The Search for the Elusive Bottom

Well folks we are in search for a bottom...This week initially should be bearish and a recovery later which should also coincide with a longer term bottom. This is what I am thinking now however we are in unprecendented times so be cautious. I am adding stocks in cash in all dips...Lets rock...! 2600 is the final bottom I see...Before that we have 2900 area and then 2750 area as possible supports. I dont see us going below 2600. 

I will look at covering my futures short positions today and take some crash puts to hedge my cash portfolio. Also adding to cash postions in a few days...

Below are some charts with comments. Dont miss them.

Best. 

Updates...

A quick update here...

As I said before, I am bit confused on what next but some ideas here on what can happen...

Today should be up huge...Monday also might be up...good probability for it....we can get to somewhere like 3500...even 3600...more than that for this round might not be possible...after that again, i expect a downmove to an important low sometime mid to end next week....this will be the final low....and should be bought very aggressively...

Now the problem here is I do not know how low that low will be?....Can be a lower low....Can be something very close to 3000 also...

BUT there is also a possibility it goes lower to somewhere in the 2700-2900 range...
So best keep above in mind...

What can be done is keep buying in cash but also hedge positions with equal number of PUTs...Atleast our risk is managed for this month..The idea being that we build a long term portfolio for the next big rally...

What we are seeing now in the markets and economy is truly unprecendented....Something I have never seen...Bottom picking is never easy and can never never be 100% accurate...But the aim is to get as close as possible...And maximize reward with respect to risk...

All the best folks.

What Next?

It turned out to be a very good idea to get out of leveraged positions on the big upmove we had before...As I had adviced here...What next?

I am confused but I think we shall try to go a bit more higher and then come back down again to retest the lows and slightly lower...So what to do? Sitting out a bit until some sanity returns is a good idea...In cash, its a good idea to keep buying the dips...I am still longer term quite bullish...Only thing I am not very sure about is how the lows retest will happen...

From 3300 up to 3600/3700 again...And then back down to 3150/2900 range? Something like this I am thinking about now...And that low should be the major low...5th wave low that is.

Its all speculation...So better to avoid leveraged positions...In cash as I said...Keep buying the dips...I think anything around 3200-2900 is an excellent buy.

Best.

Yeaaahaa!! :)

See the US markets today...This is one for the record books. The fractal and yours truly nailed the bottom here in real time and fully boarded the bull bus...Hope some of the readers of this blog are aboard with me :)

Ready for a 10% up day or close?  :-)

I will probably exit a good chunk of my leveraged positions today..Cash I am planning to hold for some time...

I believe you aint seen nuthin yet! Still lot of gloom and doom and bears around...This ofcourse will continue to provide fuel for the ongoing rally.

A couple of charts for your review below. Comments on the charts. 

The other important chart I am looking at is the weekly nifty with stochastics...Still not turned up but close...

As I said before...You aint seen nuthin yet!...Enjoy the charts.

Best.

Market Thoughts for the Week

Well I posted to buy on Friday...I dont know how many bought in that panic with me...I see a very good possibility of an intense rally. I do not know if this is THE bottom - In answer to some of the comments and emails I got - BUT odds are we get a very strong rally maybe to 4140 area....Above 4140 and the bears will die big time...But one step at a time...The roadmap should be 3600 first...Evaluate there...Then 3800...Again evaluate...Then 4000-4100...Again reevaluate...Above 4140, and then we have something big on our hands...But as I said, one step at a time...I think we have had a washout...Capitulation...Still I see people calling for 2600, 2000, 1800, ZERO...lol...Well maybe we will get 2960 on this round but it looks unlikely to me...If we do get it, I will still be buying in cash...These opportunities do not come often...I will compare this crash we have just had to what happened when the commies came to power with the  Manmohan Singh government...God I wish I had the guts to buy at that time....Instead I sold...Everything I had...Now with the experience I have..And all the bearishness I see around, I think this is the time to buy. Maybe its just 3-4 months of rally...But still its a rally...Buy the dips is my advice...If you are risk averse throw in some PUTs to hedge your risk.

On the charts, I see that weekly stochastics is way down...An up week will probably turn it up and if so we will be on a longer term buy...

On EWI scale, we may have completed a BIG wave A down with a monster B wave rally to follow into the mid of next year before we have another major decline...

But now is the time to buy...I expect we will have a retest of the lows - But its not a big probability...I am lessening my futures trades and accumulating in cash...I bought heavily on Friday and today we will have a big gap up and then an attempt to fill the gap...I will watch this and probably buy the dip today afternoon...

All the best. These opportunities come once in a lifetime. I dont profess to be a trading god or anything..Others are there here like that...But I can recognize good odds when I see it.

Some good stocks - Infosys, Bhel, NTPC, SBI, Mosar Baer, KSOIL, LnT. Other welcome to add to the list..I am still digging for gems amongst the carnage.

Charts will follow later.

Trade Safe.

Best.

Fractal Complete - Or close enough for goverment work! :)

Hello Friends and Faithful followers of this Blog,

Almost a month back I posted this message here -

http://theindianmarketblog.blogspot.com/2008/09/fractal-theory-building-case-for-next.html

and here - http://www.vfmdirect.com/forums/show.cgi?topicid=1221160847

Please review above messages/posts before you read this below.

The message said that based on fractals that we were going to have the next leg hard down. Nifty was at around 4300 at the time...Now at 3200...

Booked all shorts b/w 3500 and 3200...Some early...Some late...Overall a fantastic trade - The best I have ever done...Even I was amazed at how the whole thing played to the dot.

Now see the latest chart posted above. Nifty log. 
I have also added some comments on the chart.

To me it looks like the risk-reward has shifted to the long side and we should buy the dips going forward...We might get a retest of the lows in order to complete the wave structure but its not necessary. 

I bought heavily yesterday at around 3200...If you did not buy, dont worry, good chance we will retest the lows again...Else just buy the dips...The move up could be fast and furious..but should be profitable nevertheless...

One thing to note here - something I have always said...Dont use insane leverage...You will be wiped out...Trade safe..

