. Now imagine the intense monetary easing that was happening since the 2008 crash..All this effect was there even in mid of 2010. Hence we got a muted low..Now on the other hand, we dont have that much monetary effect or liquidity..Hence this low might take the natural course. Hurst says that fundamental factors will affect cycles - and cause them to deviate slightly from the norm.
I will give more importance to reason number 1 above..But thought of mentioning this also.

Now you might ask why is this a 4.5/9 year low and why not the Oct 2008 bottom. There are several reasons and methods used to arrive at this which is too much for me to go into at this point but as we go along, you may understand more. Suffice to say, when we phase back, this timing fits best. And also when you look at other markets specifically US as well, this model fits the best overall - this is known as commonality in Hurst language. More on that later.

Either way we are getting a bottom and our job is to figure out when it will happen and after that also, when it might top.

A shorter term look again -

Pretty much same as before. As I said before I believe that the 20 week low came on 6/20 and then the low we had few days back around 4950 was the 5 week low. And now we are having a weak bounce out of that low. So as I have been saying before we are within the last 20 week low in this 80 week cycle. So its a bearish 20 week cycle within likely a bearish 80 week cycle. And the fact that we are severely left translated (read earlier post) confirms this fact.

Still looking for a major low sometime in November. I would harbor a guess of around November 2nd-3rd week for a major low. But as I said we will fine tune as we get closer.

Comments, questions etc welcome.

Best,
Lee

Hurst Cycles - 8/7/2011 - Backup from VFM

2011-08-13T11:06:00.000-07:00

I was thinking for a long time about closing down this blog and restricting my posts to VFM only going forward due to various issues. But after thinking for a while and after seeing a good response to what I posting on VFM, I am bringing that here also. Basically taking a backup because VFM has got a notorious history of losing older posts. I think this is valuable stuff so I want to keep it here as well.

Will be posting actively from now on..both here and on VFM.

I think this is very valuable stuff..Please go through if you missed on VFM. And you can also see how I traded using cycles.

Best,
Lee

FROM VFM - Link : http://www.vfmdirect.com/forums/show.cgi?topicid=1312717195#1313194596
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Hurst Cycles - 8/7/2011

Posted by: princely.k.mathew on 07-AUG-2011 (11:39:55)

Hello All,
Several months back, I cam back to this forum and I was trying to post more actively, revive my blog again etc..but over time I have found that I have not been able to concentrate on my blog frequently enough..so I stopped posting there..Over here also, I havent been able to do much constructive..

But anyhow, I have made a decision not to update my blog going forward..But I will try to give a weekly or bi-weekly update here on a normal case and in case of some important low or high, I will try to post earlier on an adhoc basis..Need to see how it will work out.

Now, as I mentioned in another thread, I have been dabbling in Hurst cycles methodology for past several months..And I like what I see so far. This is an abstract kind of methodology and I find very very few people out there who can practice this successfully.

A writeup on who JM Hurst was and what he did : "In the late 1960's a small group of private investors in California rented time on a mainframe computer---the only kind that existed at that time---and asked an aerospace engineer, J.M. Hurst, to help them in their stock market research. The results of over 30,000 hours of computerized data analysis were distilled and revealed in Hurst's 1970 book, The Profit Magic of Stock Transaction Timing , which has become a classic work on cycle analysis.
In the early 1970's Hurst authored a full-length course on cyclical analysis and on how to apply it to actual trading. It was published by Cyclitech Services, and Hurst taught the principles of this course in a series of seminars for a year or two. The material in this course is considered by many to be the clearest and most thorough material ever made available for those interested in learning about cycles and how to trade profitably with them. There were only 250 copies of the course ever sold. It has been out of print for the past 25 years.
In the mid 1970'2, Hurst, an intensely private individual, disappeared and has not been heard from again. We have had many customers over the years who were tremendously interested in Hurst and his work and were extremely interested in contacting him. They wanted anything he had written or done beyond his The Profit Magic of Stock Transaction Timing , but until now, there has been nothing available. I had only heard about this course in rumor for years. Only recently did I actually locate a copy of it"

I finally managed to get a copy of the book..very damn expensive..and have been studying it for past few months..I have to say its been enlightening to say the least..

