11 October 2012: Nifty Elliott wave analysis: Nifty is moving towards the support at 5630 levels. Break below 5630 will cause further dip towards 5500 levels. Market is eyeing for quarterly figures.

You must read previous articles and watch above chart carefully to understand this article completely.

Today’s outlook: -

It was no different mood for market yesterday. It has slipped again with some remarkable fall in many reality companies. I must say that those are deserving fall. It is a common suggestion that one should try to maintain distance from all reality companies for few days/weeks. I read a lot about DLF in news papers. If those are true then just think how safe your investment can be. Those who are reading me regularly know that I have already criticized these companies long back and put them in ‘no investment zone’. It started from DLF from 800 and ended with Unitech from 90.

Now, back to technical, I have two very popular indicators which I discussed in past 3-4 days. One is RSI and other is MACD. Both indicators are giving signs of weakness and backed on those I have acted on short trades from higher levels. I tried few shorts earlier also but failed. Technical trend line studies are suggesting that we will have decisive support at 5638 to 5630. I have already quoted this support three days back only.

Now suppose if it breaks 5630 then it will have greater chance of hitting levels towards 5500 levels. I must add that market is going to be influenced a lot by speculation over upcoming Infosys and Reliance quarterly numbers. We have got so much of poor IIP data that I have a doubt about result now.

I have also quoted about S&P 500 (USA) earlier. It was stated that if it fails to breach 1475 then it may remains yearly top. Right now when I am compiling this article, S&P 500 is at 1433. We have crucial support at 1424 to 1418. Break of this range will create problem even for US market. So it was other way to look the market. I conclude something first on US market and then correlate this with Indian market too. This gave me better confidence to deal.

There was another development which deserves to be mentioned. S&P has warned/threatened India for a possible downgrade in 24 months time. Note down two important points. First is, we will be in election in 24 months time and do not expect speedy reforms. Every ruling party in the world is doing this and India will follow the trend. Secondly, we know that Indian economy has lots of hurdle. It deserves downgrade but not by leaving rest of the nation’s rating unchanged. I am also saying that our economy may be in trouble. Well, but there is another fact that Europe is already trouble. Rating agencies are always trying to be brutal with India. Current rating for india is BBB-, which is poorest rating for investment. A downgrade means “JUNK” rating for India. Common, this is not fair. You cannot compare India with Greece.

Have you noted one thing? All Indian experts were bullish and DII’s figures were on constant sell side. Almost all rating agencies were trying to be negative with India but FII’s were on buy side. Interesting, isn’t it?  

Regards,

Praveen Kumar

10 October 2012: Nifty Elliott wave analysis: Is the current valuation justifying stock price? Wave theory is denying those. It seems that short – term top has formed. Support for NIFTY @ 5630.

You must read previous articles and watch above chart carefully to understand this article completely.

Today’s outlook: -

Yesterday I have quoted as, “It may open higher by 25-30 points, say @ 5700 levels. Then it may fail at 5725-5730 zones at the max.” It hit a high @ 5729 and then slipped. Apart from that, 2 days back it was quoted that if S&P 500 (USA) fails to cross above 1475 then it may also act as short term top. Those were two recent finding of wave theory applications.

I am already saying that market should not try to discount up coming quarterly numbers. It seems that now market is sensing those. I like to draw your attention towards MACD which has given a sell signal in the last trading session. We must note that last sell signal has seen a divergence. We have three sell on RSI also in past few weeks. It cannot be easy to surpass this kind of trading signal.

I am still not saying for much bigger cut in market. I like to see the market behavior in the zone of 5638 to 5630. If it break and close 5630 then I would be in the position to say for concerning dip. I always prefer to take market in a phase manner. Current phase seems to be a shaping up for weakness.

On the higher side we will face stiff trading resistance first at 5730 and then at 5750 levels. Cross over of 5750 will again lead us towards 5800 levels. In the down side, if I consider the beginning point of this rally from 4770.then even 23.8% comes at 5567. So we are still too far from any crucial Fibonacci support levels.

There are few more important developments. Euro zone is again giving all signs of burning. I have already criticized Mario Draghi when he comes out with his great idea of ‘unlimited bond purchase’. Those has postponed the problems but not solved. At some point of time Euro zone has to face their bitter truth. This is not the one worse thing. Next was QE 3. Now what people are waiting for? QE 4? These are just the waste of money. Take a note that higher stock price cannot be the guarantee of generation of job. It seems that policy makers are running short of ideas to come out of this phase. I have one such, start creating government based job and stop relying on private hands. It will help to end the fear in economy and will able to rotate the money cycle. This may take time but I do not think that we have too many options now.

Lastly, I am assuming that only the ‘announcement of FDI’ can not solve problems for India. You need to create good environment to attract FDI. Where are those environments? Now a day, it seems that we are getting newer topic for corruption on weekly basis. Stock market can go up or down depending on many factors but economy always need to put on right track. That track is still missing even after efforts.

Bottom line is that I want to say that upcoming quarterly numbers and earning guidance may fail to fulfill the apatite of the market.