Now wave structure I am not sure...If we have completed the BIG wave A down and the corrective multimonth B wave rally is going to start? OR if we have one more downleg in a month or so to complete the big A wave...

Maybe in a later post, if all are interested, I will post a couple of EW possibilities with charts. This fractal call turned out to be pure GOLD for me...And hope some others also benefitted...The whole time this was running, you just had to look at the charts I had posted earlier and note the pure symmetry of the both the waves...Its really a thing of great beauty :)

Trade Safe.

Best.

Buy!

Today may bring a 10% circuit down or maybe even more....I will be buying agressively today...Just a quick update...Not going to advice everyone to buy as more pain can come but odds are that decline completes today and we embark on a multimonth rally...As I have been saying in past posts...Buying without leverage...Or very small leverage will be safe..And add as we go up only...Today 3350, 3200 and 3150 is important...Below this 2960-3000 range. I dont expect below this...

Trade Safe..

Best.

Market Update

A quick one chart update from my side on where I think we are and where we are going...

First refer my fractal post made almost a month back -

http://theindianmarketblog.blogspot.com/2008/09/fractal-theory-building-case-for-next.html

And here my latest updates and thoughts on this chart...A follow up to above post...

Interesting times we are living in...

I will post a more detailed analysis tomorrow after watching todays action.

EDIT: Just to be clear here - I expect 4-5 days of upmove starting today maybe to the 4000 area and from there we should come back down to test the 3500-3600 area again...Possibly up to the 3300-3200 area BUT this will be a fantastic opportunity to buy some longer term positions...I will post follow ups tomorrow and also in a few days...

For now covered all shorts and flipped long...Very short term trade ONLY.

Best.

OH WOW!

US markets today...Man thats a crash...Biggest decline in a day that I have ever seen....Biggest since 1987....

Everyone ready for a 20% down day today? :-)

Its very likely unless some massive governtment intervention comes in. I think my longer term targets will get achieved very soon.

Dont miss the charts and TA below. When I did below analysis today early morning, I had no idea US markets would crash today...Man what a move! Almost like our own markets :)

PLS do not be in a hurry to bottom pick/knife catch. There will be lots of time. We are in panic mode now...Let the market find its bottom.

Best.

Charts and Updates

After a long time I am finally getting an opportunity to put up some charts and detailed analysis. Its some busy and crazy times for me what with the hurricane and internet being down...Well things are kinda back to normal now and I am back in business. 

I got a lot of emails from readers of this blog asking why no charts..Well reason is above as I did post several times over here...Thank you all for your wishes and concerns at this time...!

Now to the markets. 

If you remember my fractal post, I had clearly said we will get something like this coming...I did turn short term bullish in between which turned out to be a dud as it did not bounce as much as I expected and I would have been better off just holding shorts...Unfortunately market has been very volatile and whipsaw-y nowadays that its been tough to time short term trades...My thought is avoid trying to catch the knife either way...Wait for bounces to short seems to be the wiser thing to do...Unless you want to take a sizable drawdown.

Okay lets look at the hourly chart here. Some things I have pointed out on the chart. You can also compare with the earlier move we had similar to this(see fractal post) and it should give some ideas on how this can go now...

Next the daily. I have market the possible move happening here over the next couple of weeks. I expect a very very important bottom to be set here in October itself maybe...Maybe around 3200-2900 range. We should then embark on a major multimonth rally...But these are based on waves so we will revisit this in another post in a few days. Also note in this chart, note the macd and stochastics clearly showing the downtrending nature of this move. 

If I were to guess, I would say the market continues the decline, makes a low around 3600 and then moves upward to test the 3800 line again setting up a perfect short before we go down to much lower targets as shown in chart below.

Next the daily log chart...

Note how clearly we are within the doomsday channel as I had dubbed this before...We should move toward the bottom of the channel soon...

Finally the weekly. Nothing much to say except both macd and stoch on weekly also on sell...Watch for the stochastics turn back up on weekly to signify a longer term bottom. This is what I will be watching for.

I am really amazed at how well my fractal post worked from a couple of weeks back! Enjoy :)

Comments welcome.

Best.

Not looking good

Charts will follow in the post after this.

For a few days I was entertaining a bullish notion...I was wrong about short term..Looks like longer term bearishness has taken stronger hold and we are going to make a very important low. Where I do not know...But I think odds of breaking 3800 are very high this time. I know of very few situations where a support is being tested for a 3rd time and surviving...So it should break and we should test 3600 and lower. We will visit that when we get there. After making this low, we should embark on a strong multi-month rally...(the bigger B wave - will explain more with charts)

I got stopped out of all longs and am now looking for an area to short. But it situations like this, its dangerous to chase an entry...Maybe just sit out for now.

Best.

Low Volume Declines

The past 2 days moves lower...both here and in US..have been on low volumes which makes me very cautiously bullish...Now again only for a bounce upward where I plan to get short again...Now dont trade for few days if you are risk averse because nowadays markets are moving on news alone and things are quite volatile and dangerous. If you dont manage risk properly, a trader can have his head handed over to him. Be careful out there...Its a jungle!

Some UPSIDE and then MAJOR DOWNSIDE...My Outlook for Now...!

Lets see :)  

Best.

PS: Long time since I put up charts I know...But will do so before or on this weekend.

Update for the Week

Hello All, Well after the outrage over last weeks events and everything else, I settled  back and looked over things and reflected, analysed, and reached more saner areas in my thought process....Most of the time, a position can cloud your judgement and ofcourse this will impact your ability to make money...always..We need to be of clear mind to keep making money..consistently.

Trading is not about trading systems...its more about the mind..and good money/risk management techniques..Now dont get me wrong...TA and systems are important...though not as much as we think them to be or how much people make them out to be...

Okay..Now coming to the markets....We are gonna have some decline today for sure..I will look to cover them shorts I already have which I took from 4250 area as I had updated in previous posts and go flat...And from there I might try some very small nifty longs...Very small coz I am not confident on them and since recently bearish positions have worked better for me than bullish ones..but still might try some small longs for a bounceback....Dont get me wrong...I am still bearish but near term some bounces can come..Maybe to the 4400 or 4450 area.........

