Round and round we go....

"And those who were seen to be dancing were thought to be insane by those who could not hear the music...."

-- Friedrich Nietzsche

Well folks, finally what I was expecting to happen for some time has happened. We have broken and closed below the Nov lows on the SPX and on the DOW..On the DOW by a big margin.

Chart -



Why our market is still showing resilience is still a mystery to me. Manipulation? Or just a delayed effect? Either case, my gut is saying we touch 2525 soon.

The other side of the coin is the low which I expect will come sometime in March or worst case early April may just be the BUY of a lifetime. Its coming but not yet.

We shall see.

Have a good weekend...Ciao! :)

Best.

PS: Any ideas on how the RIL-RPL merger might affect markets on Monday? To me something smells fishy...But I'd appreciate thoughts from others...

Interesting Juncture

12:45 PM Update - Okay again lulling us back to sleep. Be alert for a quick move. 2730 on upside and 2710 on downside...Break of 2710 and we can move quick to 2660. Maybe thats it for today. Be careful out there. Consolidation at the lows in this kind of flag pattern is never good for bulls. I did not do any trades today. Still holding to positional shorts from 2780 odd. Last update from my side today. Goodnight!
====================================================================================

11:30 AM Update - Well well what do you know...2740 is broken...Interesting...Next support is ofcourse 2660. Break this 2660-2600 range and I think thats it for the bulls. This is typical market maker tactics...play the bullish side...or just let the volatility die down for a long time...lull everyone to sleep and then trigger move in one direction - This makes sure that very few players are on the bus for the move...And we all miss the move...This is why we need to be very alert in this market. :)

ALSO the inverse HnS I talked about before is also invalidated now.
====================================================================================
We are at a very interesting point in the markets...I cant believe that US market is so close to breaking the November lows and we are no where near it. I think this can get resolved very very fast - knowing our markets. VIX is down for now but things can change very fast. We are looking at a big move soon. I still vote for down...

Okay now coming to the levels. 2740-2720 is important support. 2800 is resistance. Above 2800, we can run quick to 2860, 2880 and 2920 areas. There is a very big intraday inverse HnS developing which projects to 2900 odd. So thats a danger point for shorts. But I am holding to my futures shorts and some puts I entered yesterday. The timing was bad on the puts but the futures shorts are looking good.

As I said before a move above 2920 means market is turning more bullish and I think the short strategy will have to be abandoned.

I see a lot of confusion in the markets now. And the market makers are using this to move the markets. Yesterday was a classic example.

I will post some more a little later if I see something important developing.

Also charts will follow later.

Best,
Lee

Expiry Fun

Yeah...2800...Someone wise told me never to trade on expiry days :) What a move in the end...Someone seemed desperate to get it close to 2800. Well tomorrow is another day - lets see if we get follow through.

The intraday inverse HNS has almost completed target BUT there seems to be another bigger one developing that could target 2880-2900. Danger for shorts. But let me look at some more data and charts before posting again later.

Cheers,
Lee

Building Cause - Intraday Updates

Okay last I promise :) ... We look to be resolving oversold condition intraday right now by going mostly sidewise..I wish I could stay up to see what happens but going to sleep..Good night!

Okay one final EDIT - I am dipping into some 2700 March PUTs right here. Very few. Scaling in. Will add more tomorrow.

EDIT: 11:20 AM IST : Hmmnn...Interesting position...Looks like we are back at 2740...Now we can take this on upside and never look back with a good rally or totally fail here..Its basically a toss up right now. I dont think I am going to do any trades today. Sitting with my shorts from 2780 odd yesterday. Goodnight All.
I intend to continue this tomorrow. So expecting more comments from everyone! :)

EDIT: 10:30 AM IST : Okay it looks like 2740 area is providing support for now. See chart below which shows why and the confluence of support in this area. For downmove to continue, we need to break this and then ofcourse break 2680-2660 as is clearly visible below in the chart. I expect we can try to move a bit more higher as long we as we hold 2740. I might add a few puts if we do manage to go higher - so far, I have done nothing today.