I have dabbled in elliot and classical TA but I have not anything like this capable of pinpointing cycles to this level..I mean major lows and tops only this one can do..And together in combination with other forms of TA, it forms a very powerful tool.

A little bit about it..Hurst said that cycles move in a nominal model with deviations..there is a 5 day cycle, 10 day, 20 day, 40, 10week, 20week, 40 week, 80 week and so on. There will be deviations and thats what we try to figure out using Hurst methods..There is so much of work involved in the background that it will be futile for me to try to explain here..I will however try to explain bit by bit in future posts...But for now it will suffice to say, that the Hurst Theory trys to identify major price lows and highs in time...Each of this low and high will have a certain degree based on the timeframe..80 week low, 40 week low etc.

Most people will remember from my posts in beginning of year when Nifty was around 6000 when I said we are going to get an important low toward end of this year..Oct end/Nov mid timeframe..We will fine tune when we get closer. This was based on Hurst methods and specifically the 80 week cycle. March 2009 was an 80 week low..so you can imagine the potential for a rally from end of year..we will see..

This is what I wrote last week -

For now, if you see the chart attached, the 40 week low was in Feb mid, we had a good bounce from there..then the 20 week low was in June mid..Another good rally from there..and now we are moving into the next 20, 40 and 80 week nest of lows toward end of Oct/Nov mid timeframe. Right now, a 10 week low is due in 3 week or so of August..So I also expect market to remain week till then and even after that, the bounce we get will be weak..Infact I see potential for 5200/5150 to be broken before that..I mean before we get a good bounce..Then again another big fall from Sept mid or so into Oct end/Nov mid..Before all this is over..
I hope I made some sense..Hurst is tough stuff..But I have been dabbling in this for some time now and I have to say, I am very happy using it..Its complex..so not for faint of heart..

Now in future posts, I will try to bring some more clarity to what I am trying to say...put up more info on longer and shorter cycles and so on..And what I expect going ahead..

I hope some people find this useful and I would appreciate comments and thoughts as always.

Best,
Lee

Posted by: princely.k.mathew on 07-AUG-2011 (12:00:54) [IP address: 197:253:94:----]

Ok now a look at the longer term cycles..see chart attached..the stacks of diamonds show major lows in the market..this is a weekly chart...so shows 80, 40, 20 week lows..And higher ones also like 4.5 year and 9 year lows..I dont pay too much attention to these but for me the 80 week cycle is very important..

As I mentioned earlier, the rows of diamonds or the semicircles indicate which cycle it is. The diamonds indicate the lows and on the extreme right you can see which low it represents..The semicircles help to visualize a bit more easier..Showing the rising and falling of each cycle...from the 9 yr down to the 10 week/80 day cycle.
You can see from my comments the important lows marked and the projection in time for the next important low. Complex spectral analysis is behind all this analysis..I will touch upon this more detail later.

Now shorter term, this is always more difficult to fine tune..but like I mentioned in my last post..We are close to another important low..I expect by 2nd week to 3rd week of August...This is the 10 week low from where we should get another pop up after which the decline should continue into another very very important low..the 80 week low around end of Oct or mid of Nov. This is what I have been saying since beginning of year and still reiterate the same..I will be looking to recommit long term fund around that time which I had exited earlier this year.

I hope I have been able to make some sense..Watch out for future posts. I will be focussing bit more on shorter term cycles in next post..probably tomorrow.

Comments are what will encourage me and make me go ahead..so I would always appreciate the same.

Best,
Lee

Posted by: princely.k.mathew on 08-AUG-2011 (08:43:29) [IP address: 197:253:94:----]

Hi Guys,
Thanks for your comments and interest...much appreciated!