Charts and EWT structures..I am still reviewing this...Watch for them in following posts.

Comments welcome...Are you bullish or bearish on our markets? Please comment!

Best.

Sheer Stupidity

Surprised by my post title? I will explain. You all might have noticed the sheer volatility today in the markets. Intervention after intervention by the authorities and the governtment - Insane volatility in the markets. The DOW acted like our own markets...LOL..First time I have seen anything like it..

The latest from the authorities, they are gonna ban all short selling..Ofcourse this is not yet confirmed BUT its amazing...Any fool in the market knows that we NEED shorts for the market to run...Thats how efficiency is built in and that is how short covering rallies come up - It lends a bottom to the market!...Remove that and what do you have? You kill half of the market turnover and also open up a HUGE HUGE crash possibility. Why? Because the FLOOR in the market is removed!...No shorts mean NO floor..!..I hope I am making sense. I said in past couple of posts we are entering into unprecendented times...This is the demise of capitalism..Pure and Simple.

Okay now that I have vented....The markets, I am glad I went flat yesterday night..I see this as another good opportunity to build some shorts...I am looking to short today at 4250 levels with hedges in option calls so I can cash out if this volatility continues. I will continue to add shorts next few days as I think we will top out in 1-2 days. Now this is just my gut feel and also based on the wave structure as I see it...I still do not have my charting service back together so no charts...But you got the idea. Dont get carried away today by all the bullishness.

Best.

SQUEEZE

Well the short squeeze from hell came in giving bears a nightmare - me included. I got out of all shorts yesterday when it became apparent we are not going to break down..I gave back around 70 points of my profit in the process but well still a very very good profit in my positions.

Yesterday was a concerted effort by all central banks to pump up the markets. See how Hangseng and China which were in blood recovered toward the close. See the news below -

Sept. 18 (Bloomberg) -- The cost of protecting corporate bonds from default fell after the Federal Reserve, Europe's biggest central banks and the Bank of Japan said they are taking coordinated action to ease tensions in financial markets.

Credit-default swaps on the Markit iTraxx Financial index of 25 European banks and insurers fell 15 basis points to 135 and the subordinated index dropped 30 to 265, according to JPMorgan Chase & Co. prices at 8:15 a.m. in London. The Markit iTraxx Europe index of 125 companies with investment-grade ratings declined 10 basis points to 135.

Credit-default swaps, contracts conceived to protect bondholders against default, pay the buyer face value in exchange for the underlying securities or the cash equivalent should a company fail to adhere to its debt agreements. A rise indicates deterioration in the perception of credit quality; a decline signals the opposite.

AND NOW - WHAT NEXT
The bounce should continue for few more days. Maybe into beginning of next week. I will look to build shorts again at around 4100-4160 levels all the way up to 4220. Above this means we will try to grind up higher but I doubt it will....Let us see. Market is all about taking risks to make the big bucks. Yesterday if I was conservative, I would have made much more but I took a risk expecting more - When the market told me to get out, I did. Still did not go long because in this environment, we just do not know what will happen overnight. As I said before, we are in unprecendented times - No one knows what next. We can just take calculated guesses based on TA and trade that. The market tells us if wrong. I am looking forward to building the next short position.

Btw - Did anyone see GOLD yesterday?...I am sitting on good profits on my investment long position. Enjoy!

Best.

Selling Climax

To me it looks like we are finally entering into the selling climax of this leg down. This might be later today or early tomorrow. My heart goes out to those who tried to bottom pick and go long in this market but my warnings and messages were very clear.

Anyone who shorted with me at 4350 with me reading this? If so, leave a comment - I enjoy reading accounts of ppl who benefitted from my analysis and calls.

What next? Its very difficult to say - The events happening today are truly unprecedented - I am amazed at the way our markets are holding so far. I want to see a limit down day or two to feel more comfortable on the long side. Having said that, I also think that we are close to a selling climax. Will it happen today? I am not sure but there are good odds that it might. If so, I will look to close shorts in futures and buy some crash puts just in case we crash tomorrow. Overall I feel this is not a time to bottom pick. I amazed at the calls going around past 2 days advising ppl to bottom pick - Today they have their heads handed over to them. The credit market crisis or a bear market of this intensity is not something any one of us has seen. Why try to guess where the bottom is? To go long, the market will tell us when its time. And I will surely post here. A bounce is coming soon. I am not sure yet from which level but let us see.

Best.

One more Update

Well folks...Whoever shorted on my call and charts have made a fortune now as have I...Today might be a good day to take profits...atleast some profits...but be ready to short at higher levels again because we are still far from the bottom...Today lets see if 3950 holds..If not, we go down to 3800 area which should hold...Below this next strong support area is 3600-3550 area. But we will not go down in a straight line...

Now pls note above is for nimble players...If you dont want to trade in and out...Then just hold shorts with trailing stops...Based on your risk appetites...This is what I will be doing...Holding shorts until I see more reasons for a bottom...

Best.

PS: There was a query in earlier comments on how to learn EWT - Well its a tough question as there is no easy way. EWT is a very tough form of analysis because it all depends on a persons perspective...Again we need to use indicators to confirm wave analysis. EWT is best learnt thru sites like this and the rest is ONLY thru experience. Try other forms on analysis first and observe how waves unfold before using them solely...And ofcourse follow this site and Vivek Patils EWT analysis on ICICIDirect.

Some books on EWT can be found here - http://www.esnips.com/_t_/elliot+wave?q=elliot+wave

I honestly dont have an opinion on which one is good since I have never fully read an EWT book that is easy to understand.

Quick Update

Well I was not able to follow up on my latest post...Since of Hurricane IKE in Texas..Donno if anyone saw the news on this but things were quite bad over here...No Net..No Water...No Power..No nothing at home..hehe....out at a friends house to check things... Well I am still of same view...Msg posted few days back when nifty was around 4350....still of same view..I think first bottom will come at around 2 months or so from now....Not sure on time yet but with respect to levels, expecting 3600 first, 3200 second and finally 2960...not more than that at present because of some VERY VERY important support lines...But we can reevaluate when we get there....I am not going to post an updated chart here coz of the reasons I updated above...Its tough times...And I dont have much time...So thats it... All the best to all... Best.

