The state of the markets: Contemplating similarity and difference between 2008 and 2011 market corrections and the possible road ahead.
After seeing sell off in the initlal 4 days of the current October derivatives expiry to low of 4741; nifty index has been steadily showing upward trend resulting in a high of 5402.75 on the second day (28th oct and start of nov expiry) of diwali muhurt trading day.
We had seen a sell off to 4720 level from above 5700 in at the end of the august derivatives expiry beginning from the end of july expiry (july was tight ranged and low volatile trading band month for the indice) following consistent correction in the august expiry as said.
If we go back even further and want to take a sneak of diwali to diwali map than we can see market making clear lower top lower bottom pattern (one of the few sure-shot highly reliable and predictive technical patterns) since last diwali which was on 5th of november 2010.
We can see in the chart no-1 that nifty made high of 6338.50 on 5 november that is the 2010 diwali day!
Head and shoulders pattern-
According to another highly reliable, time-tested and predictive techncal pattern the nifty index has made head and shoulder pattern as seen in red box lines in chart-1 and according to that if nifty do not sustain the 5200-5400 range then it is bound to slide lower and break the support levels of these pattern which are at 5200 and then slide below 4720 which is recent low of the indice. According to use of our other indicators and news analysis and prediction model nifty can rise to 5400 (also to fill opening gap, which was bound to fill up as we were saying repeatedly when nifty was sliding lower and now on 29 oct 2011 has hit that level) and above before Christmas in December or before it. The point is that in Christmas nifty will have consolidated and filled al the gaps it made earlier and going to make in nov month and then decide the course for mid-term trend and low volatility and high action activity which is not the case presently.
DRAWING ANALOGY BETWEEN 2008 CORRECTION AND 2011 CORRECTION AND WAY AHEAD IN 2012-
2007-2008 correction details-
High made 6357.10 on 08-01-07, low made 2252.75 on 27-10-08 , time taken between high and low was 10 months.(conclusion/view=mkt may correct sharply but does not remain down for long and bounces back, thus our approach to remain invested at all times)
Main reasons-
USA’’s not-before-ever type of financial markets crisis followed by/bringing in 1933 type real-market recession/depression.(1987 crash,LTCM crisis,enron issue was limited to wallstreet and not wide spread in throughout all type of financial markets and into the real economy like 2008 type)
Lehman brothers collapse due to financial markets crisis.
Fear or recession/depression.
Fear of stagflation (which was and proved overdone)
Unemployment rate reaching abv 9% first time after 1933 recession (still at same levels but tolerance of financial markets of this indicator has increased).
USA DowJjone index before, through and now-after the 2008 phenomena.
2011 situation=
2011 saw the steep monetary tightening in by Chinese and Indian central banks (RBI so far has done 13 rate hikes) which were apparently aimed at bringing down inflation which was hurting to economy and consumers and monetary system while the monetary tightening/credit contraction efforts brought down profitability/earnings of corporates in India (assume Chinese corporates situation on same lines)
After 2008 in 2009 and more in 2010 and even more in 2011; the European Union has come out with more drama in terms of the debt problems of its euro zone countries mainly Portugal, Italy, Greece, Spain. After coping with Spain, Greece has become a headache for EU leaders and since last week there was no doubt that Greece will default and nothing can be done by eu leaders (before 2 days EU announced 50% write off of Greece debt and 5-times increase of bailout fund for euro zone debt-struck nations along with other smaller measures till date since the crisis surfaced. It is apparent that all the measures are aimed at keeping sufficient liquidity in the system, cushioning banks from failing and in overall avoiding Lehman-type moment. Austerity and direct-indirect bailout of sovereigns and banks have been the main course. Dont talk about growth related measures. You don't arrange party in sinking ship but try to put down the holes first.
it is important to note that the global markets were ripe for correction in terms of commodities prices shoot up and heating up of emerging economies like India, china and Brazil during 2008 correction. while 2011 was indeed including 2010 followed with monetary tightenig by those countries. while Brazil still remains darling amongst the BIRCS (brazi, india, russia, china) nations china is seeing concerns on its property market bubble ‘shadow economy’ and so-called ‘ghost city’ phenomena which is raising concerns among investors of a multiyear slow-down measures by the govt (not gdp slowdown but the efforts of the govt to slow down the gdp!)
On the other hand India is witnessing huge political turmoil including big scams involving corporates, and govt bureaucrats and politicians alike followed by arrest of some of them (cases filed now), then the nation-wide anti corruption movement, consequences of which belieed to have decreased the chances and raised fear among the foreign investors the present cong led govt to win power in next union elections.Then if things were not too bad the govt came out with 26% profit sharing mining bill we believe negative impact of which is not yet fully discounted in mining companies stock prices, then the much-up roared land reforms bill is also feared to increase the cost of acquisition of land for industries however the impact of which is yet to be seen and the fine print of the act is also not out. The consolidating and bottoming out of voice-tariff rates and new telecom reforms are expected to bring cheers to telecom companies however they are also still to be put in black and white by the govt, which should be done by next quarter.