Nikhil, from the other thread -
Yes complex..but maybe its for me alone since I just started couple of months back..Already I can see some differences in my approach and its a good thing so far. Account balance speaks!
And the good thing is over time, this might come also simple and natural to me..I hope so..Atleast I know a few Hurst Technicians doing a an awesome job out there consistently..It amazes me how they do that..

The difference b/w elliot and this is great..Elliot is too subjective..This is also subjective but there are some good guidelines to help us be on right side of trade..

I will try to post regularly on Hurst here..I hope it benefits folks.

I use this with some common sense, other market TA and its giving benefits..

Gera, you are right..Its very very useful for investor types..For traders, as you become experienced, you will be able to trade smaller cycles..And this is what a trader needs..However smaller cycles become tougher always..I find the 80, 40 and 20 week cycle best for trading or investing..Sometimes the 10 week and 5 week also work out..But need to be very careful when using these..

Lets try to figure this out together with live cases in real-time.

Now coming to the book, yes this is the first book that JM Hurst wrote..BUT I would caution against reading this because this was his initial work and later after long long years of research, he did a complete course for Hurst students..This is what I have bought and am studying now..This is what I said is expensive..comes to around 500$..

Link - http://www.traderspress.com/detail.php?PKey=99

Some history around JMH can be read there..

Hurst experts advised me not to read the first book but get the course and study that..So I will say the same also..But you cannot get the course online for 'free' anywhere..have to buy..it includes 10 audio cds and 2 extensive manuals..Once I study this fully, if anyone is really really interested, I can pass it on..but this takes time..Dont go for it unless you really are ready to spend some real effort.

One thing I'll say..this is one of the best market methods out there I have seen..But its difficult so most people give up on it..Here in US also there are very very few who use it successfully. I dont know of anyone in India who does..

I had thought of putting up a shorter term market cycles post today before market opens but its almost open..so later..let me focus on my open positions..I want to close all shorts today..I know my projected lows can still be a few days into future but there are few uncertainties here and I want to take my profits.

Later.

Best,
Lee

Posted by: princely.k.mathew on 09-AUG-2011 (09:32:43) [IP address: 197:253:94:----]
Well it looks like I was early in covering my shorts..hehe..but in a ultra fast market as this, I think I should be happy with the profits even though missed some..

And today's initial morning strength is surprising..I think we are seeing the initial signs of a cycle low forming..I am still confused about the degree..I thought it might be a 10 week one but I feel that is unlikely now..So that leaves the possibility that its a 5 week low..We will need more data to confirm what it is..Meaning few more trading days...Whatever it is,looks like it might give a decent bounce.

Trading this wont be easy..But keeping your size small and stops very close, you should do fine..

So if the low is coming in today or tomorrow, we should see a rally for the next 2 weeks or so..August last week/Sept first week next top?

Let me stress again - We are seeing unprecendented conditions in the market now;;; Take my comments with some salt;;; Do your on research before doing anything.

Bala, Nikhil, will definitely try to do more work on this here..Feel free to ask questions in the meantime..

Btw GANN is too much for me..I have only seen one person use GANN to some success and that he used to combine with HURST as well..SO..

I will try to come back with a chart later..maybe tomorrow when things clear up a bit more.

Best,
Lee

Posted by: princely.k.mathew on 10-AUG-2011 (21:18:23) [IP address: 10:219:161:----]
Ok so far, so good..we did get the low..what next? Well, most likely we are right now in a wave 4 from the top with wave 5 still pending..so what we are seeing right now and over the next few days/weeks will be multiswing action and very fast markets..better to stay out if you arent nimble enough..I went long the day we had the huge gapdown, covered yesterday and even started few shorts..After a retrace, we should have one more pop high lasting few more days..maybe more to complete this wave 4 after which wave 5 down should start..This will likely be a longer affair going down into the 20, 40 and 80 week lows I had mentioned before coming in toward Oct end to Nov mid timeframe..It can extend into December also so we will fine tune as we go along...