Fractal Theory - Building the case for the next leg down

In my last post over here, I mentioned that I am exiting all long positions and sitting on the sidelines with small shorts until I see more evidence for some more rally OR 4522 being taken out on the upside. From then the market has clearly deteriorated. I hope some people reading over here would have been saved from all long positions even if you did not take any shorts. 

Yesterday I was looking at my EOD chart for hours and some things jumped out at me...I mean it was visible before too but after yesterdays study, I am really confident on what I see...Its clear that we have started the next leg down. I will present my ideas in the chart and writeup below this but before that, let me present something known as 'Fractals' and what it means. 

"A fractal is generally "a rough or fragmented geometric shape that can be split into parts, each of which is (at least approximately) a reduced-size copy of the whole,"[1] a property called self-similarity. The term was coined by Benoît Mandelbrot in 1975 and was derived from the Latin fractus meaning "broken" or "fractured."

More on fractals can be read here - http://en.wikipedia.org/wiki/Fractal

Elliot wave theory is built on the fractal wave theory - essentially what it means is that similar structure keep occuring in the market, in nature and well everywhere...Its a great mystery of nature as to why this happens. I believe other theories such as Kondrateiff also have their base in fractals. Fractals are recursive. Means the same structure repeats over and over again...They can be different on a whole but there will be so many similarities and when we can spot these, it builds up a high probability trade AND you also know when it gets invalidated. Fractals are why you have similar bull and bear wave structures in the market. Google more on fractals and you will be amazed at what you find...Fibo ratios also play a very important role in fractals and in effect EWT. 

Okay now coming to the chart. See below chart...I have added a good deal of comments on it. 

Now same fractal iterations as in above chart, can also be explained in EWT terms but you already know my count ABC-X-ABC where the final C might have just started. We have a very high probability of a big sell off coming. I knew it was coming. Only question was of WHEN? 

The other interesting thing is, back in May when the last fall happened also, a lot of market participants were bullish and confused expecting one last wave up. I was also one of them. It never happened. Almost similar today. Several folks including me expected one last burst up to 4650 and 4750...Might never happen. Areas to watch now are clear - 4200 and 4160 on downside and 4450 area on upside. 

Today inflation is 'GOOD' lol...If IIP is also 'good', pray for a rally to get out of any remaining longs and start piling on shorts....If we get a rally to 4400 area again, its a God given gift to get short.

Comments welcome please. Sometimes I feel like I am the only visitor to this site. Please post and offer your views also.

Best.

Confusion!

Confused on market direction in near term so I booked all longs today..Yesterday would have been ideal but greed and stupid ICICIDirect got the better of me...Well booked all today and started some small shorts right now with hedges also in place...A move above 4522 will get me out of shorts...Till then leaning slightly bearish...Yest moves made me bearish since we could not sustain above 4522-4540..I can explain the importance of this area later....But still overall damn confused on market...And when confused, better sit out or trade very small with tight stops...

Best.

US Markets EWT Counts

Chart is self explanatory. Expect our market also to follow something similar.

Best.

Market Psychology

A nice writeup from a fellow blogger...Read it even though its long...A good insightful post

PS: dont miss weekly analysis post below this!

As a trader I have always been fascinated by market psychology. By its definition the process of ‘price discovery’ is intrinsically a large experiment in human emotion which is driven by greed and fear. Although the former is what brings people to the market in the first place, in 9 of 10 cases it is the latter that proves to be the basis of their financial demise. As Peter Lynch put it: “The real key to making money in stocks is not to get scared out of them.”

Of course things change profoundly when you find yourself in an ensuing bear market - but in a way things remain exactly the same. Only that the dynamics now switch into reverse, in that the ‘upside’ is the continuous slide down and that the ‘downside’ are the various episodes of corrective bull rallies. Nevertheless, many investors seem to have a psychological barrier towards ’shorting’ stock and it is probably fair to say that an overwhelming majority have never shortened a single stock in their life. After all, it is a bit ‘unnatural’ for Joe/Jane Sixpack to grasp the concept of selling something now just to buy it back later, hopefully at a lower price. I have tried to explain this idea to some of my friends and most of the time they just give me a polite smile and hastily proceed to change the topic of conversation. As I enjoy getting invited back (especially since the food is free and the women are hot) I don’t press the issue. And finally, as I am an evil speculator I am aware of the fact that for every penny I wrest out of the market someone else out there has to lose it. It’s a zero sum game, no matter what anyone tells you.

The other aspect of investors losing money in a bear (and also bull) market is that they fall prey to their own cognitive biases. Let me suggest a few of my favorites - you can find the full list in Curtis Faith’s ‘Way Of The Turtle’ - a most excellent read:

• Loss Aversion - The tendency for people to have a strong preference for avoiding losses over acquiring gains.
• Sunk Cost Effect - The tendency to treat money that has already been committed or spent as more valuable than money that may be spent in the future.
• Recency Bias - The tendency to weigh recent data or experience more than earlier data or experience.
• Bandwagon Effect - The tendency to believe things because many other people believe them.
• Low of Small Numbers - The tendency to draw unjustified conclusions from too little information.

I guess you get the picture - people often (if not most of the time) make decisions which are driven by human emotion, not by rational analysis. The natural instincts of our deeply ingrained reptilian brain might be well equipped to staving off natural enemies and surviving a cold winter, but are completely orthogonal to the skills needed in making money in the market. Yes, we all like to believe that we are stone cold traders who can press the buy button when our instincts scream at us to start selling everything now! But evidence points quite to the contrary - most traders fail because they sooner or later fall prey to their own fears. Of course there is a good portion of people who have a trading system without a statistically reliable edge or have no trading system at all, but this is not today’s topic.