===================================================================================
I am starting something a bit new here. I.E a thread each and every day for intraday updates. I will post thoughts every few hours but ONLY if I see something worth posting. And ofcourse until I go to sleep. :)

So if you are a faithful reader of this blog, please visit during market hours also as I will post updates whenever I see something worth posting.

Another thing - I note there are many regular readers here. If you like this blog and the material posted here, please tell your friends also. Also if you think of any way I can improve this blog - new material you would like to see - or anything else for that matter, please let me know. If it is infact feasible, I will get it done.

Okay..One more thing..Earlier post, I know it was boring..Macroeconomics and all that..I know most of you guys are focussed on what will make you money today...BUT understand that all this macro views are important to us all..And simple fact of the matter is - It will help you make decisions on your short term trades also.

A simple example. 2 months back, I used to try the long/bullish side for positional trading..even though I fully knew that the situation is bad...And what happened? I lost on most of those tries. Bearish positions on the other hand continued to win big...What I learned in this is..Never trade against the BIG PICTURE. To do that, you need to understand WHAT that is..And I am sure most people do not know!

Now dont get me wrong..I still scalp on the long side..I dont post that here..Or its just a 1 day trade like I did a day back with good profits...But I dont do that unless 1) I can get out quickly 2) I know odds favour me 3) Risk vs Reward is good.

Okay coming to market today...The inverse HNS pattern I talked about yesterday targets 2800-2820 odd...So I expect we shall tag this area...I started shorting yesterday...Might do some more today via March PUTs...2860 above means I am wrong above this short term and we can go above to around 2920..Unlikely but something we should be aware of when trading in these conditions...

Either way I think we are building cause for the downside.

More thoughts later...I might add EDIT thoughts into this post itself a little later.

Best,
Lee

Counter

Now this is going to be a funda post...So if anyone wants to skip go ahead - But I would recommend to read it very carefully since its something that will affect our actual lives also...Not just trading.

In earlier post - Sajal(Long.Short) raised some very clear thought out and important points...I am pasting this in here as I think everyone should be able to see the counter points to my earlier post.

1.What I have understood from your explanation that you are trying to establish a theory where--i) US will suffer a depression in the coming years ;ii)while India and China will shine.I don't know if I understood correctly but at least that I got from your undertone.

Just here lies my problem. If your first premise is true then your second assumption should be wrong.
Rather it seems like the stupid "decoupling theory" that cropped up Nov -- early Jan last year in our market which was ultimately shattered by just 2 back-to-back down circuit in Jan.
My point is --
a) In 1944,Bretton-Wood accord established the US$ supremacy in exchange-rate world over.It is the US economy which creates and circulates US $.

b)Politically US is the super-power and I am not seeing any country who can dethrone US in near terms. So, Bretton-Wood will continue.

c)If US recovers then a mojor contribution will come from this US$ supremacy by Bretton-Wood.I mean other economies will help US to recover by forgoing their own growth.

d)What earnings you are looking today of the Indian Incs, can change dramatically within a quarter or two.So we should not give much importance to the present marksheet of them.

Lastly,in short,my point is If US suffers nobody in the rest of world can avoid sluggishness(at least).Once a French President said beautifully... tying with US is like sharing a life-boat with an elephant.

Now I totally agree with most of these points...Dont get me wrong...I like to see the 2 sides of the coin...And most of these things, I have already thought about a lot...I will try to outline my thoughts in order - But remember one thing...Economics is really a very very grey area - No one knows what can happen..Its more of speculation at a different level which is why I prefer to stick to TA - Atleast we have that to guide our trading...BUT its always good to have an idea of the BIG PICTURE...It will help in our trading - Always.

My thoughts - Sure USA is the major power now...And logically we must conclude that IF USA goes into a depression, the whole world will. Now this might be true in the beginning of the slow period but eventually others will step up to the plate is what my view is.