Best,
Lee

Posted by: princely.k.mathew on 12-AUG-2011 (09:58:18) [IP address: 197:253:94:----]

I was holding some longs awaiting one more burst higher but I am not happy with what I am seeing so I am dumping the longs and going small short..5230-5250 range has to be cleared for next upmove else downward pressure will be on..

Too tired to respond to other posts or to post chart..so seeya all on the weekend!

Best,
Lee

Posted by: princely.k.mathew on 13-AUG-2011 (00:16:36) [IP address: 10:219:161:----]

So short was the correct move after all.I should have added prices in above post to make sense..but never mind..Short from around 5160 for now..wait and watch what next week brings. My gut still thinks that there is one more small upmove left but the market seems to think otherwise so I will go with the market :)

Bala, not surprised with the correlation. The 80week or 1.5 year cycle is an important one..I will try to describe more below.

Ranga sir, thanks..I dont like to read much into so called experts views..And I mean those who come on TV and those who send out emails..Not unless I know who those folks are.

Anyhow..

So I have some time right now..Thought I will explain a bit more around cycles and how it works. Might be a little deep, so anyone not interested to understand more around how this works, please excuse.

First of all..around cycles - I have taken some excerpts from online to write this up..So..

Cycles are extremely important because they help us frame the market within the dimension of time.

The first thing we should do is ask what cycles are - cycles are the observable tendency of prices from go from top to bottom to top to bottom at regular intervals. The price index will move upward from one trough until it reaches a crest (top), then the price index arcs downward into the next trough, or cycle low, as we sometimes refer to it. We can see the evenly spaced bottoms on the price chart that give evidence of the existence of cycles, but what causes this to happen? What is the cyclical force behind the price movement?

A stock market chart is a picture of human emotions expressed in the form of price movement. Fundamental events don't directly move stock prices, it is the emotional reaction to those events that moves prices. In a much broader context there are recurring events in nature and in the business cycle that affect human emotions. In other words, natural and fundamental events do affect the market, but only through the filter of human emotions. This is why it is so difficult to design economic or market forecasting models based on fundamentals -- humans can react quite differently to the same fundamental circumstances at different times.

There are two 10-Week Cycles within one 20-Week Cycle, two 20-Week Cycles within one 9-Month(40week) Cycle, and 2 40 week cycles within and 80 week cycle(18 month cycle) and so on. Where cycles of different lengths make their lows at the same time, they are said to be "nesting". This is a very important concept..Because higher cycles tend to make the lows at the same time together, its called nesting..This is why LOWS are very important and easier to identify..But tops tend to be spread out - called topping formation. This is also the reason why if you are bearish on the market, shorting is very difficult and you need to be very nimble. See the attached diagram too see what I explained above about cycles..Also my earlier charts should help illustrate what I am explaining here.

The most compelling thing about this picture is the impression of power associated with major nesting points -- where all cycles are making lows at the same time at the 10-Week, 20-Week, 9-Month, 18-Month, and 4.5 Year Cycle lows. Visually we can sense that price declines into these major lows will be quite severe, while rallies off those lows will be explosive and powerful. Conversely, there other areas in the cycle structure where the cycle forces are mixed, with some cycles moving up while others are moving down, and it is hard to get a sense of exactly which direction a composite of these cycles would be pushing the market.

You will often hear reference to a cycle's "translation". This refers to the fact that cycles rarely crest in the exact center between troughs. More often they will crest to the right of center, called a "right translation" cycle, or to the left of center, called a "left translation" cycle.

In a bull market the market spends more time going up than down, so we will normally expect major cycles to crest toward the end of the cycle, with the crest being followed by the down phase of the cycle -- a right translation. (this is what we saw after March of 2009)

In a bear market we would expect to see left translation cycles with cycle patterns exactly the opposite of those in a bull market. (this is what we are seeing now)

Check the earlier uploaded charts for a more visual feel of what I have explained so far. Read read and read this again...These are fundamental concepts in cyclic analysis.

I will explain more later..this is just basics! :)

I will post charts with latest views either later today or early tomorrow.

Questions and comments are welcome.