Reducing the ‘Noise’

The Internet and modern information technology as a whole has given small time investors/traders access to a wealth of data and tools that was reserved to a wealthy elite just a decade ago. I should know - I was there and remember paying top Dollar for a trading platform that does not even come close to what I am now able to enjoy for free today. On top of that I am able to access a vast amount of information and news at the push of a button, right from the convenience of my home. I can also watch financial networks covering the market pretty much 24×7 (not that I personally ever do, but it’s there). For the fundamental trader I can only guess that this is pure heaven, however for the technical trend trader (yours truly) all that data in some ways may be more of a curse than a blessing. You see, the human brain is not very good at absorbing vast amounts of information. We are good at averaging - some call that ‘fuzzy logic’, and most of us are very visual. Which is why man traders eventually embrace technical analysis. As the thinking goes - all that vast amount of fundamental data which we could not possibly hope to digest is simply reflected by one main denominator, the actual market price of the underlying equity or commodity as depicted by a price chart (remember, I was talking about ‘price discovery’ at the beginning). Add to that some time tested chart patterns like ‘triangles’, ‘head and shoulder formation’, ‘double tops/bottoms’, etc. and you’d think that trading should actually be fairly easy, right?

Well, as you probably have learned from the tribulations of life as a trader - the answer is no. We just can help ourselves it seems and sometimes - and I actually dare to say most of the times - the majority of us are unable to see the forest for the trees.

Weekly Trends

Late on my posting for the week since I had some problems over the week...An accident...Luckily nothing happened to me but my car...well thats a different story...But well thats life and it happens...

Anyways, coming to the market, I should have updated on Thursday but due to problems above could not...I turned slowly bullish on the day as the market was holding onto support levels quite strongly and as I said before US markets were quite ugly at the time...We opened ugly too but still bears were not able to break support even with all the global support..Slowly I turned bullish and started buying with tight stops...Happy I did so..!

Lets look at the news front..We have 2 major market moving news that came out over the weekend...One is global and the other is local...Not so sure which one is more important but together it should give a big big boost to our markets in the short term...We still need to see and review what this will do in the longer term...

The Global News - Well if you didnt hear it by now, Friday after market hours, the US govt. made public the plan to nationalize/support the 'deep in trouble' Fannie and Freddie...This is a very bullish thing to the markets esp financials due to the amount of paper being held by all the different banks...Longer term..Well makes no difference..Infact its very bad as in essence capitalism is losing and something different is happening in the US of A. I would say we live in unprecendented times...The other most obvious bad thing is that USA goes more into debt worsening an already bad situation.

The Local News - Sure everyone knows this..The NUKE deal finally falling thru and it looks like we have a better deal now...Quite bullish.

SO. A gap up is almost guarranteed..If not long, look to buy pullbacks...Dont rush in and buy..Lets see how the markets react at supports and resistances...Since I am already long from Friday, I will sit tight...

Now to the charts...

First the daily...Comments on the chart and nothing more to say here.

Heres the log of the daily. Very interesting...Again nothing more to add here except for the comments on the chart..Open in new window to view.

The weekly....Note here how the MACD is now a clear buy...But note that this is quite lagging to be careful following this except for longer term cash investments. Stochastics is quite neutral right now...Need to see this week to understand more on what will happen next.

Overall the charts and news are quite bullish for this week. But longer term, we remain bearish...Short term and maybe medium term(1-2 months?)...We can turn bullish...Watch out for more bullishness coming from the new channels and public...This will be our signal to be more careful...For now, things start to look rosy again...But dont be fooled into longer term investments...This is still an upward correction to all the downmoves we had so far.

Best.

What Next?

No charts today...I am not sure yet of market direction...BUT I will look to exit longs today at some good profits...Only because I dont want to let these profits go..We will see what the market does near 4540 and 4620 if we do get there...

I was quite bullish after our market action on the last trading day but after watching the US market for past 2 days, I dont like it at all...Does not look good at all...Sure our market can still rally but to me it makes sense to take profits here and now if you're long with me...

I might also try some small shorts today but remember that its quite risky because of the strong momentum we saw before...We should know within the next 2 days whether it was the real thing....Till then the best thing might be to just sit out...Or if you are gutsy try some day trades...

Best.

Howz that!...Back with a Bang

What a rally...whew!....How was my call guys for short term bullishness? :)

Next tgt is 4620 area..(4540 still needs to be taken but I think it will)...If we sustain above this, 4750 comes after that....BUT one step at a time...Read my 'morph' post for more details on what to come next....More charts and analysis later...

I got almost best levels to cover shorts and go long...Hope my readers did the same with me...
If my past 2 posts helped you keep out of trouble and also made some money, pls comment here!...I appreciate appreciation...lol :) ...

Have a good trading holiday!

Best.

Bull and Bear Traps

Yesterdays trading was quite funny..First they trapped all the bulls on the wrong side and then got everyone beared up and then trapped all the bears...Good for me..I used the initial weakness to close all shorts and go long...As I had updated in the post below...

We need to take a slightly longer term view and stick by it to survive in this market...no other way...As of now I am bullish for short term..only very short term...The trend can turn back down any time but for now, we need to play attention to the bullish case...For now...

If you are long, play with tight stops and keep booking profits...Thats the only way in this market.

Now one thing to note here the earlier bearish signals on the daily...macd and stochastics are giving some signals that they might be neutralised...Watch this place for more later..For now the bearish case is losing strength and the bullish one is gaining...lets see how it turns out over next couple of days...This might be the last gasp of the dying market...

Best.

Morph Point

Well from my previous post, you would have seen my state of mind..lol..man i love that monkey...well it captures well the state of mind of traders..not only in our markets but globally...one day we go up, the other day we go down...confusing the hell out of everyone...well you would have got by now that I am confused..we are at a wave morph point...I will show one chart which was my earlier preferred scenario...and a 2nd chart after that which shows the other possibility which is also becoming strong day by day...the more bullish scenario...

First possibility...what i was looking at for all these past days...


2nd one...this one is gaining credence every day we go by..and we need to pay attention to this one here...being completely bearish is dangerous..