In every major economic cycle, we see one major economy crumbling, and another one stepping up to take its place. These are not 1 or 2 year events but a big process. For example, before the last great depression, England was the super power...Now its just a shadow of its original form. Same as for the Roman, Persian and Greek empires. The rise and fall - roughly will span around 200-300 years. I think the fall of the USA has started. And the rise of some other powers have also started. I feel for sure that China will be one of them. India on the other hand, not so sure but I do think we will also come close.

Now, HOW is the big question? Where will demand or growth come from? Well it has to come from within..Simple..No other way. This is one thing which I feel pained about - India is a service oriented economy - The way it is now - We will not be able to survive for long. We need to start building from within - Thats the only way demand and growth gets going. In the first part of the 20th century, there was a massive wave of infrastructure growth in USA - this is what fed the growth cycle. Same needs to happen elsewhere. China is on the right path - Recent plans show that. I am disappointed with the so called stimulus plans India has now..We need to stimulate growth from within...Period.

Okay enough of my rant.. :)

Now I can be totally totally wrong here. Its just a debate. Economists are probably more than often wrong - Else we would have seen this crisis coming. So what can we do?...Just trudge along trading these markets until we see some light. I will remain very long term bullish until that multiyear bull channel is taken out on the sensex. If this happens, well, I dont want to think about the state of the system then. Lets keep our fingers crossed that this does not happen.

Okay I know I bored you guys...Here is something more before I stop. See the image below.



It’s a geographic representation of the impact this financial crisis will exert across various nations as projected by a recent LEAP report -

LINK

LEAP/E2020 has studied the situation for the main countries and regions of the world along seven precise criteria enabling to measure their degree of immunity to the financial detonator.

CRITERIA:
Share of the economy dedicated to the financial sector
Share of the economy dedicated to services
Level of household debt
Quality of financial system and household assets
Relative amount of public debt (municipalities and social systems included)
Relative amount of external debt (trade and payment)
Share of capital-based pensions on overall pension fund system.

Based on these criteria, [the] team was able to identify 6 major groups of countries hardly related geographically but with similar profiles.

The report goes with a projection of approximately how long each of these regions will be affected and also elaborates on main challenges in overcoming this systemic crisis. Great stuff to say the least.

Now you can see, the US and UK will be the worst off...Africa - well nothing will happen to them because of this crisis. China and India will be in a recession period for 2-3 years (US will be in a depression spanning around 5-10 yrs by contrast)
[Different language on the image but you can see what they are saying here]

Now I stress again...All this is speculation. Makes for good debate but not much use in our trading - But it always helps to understand the BIG picture.

Thanks to Sajal for all the valid counter arguments.

Best,
Lee

Lull before the Storm?

EDIT: Wednesday morning after market open...Got out of my calls from yesterday...Thats it for me on the LONG side...Now slowly scaling into shorts...Dont getting me wrong...I will short slowly up to 2860...Cheers to all!
====================================================================================
Well how was my timing yesterday? :)
I for one was very happy with it...Covered shorts near the low and took some very low risk longs in calls...In a notional profit right now. I will likely look to cover it very soon - even before expiry - I am obviously not very comfortable holding longs at this juncture...Markets can reverse back down at any point of time...2850 would be the most aggressive target.

Now why did I cover? Below chart explains it...And I did point this out yesterday also...And we got a doji...Seems to be playing out according to plan...We should also get a big up day very soon if its playing according to the plan.



The other interesting thing - If you pull up the intraday chart from yesterday, we seem to have formed an intraday inverse H&S which projects a target to 2800 if we move above yesterdays highs...So worth watching. (pull up a yahoo 5 day chart and see what I am referring to)

Okay so thats my short term outlook and my trading plan...

Now coming to the bigger picture...MVP asked a very interesting and important question in the chat box...Something I have also been wondering for some time...Simply put...why is there a disconnect b/w our markets and the dow or spx...We have broken the lows in DOW or SPX and nifty is still strong...Why? Well I do not have answers but I can speculate...

Something else worthy of note here is that Nasdaq has not broken the lows and looks more strong...It looks more like Nifty so we can compare ourselves to that index...