Best,
Lee

Quick Update

2011-05-04T12:11:00.000-07:00

Update - March 31st

2011-03-30T21:56:00.000-07:00

Been meaning to post some charts for some time..Here are a couple with comments which show what I am seeing and my thought process here.

Careful out there!

Lee

30th March

2011-03-30T00:25:00.001-07:00

I wanted to post some charts here..but dont have time to..

So..Bottom line is..yes very bullish..but I think trend is turning or might soon.

Book profits on longs and wait to see what will happen.

The TURN is coming...

OR else we go all DAMN bullish very soon.

Will post charts tomorrow.

Best.

Confusion

2011-03-28T21:14:00.003-07:00

Will be very frank here..

Confusion reigns supreme.

Its anyones guess here what will happen.

5800 is the bull bear line as I said before.

I got out of longs today with decent gains.

Shorts..I am going to start building them today with stop of 5820.

Be cautious. If you are confused or not confident, pls dont do anything.

I will post some charts tomorrow which might clear some stuff...some more
views..more thoughts etc etc

Best

Week Ahead - 28/03/2011

2011-03-27T19:20:00.001-07:00

In last update I mentioned above 5540 we can see a good rally and we did that above and beyond what I thought might happen.

There is no doubt - things are looking quite bullish now. I have tried to give some views in the charts below on possibilities. This week after an initial pop, we should see some pullback - Use that to exit shorts and try some longs. I got out of all shorts on Monday and took a bucketload of calls to cover the loss - I will close those today and wait to get some good long entries.

Longer term chart looks still bearish however I see potential of a change coming up.
Chart gives more idea. I will be moving focus to stocks going forward and wait to see what Nifty does.

Another look at the chart from far

Best of luck and trade safe. Do your own due diligence and do not follow anything written in this blog blindly.

Cheers.

Market - 25/03/2011

2011-03-24T18:35:00.000-07:00

Quick update. Market at the cusp of the triangle today. Can go on upward to test 5600 today assuming we can sustain above 5540 area. 5600 is the higher end of the trading range - will it break out? A little bit of selloff is due for a reset soon because market participants are bullish now. However OI data is quite bullish and continues to suggest higher prices in the very short term.

More detailed analysis and charts over the weekend.

Best.

Market - 23/03/2011

2011-03-23T18:36:00.000-07:00

Intra Thoughts

2011-03-22T22:13:00.000-07:00

Interesting is all I can say. I am still bearish over medium term but short term is bullish no doubt. Lets see if we can test 5600-5650 levels. I am shorting at 50 point intervals for now. Scaling in. I dont think we will be able to sustain above 5610..but let us see if it will work out over time.

My current positions -

Short 1 lot at 5450
Short 1 more lot at 5500
Will short 1 more at 5550 and 5600 and then wait and watch.

Even though I say 'lots' above its a ratio of what I am doing. Meaning 1 lot can mean 10 also depending on the size if you know what I mean.

Let us see. I am a positional trader not an intraday one. Some folks seem to think I am over analysing and I can see what they are seeing from their perspective. Its all about timeframe. I mean an intraday trader cannot come here an make sense of what I am doing. That wont happen. My timeframe is 1 to 3 weeks. Remember that.

If it does not work out for you then please quit this blog. I will take a little bit of drawdown to make bigger gains. If you cannot stomach it then this is not for you.

Best.

Some Macro thoughts, Nifty shorter term and a look at a couple of stocks

2011-03-21T10:23:00.000-07:00

Macro thoughts...Ofcourse this is only speculation. I think we are going to put in a very important low longer term toward end of this year - this will be a great opportunity for us in India to some some real good stock picking for longer term portfolios. I will be awaiting the next buy on my weekly chart. Shorting like I said before is always a game for the professional in my view. I feel retail guys should always be on the lookout for cash opportunities and focus on picking good stocks when there is doom and gloom in the markets.

I will show a great example in my next post on this and what I mean..What my plan is etc etc.

I think we are going to do a lot of volatile moves over next several months until we get a sustainable bottom.

