Road Ahead

Dow                     10,365.45 

The Dow broke an important support level of 10440 which signals further downside. However, it’s likely that it would gain some ground before falling again. For the short term, 9700 is a very important level to watch. Only the worst of the news would pull the Dow below this level. I don’t think the financial turmoil is enough to pull Dow down below this level. Having said this, the long term bull market for the Dow is still intact.

S&P CNX Nifty 3921.20

An analysis of the charts of Nifty for the years 1996-99 shows a classic triple bottom. Hence, it was only a matter of time before the start of the major Bull Run. Late 2007 saw Nifty top; however there is nothing to signify the end of the long bull run. The next few days will be interesting to watch. If Nifty breaks 3817 decisively, then this would signal a further downfall to support level of 3576. If Nifty continues to rise, then there could be a case of a double bottom being formed. This could be the start of a fresh uptrend again! However, given the negative news flow and global economic scenario, it’s only a matter of time before 3576 would be tested.

 

Market Update

As mentioned yesterday, markets exactly behaved in a predictable fashion. Investors need to stay catious at current levels. The Dow is receiving some good news in the form of Treasury guaranteeing money market mutual funds. Dow might end flat or slightly positive today. Monday is going to be crucial for both the Sensex and Dow. Short and medium term investors should sell their positions in banking and financial stocks, especially those with significant international presence.

Dow close to next collapse

The Dow is showing clear patterns of crash. Todays session offered best opportunity to sell. Indian markets could replicate this in todays session, but again it should be used as an opportunity to short your positions. Long positions can be held if fundamentals and historical values support.

Analysing Analysts!!

When I wrote on an impending crash 6 months back, not many were riding on the same boat. I sometimes find the biggest fools in “Analysts”. When the market was trading at never-before PE this January, no one prompted a sell. Business channels promptly expressed bullishness ahead and a great future for the financial sector. And la! The financial sector has given so much profit to investors than one could have imagined (pun intended). The gist is: Do you own homework. Don’t ignore fundamentals. And finally, don’t just go by what analysts say!

There’s no way companies can get out of a serious credit crisis just on the basis of a few rate cuts by Fed. It’s serious because the backbone of the US economy, the US financial sector is in ruins. I foresee the start of the next Bull Run in 3 years. However, current movements nowhere suggest bullishness. For Sensex, the next support is at 12600. However, I don’t expect this level to hold for a long time.