But...coming to the discrepancy...There are 2 possibilities...

1. If you remember in Oct of 2007, US already started the bear..Much earlier than us...We waited till January to put in the big move down...Market might be held up right now and stealth distribution might be going on...Before the final capitulation move to a bottom...This is one possibility.

2. The second one is a more fundamental one...I.E India is more stronger and is preparing itself for the next bull market...Hence the relative strength.

I think its a mix of above 2. I expect we will tag the bottom of this chart eventually as I have been calling for a while. It may happen sometime within the March-April timeframe. Sensex Monthly attached below.



And I think this will be a very important bottom for our markets...And we might not breach this in the coming months...You can see we have been in a structural long term bull market...Recent bear market non-withstanding...A tag of 6400 on sensex and moving up from there will have me very bullish. We can expect several tests of the channel bottom before the next bull market begins...Ofcourse all this will take a lot of time...Its not a 1 or 2 day event.

But during this time SPX might might just form another term bottom at 650-600 odd and then mount another rally only to break it later...India on the other hand will become more stronger as time goes by...And as the fundamentals regain strength.

This is my longer term view and should be taken with large fists full of salt :)

Earnings wise, I am here in US, I see it, its bad...SPX might have negative earnings very soon...Do you see that for India? No...Sure we are in a slowdown...even recession...But we will recover within 2 yrs or so...US on the other hand if lucky will recover in 5-6 yrs...If NOT, worst case US of A is going into a depression.

Speaking more on the fundamentals, I am appalled at the way policy is moving here right now...Its not good...US of A is moving more toward socialism when we are trying to move more to capitalism...They are worsening the situation with every new policy step they take...If they had done nothing, market and economy might have recovered sooner...This is why I think USA has peaked...New Policy is making it worse...Sure it will stabilize somewhere but I think the boom here in US of A is over...

The next few decades belong to China and India.

Comments welcome.

Best.

Some more thoughts

ONE MORE EDIT: I took a gamble on some 2750 FEB CALLS...Pure gamble...If I lose it, I lose just the premium... :) Worth the risk here in my opinion.
=====================================================================================
EDIT: A little after the market open...Out of my shorts...Flat for now...Now the market can crash without me...LOL :)
=====================================================================================
We seem to be close to an inflection point right here. I would think that we are very close to a bounce point. Could come from the 2660 area...But if this fails, we could have a quick trip down to 2525-2550. So its a risky area for sure. Either case I am considering taking all my shorts off today and just going flat. I dont want to go long here because of the 'crash' possibility..And believe me, after the US market today, its a very strong possibility. We got to bounce right here on the SPX and DOW, else its crash time. But gotta take that risk I think as a trader..So I will take my shorts off and wait for a bounce to reshort again. Dont want to risk any longs in this market.

Chart below.



Comments welcome.

Best,
Lee

Week Ahead - Quick Post

EDIT: Well looks like today was a holiday that I was not aware of until a few minutes back....LOL...Well it happens...Anyways nothing changes in views...We shall see more detail tomorrow sometime....I promise a more detailed and indepth look at things and how I see the next few weeks - intermediate timeframe - playing out...Short term, well a bounce is on the cards...Not that it matters much for the intermediate/medium term.

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

Meant to do a much more detailed post over the weekend...But a friend of mine visited and right now watching the Oscars....So no cigar...Still a few words and a chart...A more detailed update will follow tomorrow.

Right now, we are at a bounce point...Which is why I reduced shorts on Friday as you could see from my earlier post. I intended to reduce more today but the US futures has screwed up this for me...Now let me clear...I wanted to cut some shorts and then add it back after a bounce...Not that I am turning bullish...

Levels...2730 was obviously very important as I said before...below this 2660 is most important. So from here a bounce into 2820-2860 area was expected...Which is why my plan of cutting and adding came into the picture...Sometimes we have to think on the run...And adjust our plans...More thoughts later...After this bounce, downmove should continue. Chart with important lines and points below - Its self explanatory.