Remember in 2009/2008, US market bottomed in March..We had our ultimate bottom in Oct and a secondary in March. What I mean to say is we are leading the US market by around 4-5 months. This time also we hit a top before them. Too early to say for sure if it was the ultimate top or not though I think it is for now.

Emerging markets are an excellent barometer for what the hot money is doing. And it does look like the 2009 March situation is playing in reverse. Just my take on this.

My very limited cycles knowledge also points toward an important low later this year. We will have to see how it works out over time.

At this moment I dont see any chance of 3500 on Nifty being breached. I think we might get to around 4200-3800 and stabilize over time.

Reposting my comment from earlier post here so ppl dont miss it -
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Stop losses are a real ART Yoda. I have kind of given up on them and instead am focusing on my signals.

Sujatha - tough question. For me this is where a bit of discretion comes in - mean to say more of feel kind of trading. Also simple supports and resistances.

I know the larger picture. Then I take a top down approach from there. For example 5650 broke, I was already building shorts from 5700 odd (gut feel) and when 5500 hit, I covered up, reshorted higher etc etc..I dont know - these kind of things just come my experience over time..And managing trades means I keep risk lower nowadays.

Leverage - I almost keep it at 100%..Mean to say if I have 5 lakhs - I will just short 2 lots = correct value more or less. To add 1 more lot, I need 2.5 more lakhs.

Trading hours big challenge - But I try to manage for a few hours. If I feel some important move will come, I will sit out the full trading day.

Thanks Bee..Read your mail also.

Thanks Prashant..

Ashish, you have asked a very difficult question. I will be completely honest here. Every trader will go bust several times in the stock market. No way out of it. I too have gone bust atleast 2 times. But I always made sure I dont lose more money than I can actually afford to lose.

I remember within first 2 yrs, I went bust once.

I studied lots and came back. Things went well for 3 years or so. Very extremely well for the next 1 year - got very overconfident and starting playing with huge amounts..started playing without SLs etc etc. Ofcourse I dont need to tell you what happened.

I have come to find that money management is the most important thing in trading. Understanding your risk and playing accordingly.

I would say right now, I play with less or NO leverage. Sure profits are smaller but need to keep greed under control. I am net on net okay now. Net profitable I mean. So yes it is possible and you can do it also. First thing needed is belief in yourself.

Lets continue this discussion.

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Now heres a look at a random stock just to show my methodology and how I trade with a top down kind of approach. This is for the long side only. Short side I just focus on Nifty. Lot of comments in chart - open in new window to read.

A look at nifty shorter term. Comments in the chart.

Range contraction is what it is. Today would be interesting for a variety of reasons. One thing I have noticed is the correlation b/w the Indian and US markets has diminished greatly over past few months. So todays strong US move - would be interesting to see how we are going to react.

The FIIs have been using this as a excuse to liquidate nowadays. I think that is when they get the volume to do what they want to do. Means good gap up on world markets; then sell off. It will be interesting to see if the same trend continues today.

5600 remains decisive for the medium term timeframe. IF and thats a BIG IF we manage to get over and sustain 5600 over next few days, then we can go above to test 5800. I would put this as a low probability for now and instead watch how we react at 5500-5550 range. I will be looking to put back on the shorts at this area and then see if we can get to 5600 or if we get back down to test 5300 area again - my money will be on this. Let us see.

Bottom line is this - Trend is down. Rallies should be used to short or exit from longs. How exactly you do this depends on your trade management and personality.

We will focus on EW counts next post.

Later.

More later.

Back Again

2011-03-20T07:06:00.001-07:00

Okay guys..after a break of almost 2 years, I am back. I hope I will be able to consistently post here for a while.

What I have been doing for the past couple of years..a bit of soul searching..trying to improve my trading methods. More importantly trying to improve my money management techniques - this is by far the most important thing any retail investor/trader should do - But it is the one thats ignored by everyone..More on that later.

I have found that the best way to do things is to focus on the bigger picture..Keep leverage down to a bare minimum. Have a clear idea on the RR ratio..Most folks dont try to determine the risk but instead focus on the reward alone and in the end get bombed.