Hope you read my comments on the chart...I think we are in a strong 'morph' scenario..we need to give importance to both cases here..As you know I am short still from 4400..I am thinking I will cover today on initial weakness and maybe go long in small amounts..now dont get me wrong..I am still bearish..but see some upside in short term...

Comment welcome please...Good or Bad...

Best.

State of Mind of the Nifty Trader!

Confusion confusion....what to do next....lol :-)

Btw, a note on this blog, we surpassed 10000 visitors a couple of days back...in just a few months I think...I admit there were slow periods in between due to my work and other commitments but hopefully we can maintain the momentum going forward. Thank you for supporting this blog with your visits and comments....!

Weekend Analysis to follow soon....See above picture for my current state of mind..lol :-)

Best.

Expiry Day

Well market declined much more than what I expected it to in one day. However we are close to short term strong support(4200, 4150) so I do not rule out a fierce short term rally fuelled by short covering. Intermediate term and longer term, I do not see anything exciting to be bullish about but short term bears can feel some pain. Break 4160/4140 area and the bears will rule big time...Retest of the lows and even lower will come if this happens.

Trade Safe.

Best.

Make or Break!

More likely is break. Be extremely cautious here folks. I smell some serious danger ahead. Only thing I dont know yet is when the carnage will start. Over the past few days I have seen some very bullish messages around. Dont be fooled by all this noise. Let the market speak. What we have seen so far is weak hearted attempts to take out overhead resistances. But market says no. Today US markets look bullish so far..But I will remain net short from 4400 as I said I will do in previous update until I have a daily close above 4450 area. Then will reevaluate and post what I do next.

No charts today. Nothing has changed. Everything looks the same on the charts. The range compression we have seen so far says the next move will be a doozy...! Up or down is the big question and I vote for down until further notice! ;)

Best.

Weekly Trends and Analysis

Analysis for the week ahead. I will present a bigger picture look at things after we look at the charts.

Starting with the daily. Some comments on the chart - open in new window to view. Here we can see the MACD is signalling danger. Last time it happened, we had a major downslide. Will we do the same this time? We need to watch this week very closely.



Next the weekly chart. Here the stochastics is trying to crossover to the downside. Last times it happened resulted in major mayhem in the markets. Break 4240 and its probably over for the market - Under this 4150 is also strong support but 4240 might be more important as its last weeks panic low.

Daily log chart shown here to present a different look at things. Note how we are back in the downtrending channel on this one.

Lastly hourly charts with comments on it. Nothing more to say here.

Overall charts and market are showing some confusing views. Prefer to sit out in cases like this. I am looking to build short positions at higher levels maybe starting today. So many strong resisitances at higher levels. This week being expiry week might see a lot of index management by the market makers. Might be a good idea to sit out...Daytrading can be done though. I have given some key nos in the charts above. Play in between these levels.

Okay now coming to the bigger picture.

Lets face it folks. We are in a major economic upheaval. We need to pay attention to the global picture also. Being in the US of A, I see things here and I am convinced beyond a doubt that we are probably in a very serious economic predicament - There are no jobs..Jobs are being cut as it is...People have stopped buying cars and houses...Overall tighening of spending. Flashback to 6 months back and it was very very different. People were upgrading their cars, their houses and so on...Its funny what a few months can do. The last few years saw people spending without any restriction money that they did not even have in the first place. Easy credit and uncontrolled spending is what lead to all of this. So pain is being faced right now and may continue for more time than what people are expecting.

Come home to India and as I said some time back, the PE growth in our markets have been quite pathetic over the past year. 8% or so. I mean that is really bad. We factor in inflation and the real growth becomes even more pathetic. We are in for some dire times folks. Be careful with your money.

BUT as they say, its always darkest before the dawn and the same is applicable here. Markets are a leading economic indicator. We will begin to recover before the broader economy. When?

I expect we shall see a major downturn over next few weeks...maybe a month and then go toward new lows....The next new low at maybe 3600-3400 levels will be a fantastic buying opportunity for the longer term. Again note that the levels and timeframes here are more of speculation that anything else. Take it with huge handfuls of salt :)

Its my longer term view on the markets and economy and so will be continuously updating them...I think we shall make a significant bottom within next 3-4 months...Then a big upmove into March of next year...More decline/consolidation after that...But let us see how the next few months play out first.

Best.

Is it over?

Not looking good folks...Yesterday was a clear harbinger of things to come..I was expecting a bigger and better bounce but did not happen to the extent of what I thought. But yesterday's market has damaged the charts and I do not see an easy way out of this....

Weekly stochastics has more or less crossed over to the downside. Weekly MACD did the dreaded kissback I was talking about and rolled over. Daily MACD also issues a sell..So what gives? We can see maybe a very small bounce today but ultimately I see a lot of weakness for us in medium term...Retest of the lows and maybe lower is on the cards.

Yesterdays market left me very frustrated. Market is doing pretty much what I expected it to do but I am just not timing my trades right...Or in other words trying to do too much and catch every swing... :( Probably I need to learn how to sit tighter in my trades!

But well better luck next time then.... ;)

BTW, how was my GOLD call? Good profits very fast...lol...Anyone made use of it?

Best.

Market Update - August 20th 2008

Later when I posted market thoughts, I mentioned we should have weakness and then strength later in the week. Played out pretty much as expected. Now the weakness might be over or very close to over. Yesterdays lows are important...Or slightly lower at approx 4270 levels. Below this the most important number as stated before is 4150.

I am trying to build some longs right now - this will be a very short term position..Or a scalp only...I will bail on weakness or if I get something close to 4520. But lets see how it plays out.

See hourly below. We look like we are very close to some important support levels. I think its critical we hold this area where we are at now.



Next the daily - I have added some notes on this. Nothing much more to say.

Then the weekly. Again same thing..Notes on the chart. We are quite close to a big intermediate term decline but before that I am expecting a decent bounce. How much we bounce I do not know yet..But it could very well be a lower high...Watch carefully - Things could get quite ugly soon. I think longs are risky unless you are very nimble....I am also looking to build up some shorts at higher levels.

I will post a 'Big picture' article after some time.

Trade safe ;)

Best.

GOLD!!