Best.

Covered Few

I covered few shorts near lows today....Just taking profits...No change in outlook.
I think some bounces are possible...But I dont think it can sustain the gains.

Cheers,
Lee

Outlook

Unfortunately did not get time to make a more detailed post...But a few words on my outlook. I still think there is ATLEAST one more significant down wave no matter what the count is...

So if you look at the triangle we have been in for past several weeks, yesterday we tagged the bottom of it and bounced back....2730 odd....so for the bearish case to gain strength, we do need to break that and close below that...For the bullish case we obviously need to hold above that as much as possible...

Now you already know my bias. I dont like to post 2 sides of the coin...Very clearly, I expect we shall break 2730 soon and go on to test 2660, breaking which we shall touch 2550-2525 where I think I will cover my shorts for this round. All this should happen very soon as the down waves look impulsive to me...

2860 on upside is key for da bulls...And above 2920, I would say bearish case is dead for now.

This is my outlook. Should not be construed as investment advice and usual disclaimers apply :)

Best.

THE JINX

Yeah I know I know....I promised I wouldnt post for a while :)

But when the bear finally wakes up, shouldnt I be there for it? :)

Anyways all jokes aside...I am wondering if we are finally getting the big move. Or atleast the start of it...The move that has been so elusive for so damn long. Even shook me out of a few of my short positions. Yeah I have to say its not been easy being a bear for the past few weeks. Maybe the tide is turning?

Charts with comments below.






Hope I dont JINX it this time also :)

Best.

Walk the line!

Not going to talk about the markets here even though I have commented in the previous post...If you missed that, please read since there are a lot of valuable insights in there from different people.

I watched a movie...Walk the line...A few days back...And I loved this movie. Amazing stuff...The movie story line is a bit sad to say the least but overall a wonderful movie..More than anything the actors performances are superb and should not be missed..Since I loved the movie so much specially the songs, I thought I'd try the title song...An attempt below...

Now this song really needs 2 guitars with a lead for sure, I am not very happy with it but well it is what it is....He sings the whole thing so low..almost rock bottom base...But anyways, heres my take on it...enjoy :)



Best,
Lee

Sabbatical

Okay guys...its been a tough week...very tough for me...One day the bear case presents itself and the next day, the bull case presents itself...We are in a range...Period. And I have been wearing myself out trying to trade it positionally instead of scalping.

The fractal called for a down day yesterday which we did not get. Maybe because of the last minute stick save in the US markets but whatever it is, we did not get it....I thinned down a lot on my option positions yesterday only because the time decay was killing and ofcourse took a loss in them. Going to avoid option trading from now on...

Overall a disappointing week for me...We may have topped as I said before but as each day goes by, I am becoming more and more skeptical...Maybe we just stay in a range for some more time....Just frustrating everyone...The budget next week might provide more direction...Maybe.

I am still holding my core short position but I will likely bail if market makes more of a push higher...And again maybe try at higher levels.

Overall not happy with my trading over past couple of weeks...I see that some emotion also entered in lately.. So I am taking a break from blogging...
Definitely for a few days...Maybe even a bit longer.

In the meantime, best of trading to everyone.

Wishing everyone and good weekend and happy valentine's. :)

Cheers

Round and Round we GO

Update to the same fractal call I been posting here for a while.

EDIT: Damn - 'I AM' on the chart should read 'AM I' :)
Man last minute stick save on the US markets...Can you believe it..lolz



If this is right, Friday should also be a decent down day.

Cheers.

The Playing Field

EDIT: Forgot to mention something. See how they killed all the bears yesterday. See how they closed the gap - Exactly what I said might happen in previous post. Now what this achieved - bullish sentiment is stronger now...I find this very interesting. I think we are building CAUSE here. But I still have to say bottom line is we have to get out of the triangle below..

Simple and self explanatory chart. Thats the field...How high up will we go? Not sure at this point. But whenever we break 2850, it will be game over for bulls.



Notice also above how stochastics is close to tipping point.