Another thing guys - Option trading is NOT investing. I saw someone say on a forum some time back that they had 'invested' in 5700 calls. What the hell!...Thats not investing..its speculation lol.

Anyhow coming to the chart. I have posted something similar some time back. This is the weekly nifty chart with KPL's 20 period swing on it. So its a 20week swing. I have found this is the best way to catch the longer term trend and swings with a fantastic accuracy rate. You can see the buy and sell arrows for yourself. This tool is great for a longer term investor and trader.

As I mentioned before, when 5650 broke, I think our market has entered into a longer term bear. This will be negated only on trading above 6181. Over time the swing will come down and we have to keep monitoring this to determine buy point.

I think we are looking at a possible bad year in 2011 and if we get a good low toward end of this year, then I will start looking for possible longs toward then. It might turn out to be the buys of a decade if it plays out the way I am thinking it will...Speculation at this point but lets see. I will say more about this later.

More comments on the chart. Count the points from arrow to arrow. Only price as I have found that that is the only thing can be trusted. Most folks will focus on thousand different indicators which only muddies up the picture. Focus on price alone.

I have been trading on the long side last year until the swing turned down as shown in the chart.

Bear markets are tough to trade for the retail investor. Its a game best left to professionals. Still I am trying to do something on the short side - atleast trying to capture some of the down swing. Lets watch and see how this plays out. Patience will be of great importance here.

More later.

Amazing!

2009-04-15T07:38:00.000-07:00

Well the bulls continue to amaze. Every little pullback is being bought..and yesterday it looked like some big money really came in..I only wonder why they are this late to the game but who am I to judge. Anyhow, on the log scale on the daily, Nifty looks to have broken out and next logical target is 3800 area. But keep in mind, market defies logic...Lets see how far this goes. I tried some shorts yesterday..monster moves stopped me out ofcourse..so nothing doing now...wait and watch...

Been thinking again about this blog for a while..And due to various reasons, personal and otherwise, I am taking a rather longish break from blogging..Not sure how long.
I have lots of personal changes coming up...will be moving to India in while and so on so I wouldnt have much time to continue this blog at the same level that I am doing now...Besides I am finding the whole thing stressful at the moment.

So I am going to step back a bit from blogging..And see how I can manage it..If I feel comfortable, I will be back with weekly or bi-weekly updates...For now, bye, take it easy in trading and always keep a watch out for the unexpected.

Best.

Da Wedge

2009-04-14T21:40:00.000-07:00

Looks like we broke down from the wedge pattern and now backtesting it..Shorting with a tight stop has good risk-reward here.

Best.

The Week Ahead

2009-04-12T19:24:00.001-07:00

EDIT: Intraday at 12:15PM - Interesting action on intraday charts...Here 15min..Looks like a break. I shorted the break..small size only. I missed shorting the open even though my gut told me to..Nevertheless shorted at the break shown in the chart.

Lets see.

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Another shortened week ahead..I have found that these kind of weeks throw me off a bit..I mean timing wise it can make things a bit 'OFF' but well we got to live with it I guess.

Market this week - I am again expecting we see a pullback. It could be very fast and could also be a sidewise shallow correction. Buying the pullback could be profitable..I think for this time. But dont be in a hurry to buy - In my very humble opinion. Lets look at some levels on the charts.

NIFTY HOURLY

NIFTY DAILY

NIFTY WEEKLY

TWO POSSIBLE COUNTS IN RED AND BLUE

As you know I am totally flat right now..I am not sure what I will do next. In 2 minds..I.E to let the market settle down a bit before going long again..OR try a quick and small short for 2 days? Tough call. We will see as it goes. Will update if I see something interesting or do take a position today.

Best.

OUT

2009-04-08T21:42:00.000-07:00

Out of longs...from 3166 to 3374 odd..

Not doing anything now..

200+ pts..I will take that.

I will post some charts and thoughts later if I can.

Best.