Well folks...The GOLD bug has finally bitten me...lol :)

See chart below...I figure its in a nice ABC correction after which a good uptrend should start again....

Other reasons why GOLD should go up is flight to safety and inflation. Overall its a good a safe place to park some money. I believe we have some very tough times ahead and GOLD is a good place to park some money. I am buying GOLDBEES..No leverage...Bit by bit until I build a sizable position. Again note that this is a long term position without leverage so I will not be worried about short term price blips...

And we are very close to long term supports. The 770-740$ area is extremely strong support.

Buy the dips...

Watch out for my 2 next posts probably today itself where I will go over market thoughts and also take a look at the bigger picture....Tech and Funda...Will touch over GOLD again then.

Best.

Market Update - Monday Aug 18th

Quick update today..Not posting any charts..Earlier posted charts still hold valid.

Now at this point, I am very uncertain about market direction..My gut says we are going to dip very hard in the first half of the week and then MAYBE we recover after that.

Either way, nos to watch is 4480 on upside, 4420 and 4350 on downside. Deep support is 4150..Below this, bears will rule big time..

I might just stay out and watch this week until I get some more clarity. I favour downside for now as I said last week 4470 was important - We broke that convincingly. So bears have the upper hand short term...Intermediate term, bulls have to hold 4350 If not, its a clear ride to 4150...And if thats broken, God save the bulls.

On a different note - One analyst whom I respect a lot and whom I also consider as a mentor of sorts - Rajan Sir has started a new blog - http://niftyspotter.blogspot.com/

Check it out...I will be adding this link also to my blog lists on the right shortly...

Best.

Range Bound again for Now

Not much to update today. Hope everyone enjoyed reading the earlier extensive analysis. I mean this to be more of followup than anything else.

Anyways one thing to note is that over past 3 days, market has turned significantly weaker. The high so far is 4650 around and recent low is 4470. Until 4470 is broken, bulls are safe but I expect will be broken sooner than later. Only question is how far high up do we go?

No easy answer but lets look at the daily. Put up in log scale on the advise of Kpl sir and several others...Looks interesting..As of now market looks like its broken out of the channel and is teetering on the edge...Which is why I said earlier low 4470 area is important - Break this and trade below for some time and the top is in - 4650. If we can go above 4620-4650, we again open up targets of 4720-4750. This itself might be very difficult to attain so I have no expectations of above this. I would give odds of 4650 being the top quite high. Lets see if 4470 breaks.


Heres the hourly. Pretty much substantiates what I wrote above...Watch 4470-4450 on downside and 4620-4650 on upside. In between we will just be rangebound and volatile.

It would be interesting to see how the SEBI meeting outcomes(nothing much) affects the market today.

You all have a good long weekend and Happy Independence Day in Advance! ;)

Best.

Another Fascinating Juncture

Another interesting week of trading has gone by and the next 2 weeks for me will be very very interesting and important...Now almost all weeks are like this so you might wonder whats so special about this one?...I will explain. Lets start with the weekly.

Now what is important here is that the MACD has turned up and is on the verge of breakout out upward...BUT see the last time we were this close...It just kissed back and failed. I will be watching this one very intently for the signals that the same will happen.

Notice also how the stochastics gave an important intermediate term buy and is still on a buy.
I have been hammering the table about this important gem for a long time.

If I were to take a guess, I would say another kissback and failure for the MACD but let the market tell us that.

Now next the daily. We have a breakout out of the channel and we are targetting higher levels of 4720-4750. Important fibo levels in both retracement terms of the bigger decline and the recent more smaller decline. 4800 odd should be tremendous resistance and I would wager we fail before we get there...




I also think that the next SIGNIFICANT low will be a major major BUY point. You can refer my counts from earlier and see why I think so. ABC-X-ABC after which a big multi-month rally.
This is still what I am thinking and still sticking with it.

Here is the chart I had posted some time back. See the lines drawn predicting possible moves for the market and see market action up to date. It performed quite well for me and was able to make some bucks. However its still sad how ppl ridicule EWT..Recently on a forum I frequent many folks came out making fun of EWT...Its funny when ppl do not understand something, then like to laugh at it..I dont hold it against them...Its just ignorance.

I make it a point never to belittle a new method but instead try to understand and prove it right or wrong...If its useful, its a good tool to add to your arsenal. If not, well let it go. This is the hallmark or a good trader. Also finding out what works for you and sticking with it. Its very important to be open to new ideas when trading in the financial markets.

Okay enough of preaching. Lets look at the hourly also. At this point nothing is clear from this one. I am not going to try to count the subwaves because it is just not clear...I do believe however that we are still doing an ABC correction upward after which we should go lower...

Maybe a retest of 3800 or maybe a bit lower. Again dont expect this to happen all of a sudden. Tops and Bottoms are very painstaking affairs. Give it time.

Fundamentally speaking, I was looking at EPS data of the NIFTY for this year and was shocked to see we have a very miserly growth figure of 8% odd last year. This is quite shocking and way below what I was expecting. And with the RBI tightening down on things, we need to pay attention here. Maybe its time to put the INDIA SHINING story on the back burner for some time and just play the market trading the swings.

Comments are welcome please. This is what will give me incentive to post and also will heighten discussion and well enliven up things more!

Trade Safe and Have a Great Week! ;)

Best.

Market Update - Aug 5th

Bullishness is back on the street...I was bullish from the lows...now slowly turning bearish...we may get atleast a pullback from this levels...We need to see the nature and extent of the pullback to decide whether to buy the dip...

Market can go up to 4750-4800 area on this move...Before that, we can have some pullback...Or a serious dip...If we go below 4350, then it will be a much bigger correction or start of a new bear move...Any corrections that stay above it may just be a smallish correction.

Note how the stochastics are in the range of highs where it has signalled the start of a new correction or bear move...Better to book profits in longs if you have any...

I have started some small shorts which I will be looking to add to over next few days if we go some more higher...Taking each day as it comes...

Best.

Correction...The Bigger Picture

The bigger picture on the past 6 months correction. I know there are other possible and more bullish alternates but I prefer this one until I see evidence disproving this. All my comments are on the chart - Open in a new window to view.