2960 is a potential topping point...Above that it will be 3050 and above this 3120. Quite unlikely we run that far. I will be looking forward to adding more shorts today/tomorrow depending on the levels - whatever I had thinned down few days back.

Best.

Whats New?

Before I start, here is a GYAN -

What is the definition of insanity?
Doing the same thing over and over and expecting different outcomes! :)

A very smart guy...genius in fact said this...not not me :D....Yeah Albert Einstein.

My last 2 posts were just in jest in case you did not realize...Still some amount of seriousness is there lol...

Okay pure market views. Looks like we get gapper down today...And the usual attempts to fill that gap. It seems to me like we are being conditioned to a Pavlovian Dog instinct. One day a gap will come which will not fill...That day we will see real panic and maybe a bottom..Today is not that day.

Charts with comments.





Points to watch are 2860-50 on downside. I am not saying that the bull case is dead until a close below this point. In fact I think we shall close the gap the today or atleast try to. So its not like all is clear for the bear. Its just one more chip in our favour.

Even though I was mostly joking in last 2 posts, do not miss them since there is matter in them as well as the comments.

Best.

Damn! Somebody Woke HIM and HE aint happy :)

See this is what you get for taunting bears! :D (refer post below this)

All in jest of course - Just having some light fun....While the bear case
has been strengthened today by the US market action, its too early to
say if we can have one more marginal high - But less chance.

Thanks to all who commented in earlier post. I have posted my thoughts
and conclusion also there in case anyone wants to read it.

A more serious update later today.

Best.

There he sleeps...Somebody please wake him!! :)

:)

EDIT - WOW looks like the US Bear just woke up...be looking for a fakeout/trap :-|
Someone please wake the Indian Bear too :)

On a different note - Would you prefer my usual written updates or the videos? I noted that not many people download the video compared to those that visit here.

Markets - The beat goes on. 20day swing SL taken out. Now its on a buy...Likely this will also fail - stop is at 2660 odd I think. We are in the RANGE from HELL for now.

I still believe we are setting an important top right here. My beliefs should ofcourse be taken for entertainment purposes only! :)

Will post a more serious update later.

Cheers

Video Update - Feb 9th 2009

Latest Video update from my side...Video quality is good...But could only put the full file on another server...Go and download from there to watch -

LINK

Best.

Important Week Ahead

Meant to put out another video today...Unfortunately did not get time but still want to do this quick update since I think this week is a very important week.



The most important chart development I think is that the SL for the 20d swing has come down to 2930 - meaning that shorts should exit if market closes above 2930 any of these days. Will it happen? Well let the market tell us. I am going to review market action for next few days to decide how to manage my trades.

Something I have noticed recently is that few readers are turning aggressive, downright critical, mostly senseless comments that I cant even understand what they are trying to say. Come'on guys if you want to offer counter points, I welcome that since I can see the other side of the coin...But aggressive and taunting posts will get you nowhere. If it continues, I will be forced to take some additional steps like no comments allowed at all...Or even take this blog private so you can read by invite only....But we shall see. I dont like it when people come out taunting esp when I take a lot of effort to this analysis and updates...Its very frustrating to say the least.

The good thing though is that whenever these guys come out like this, market flips in my favour. So we shall see.

Okay enough of my rant.

Some interesting things I see on public sentiment also. Suddenly forums, news, blogs etc have turned bullish - They were bearish till Thursday. For me this is damn interesting. Market has not done much in this period to warrant this much bullishness...Is it the news? The stimulus plans? Well we all know how the last few stimulating plans helped the markets :D
Bottom line is this market should be allowed to heal by itself...sure it will be slow..but it is the only way. The more money you throw at it, you are only worsening the process.

There are a few things I am watching and also some cycles that say we are going to put in a real top within Monday-Wednesday timeframe this week. Whether this will happen or not I do not know but I am watching this week closely. I admit time is fast running out for the bearish case and the earlier fractal we were following can fail if the bullishness continues this week. I will be looking for an important top this week beginning.

I will post the video update tomorrow.

Best.