-30/10/2011
…to be continued.
After seeing sell off in the initlal 4 days of the current October derivatives expiry to low of 4741; nifty index has been steadily showing upward trend resulting in a high of 5402.75 on the second day (28th oct and start of nov expiry) of diwali muhurt trading day.
We had seen a sell off to 4720 level from above 5700 in at the end of the august derivatives expiry beginning from the end of july expiry (july was tight ranged and low volatile trading band month for the indice) following consistent correction in the august expiry as said.
If we go back even further and want to take a sneak of diwali to diwali map than we can see market making clear lower top lower bottom pattern (one of the few sure-shot highly reliable and predictive technical patterns) since last diwali which was on 5th of november 2010.
We can see in the chart no-1 that nifty made high of 6338.50 on 5 november that is the 2010 diwali day!
Head and shoulders pattern-
According to another highly reliable, time-tested and predictive techncal pattern the nifty index has made head and shoulder pattern as seen in red box lines in chart-1 and according to that if nifty do not sustain the 5200-5400 range then it is bound to slide lower and break the support levels of these pattern which are at 5200 and then slide below 4720 which is recent low of the indice. According to use of our other indicators and news analysis and prediction model nifty can rise to 5400 (also to fill opening gap, which was bound to fill up as we were saying repeatedly when nifty was sliding lower and now on 29 oct 2011 has hit that level) and above before Christmas in December or before it. The point is that in Christmas nifty will have consolidated and filled al the gaps it made earlier and going to make in nov month and then decide the course for mid-term trend and low volatility and high action activity which is not the case presently.
DRAWING ANALOGY BETWEEN 2008 CORRECTION AND 2011 CORRECTION AND WAY AHEAD IN 2012-
2007-2008 correction details-
High made 6357.10 on 08-01-07, low made 2252.75 on 27-10-08 , time taken between high and low was 10 months.(conclusion/view=mkt may correct sharply but does not remain down for long and bounces back, thus our approach to remain invested at all times)
Main reasons-
USA’’s not-before-ever type of financial markets crisis followed by/bringing in 1933 type real-market recession/depression.(1987 crash,LTCM crisis,enron issue was limited to wallstreet and not wide spread in throughout all type of financial markets and into the real economy like 2008 type)
Lehman brothers collapse due to financial markets crisis.
Fear or recession/depression.
Fear of stagflation (which was and proved overdone)
Unemployment rate reaching abv 9% first time after 1933 recession (still at same levels but tolerance of financial markets of this indicator has increased).
USA DowJjone index before, through and now-after the 2008 phenomena.
2011 situation=
2011 saw the steep monetary tightening in by Chinese and Indian central banks (RBI so far has done 13 rate hikes) which were apparently aimed at bringing down inflation which was hurting to economy and consumers and monetary system while the monetary tightening/credit contraction efforts brought down profitability/earnings of corporates in India (assume Chinese corporates situation on same lines)
After 2008 in 2009 and more in 2010 and even more in 2011; the European Union has come out with more drama in terms of the debt problems of its euro zone countries mainly Portugal, Italy, Greece, Spain. After coping with Spain, Greece has become a headache for EU leaders and since last week there was no doubt that Greece will default and nothing can be done by eu leaders (before 2 days EU announced 50% write off of Greece debt and 5-times increase of bailout fund for euro zone debt-struck nations along with other smaller measures till date since the crisis surfaced. It is apparent that all the measures are aimed at keeping sufficient liquidity in the system, cushioning banks from failing and in overall avoiding Lehman-type moment. Austerity and direct-indirect bailout of sovereigns and banks have been the main course. Dont talk about growth related measures. You don't arrange party in sinking ship but try to put down the holes first.
it is important to note that the global markets were ripe for correction in terms of commodities prices shoot up and heating up of emerging economies like India, china and Brazil during 2008 correction. while 2011 was indeed including 2010 followed with monetary tightenig by those countries. while Brazil still remains darling amongst the BIRCS (brazi, india, russia, china) nations china is seeing concerns on its property market bubble ‘shadow economy’ and so-called ‘ghost city’ phenomena which is raising concerns among investors of a multiyear slow-down measures by the govt (not gdp slowdown but the efforts of the govt to slow down the gdp!)
On the other hand India is witnessing huge political turmoil including big scams involving corporates, and govt bureaucrats and politicians alike followed by arrest of some of them (cases filed now), then the nation-wide anti corruption movement, consequences of which belieed to have decreased the chances and raised fear among the foreign investors the present cong led govt to win power in next union elections.Then if things were not too bad the govt came out with 26% profit sharing mining bill we believe negative impact of which is not yet fully discounted in mining companies stock prices, then the much-up roared land reforms bill is also feared to increase the cost of acquisition of land for industries however the impact of which is yet to be seen and the fine print of the act is also not out. The consolidating and bottoming out of voice-tariff rates and new telecom reforms are expected to bring cheers to telecom companies however they are also still to be put in black and white by the govt, which should be done by next quarter.
-30/10/2011
…to be continued.