EWT can be confusing to newbies but I will be happy to explain in case anyone has any questions.

Best.

Market Update - Some possible outlines

Nifty chart updated and attached...I have outlined 2 possible moves that I see possible over next few days...We are still in a corrective bounce aka a bear market rally...We went up to the 50% retracement area approx 4500 and then corrected 50% of THAT advance to the recent lows made in the past couple of days...So far so good...

Next what can happen is defined...This is a B wave...So we should go up again and resist somewhere above...Either at the downtrend channel boundary or we should go above and stop at the 61.8% retrace of 4720...Either way in my opinion upside is limited in the short term...I will be looking to disinvest all of my holding over the next few days to 1 week...

Trade safe...When this rise gets done, I expect some strong and extreme carnage to happen again.

Very short term - We are bullish.

Medium term - We should turn bearish again.

Anyone have questions? - Please post in the comments section or on the chatbox.

Best.

Critical Juncture

Again we seem to be at a very critical junture in our market...Open below chart in a new window to see what I am talking about. This can be a valid count but we obviously need more information before taking a sure call on the market direction...The low that will be set today should be very important I think....Trade safe.

The other thing is the possibility of another potential island reversal forming..because of the earlier huge gap up and a similar gap down today can together create a island similar to the one we had a few months back.

Best.

Bulls back with a Bang!

What a week...Bear market rallies are quick and furious and will rip out the frigging lips of all the bears...lol...What next?...I have posted this here several times and its very clear what its indicating so am not going to write anything more on this chart...

So what next...?...I see a decent pull back over the next few days to 1 week...We will look at the nature of this pullback to look at opportunites to add longs...At this point I am only seeing this as a bear market rally but it is a rally nevertheless...its not over yet...and can be profitted from...Which is why I cannot understand the die hard bears still calling for 3600...We also had several TV analyst dumbos calling for 3000 and lower on nifty...They got their heads handed to them on a platter...which is why I am totally against following the TV analysts..lol

Best.

Do or Die Week

Friday was fun..Finally a good day for da bools :-) And about time too...

Some bears would have gotten clobbered on Friday...What next?...Its the end of the week, so lets look at weekly chart below...One thing...I have mentioned how important this is before...Stochastics crossover on the weekly...One of the best bottom spotters in my book....The only problem is this next week is one filled with external news events...No need to tell anyone what it is...Tuesday will be very important for our markets...

I was thinking we get one more low..maybe a higher one..but market had other ideas it seems...

For now, for the bulls, the stop is around 4050(tight stop), 3960-3920 levels is the final stop to keep the bull case alive...Dont be long below 3920...This the line in the sand for me...After 4050 ofcourse...

I have a straddle strategy in options to profit either way...let us see if it works! :)

If the govt does NOT fall, a super bear rally to the top of the channel will happen...approx 4500 will come...So much depends on this that it makes some sense to sit out of the market or gutsy players can try some option strategies...to profit either way...

Have a good trading week.

Best.

One More Low?

Past few days market action has been cautiously bullish...lot of it on short covering...Actual buying has been missing in this market...Everyone and their uncle is bearish now..Maybe we need to start being bullish...albeit very slowly...

I see possibility of one more low...possibly a lower low at around 3650-3700...I will also be happy with a higher low...Before we lauch into an intermediate term rally of maybe 1-2 months...After which there is more carnage on the cards...So this is still a traders market...Keep that in mind...If trading on the long side, its been very tough to hold on to gains..Trends change almost immediately and without much warning...The short side has been easier to play...Lots of time to cover etc etc...Character change in the market...We need to watch for this to change...

Some positives and bullish signals exist on the charts..We can see an exhaustion of selling..However buyers seem to be on strike...But when they come back, we can see some quickfire upside...

Why do I say one more low?...Because the wave structure is suggesting that...Again I will be happy with a low at 3800 also...Ideal will be 3650 to get long aggresively...


So to sum up I am bearish very short term...medium term cautiously bullish...long term clearly bearish... :)

Daily chart below...You can see the lines of importance in here...These will be in play over next few days...Looks like we are going to play within this channel for a pretty long time!

Best.

Rangebound...For NOW...

3 lines (and a bearish flag) defining the market now..It needs to breakout or down to begin some moves...

US market action today looked like it was hammering out a bottom...Todays lows will be very important.

In our mkt, some stocks interesting on the long side are asian electronics and selan exp...Check it out...

General market looks rangebound only...Either the flag needs to breakdown conclusively and target 3850 and lower toward 3620 area...OR we need to breakout above 4220 and rocket upward...Market might be waiting to see the results of the govt confidence motion...If govt does not fall, we can see a rocket move upward...However this wave is turning out to be quite difficult to play...Play the lines as shown above.

Best.

Market Update - July 14th

The last time I posted, I said that there was a good chance to go down and retest the lows at a minimum and also a good chance of going down to 3600-3650 area...Until Friday noon, things were looking decently bullish...Then the rest of Friday kinda damaged the bullish look...even though a very wounded bull...Now the bull is really wounded again...

Lets take a look at the daily below...MACD has turned up...However Friday action makes me very cautious..remember that the MACD is a lagging indicator...Positive crossings should not be trusted in a bear market..and we are in the heart of the bear for sure.

Now the weekly below...Stochastics have turned up..would have looked much better if it was not for Friday...But its not above 20 yet and until this happens, we cannot be bullish..yet..

Wait for the weekly red stochastics line to turn up above 20, then we can go for a short-to medium term buy...

If I were to harbour a guess and based on the chart posted in the post below this one - Remember I had marked in there that we have one more downside wave...I think its started...We do not know at this point how much it can go..But let us see if 3850 area will hold first...If we fail this, then we go straight to 3650-3600 area...and maybe a bit more lower than that...But this should hold.

US market also in the doldrums right now...Almost done but not quite...Just like us...Some more downside and panic to come...For sure...

I think we get some carnage and lots of panic in beginning of week...and then stabilization towards end of week...Lets see....

Best.