Crude touches $120 in just 2 days again and markets correct!

Sensex opened gap up and made positive gains initially and traded in postive territory for quite some time, while Nifty encountered resistance at 5255, which invited profit booking and some short build up too. Both the indices have closed in negative territory at the end of the session. Nifty futures premium is narrowed down to 8 points which began with 18 points, is an indication of tiredness, form bull camp, in the absence of any positive triggers. Crude touched 120 $ once again in just 2 days, on the weakness of dollar, and it is not showing any let off, which hurts most of the economies which import crude, where the demand is ever increasing.

 

Since the inflation is already at its highest levels, our government is not in a position to pass on the price hike on petroleum products, in an election year, apart from the same it will again fuel inflation further. It is being expected that crude can touch US $ 150 too very soon, since there are no increase in supplies from any quarter, where as weakness in US dollar, and raising demand from all countries can push the price to this level. Other commodities also are not showing any let off, due to weakness in dollar, and US regulators are not in a position to see their currency strengthen in the current scenario of slowing down of their economy and the possible recession in this election year there too.

 

US markets went into negative territory on profit booking, and closed negative, might have rub off effect on our markets too today. Singapore Nifty futures are currently trading at 10 points premium, while astralian markets have opened marginally weak already, shall invite further weakness and sideways movement for our markets today. VIX slightly increased to 25.07 at the end of the session yesterday.

 

Range for the Day: Nifty might trade between 5110 to 5320 today.

Strategy for the Day: Buy 5300 puts on rallies and 5100 calls on weakness for intraday trading.

Inflation at 7.57% 42 months high! Sensex too closes above 200DSMA finally!

Taking the strong overnight cues our markets opened with gap up firmly on friday, and traded volatile till the release of inflation data, which was expected to be higher. When the data came as a surprise at 42 months high at 7.57%, initially, there was a sell off in rate sensitives but, owing to firm close of asian markets and strong opening of European markets, our indices have closed in positive territory, posting week on week gains too. In the process, Nifty has closed at 5228.20 crossing February closing of 5223.50, giving indication of bullishness. Sensex which was strugglilng to cross 200DSMA has opened above it with a gap and finally closed above it at the end of the session at17600.12. Now both the indices are well above 200DSMA, as markets look for information from now on during the week and this month, and further gains whether can be there, in view of raising crude prices once again, inflation crossing tolerable levels, is a big question. Investors need to exercise caution, though 200DSMA levels are crossed, any external news or event also can invite selling from FIIs, and markets are not going to rally as they did in the last 4 years. Currently VIX closed at 24.21 on friday, indicates low volatility, and raise in any volatility from now on should be treated as the first sign of reversal of trend.

US markets opened firm on friday and gave away all gains, due to raise in crude prices, and mixed economic data, investors preferred to book profits, while Dow posted marginal gains, Nasdaq has closed with marginal loss at the end of the session. Asian markets are trading mixed and Singapore Nifty futures are currently quoting at 25 points premium, which should give marginal positive opening for our markets. Our markets might consolidate at higher levels for sometime, in case they wish to move up. Professional short term traders can place their first stoploss at 200DSMA on Nifty which is currently placed at 5165, for all long positions, and final stoploss at 5087, in case one wish to take higher risk. This is not a bull market and retail investors should not try to catch the momentum on either side, as they run the risk of loosing money, when the tables turn against them suddenly and swiftly. SBI came with better than expected results and also announced that all its subsidiaries merger with it might be comleted by March 2009, is positive news for the stock, its subsidiaries and a rub off effect on banking sector also can be seen initially.

Range for the Day: Nifty might trade between 5110 to 5320 today.

Strategy for the Day: Buy 5300 puts on rallies and 5100 calls on weakness for intraday trading.

How May month Unfolds for our markets!

After closing with 9% gains for month on month during April'2008, with number of events and most of the corporate performance is being out, we enter in to the month of May'2008, today. May month series is longer than April and already inidces have posted gains after April series settlement, till now. While Nifty firmly closed above 200DSMA, Sensex had an attempt at it in the last trading session(0n 30.04.2008) thrice, but due profit booking on holiday consideration, could not close above it. With US markets rallying over night, due to some signs of positive economic data, and cooling of Crude to 110.90 $ due to profit booking, on strengthening of dollar, as FOMC indicated that rate cutting is done with for some time, and would watch 'inflation', attempt at tightening and controlling from here on which will be the main azenda, as the turmoil in financial markets seems to be calming down. Bank of Japan has left rates unchanged. RBI has left rates unchaned, but increased CRRby another 25 basis points. Chinese Central Bank too has raised CRR last month, also is concentrating on bringing down the 'inflation' even at the cost of moderating the 'growth' in the economy. CBOE index is 19.53 being the lowest, and VIX has hit its lowest point 25.16.

 

Today, there will be a short covering, relief rally at the opening, and the 'inflation' data to be released at 12 noon, shall extend the same till the end of the session, in case it appears easing out below 7.41% highest touched so far few weeks ago, as number of measures are initiated by Government & RBI, which made Industry also to repond to hold prices for 2 to 3 months. Singapore Nifty futures are currently trading with 70 points premium shall give gap up opening for our indices.

 

May month out look: Our indices, both Nifty and Sensex have posted higher highs and higher lows during the month gone by(April'2008) albiet volatility, uncertainity around, and also posted gains over March Closings, which are the lowest in 2008. We have indicated that Nifty shall move in the range of 4300 to 5300 in our 01.04.2008 posting, which proved to be more or less true, as the range of Nifty for April actually was 4628.75 to 5230.75; Now what will happen in may? May month is generally devoid of any market sensitive news, excepting unforeseen external/internal factors in 2004 and 2006, brought indices to bottom out generally. If we consider the statastical trend and pattern year 2008 falls into the same groove, whether a bottom can be formed during this month? and which factor can bring about such sudden fall and volatility is beyond any done's comprehension. The only indicator which bring in panic reaction and wrong policy decisions by regulators could be shooting up of inflation beyond 8%; shall force the equities to suffer most suddenly and swiftly, since the sentiment and risk aversion to this asset class is already bruised with the steep correction in the first quarter. 100DSMA of Nifty is currently placed at 5329.61 should offer stiff resistance, on slaught of bear pressure coupled with bull unloading. The rally from bottom formed in March 2008, is a relief rally in a bear market, and could be a 'bull trap'. Thus investors and traders should exercise caution, take the profits and stay in cash, or alternatively hedge their portfolios duly with ITM put options.

 

Nifty might move in the range of 4500 to 5500 during the month.

 

Strategy for the Day: Buy 5300 puts on rallies and 5100 calls on weakness for quick returns in intraday trading.

April Month ends on positive note after a dip in March'2008

"Today being the last day for April'2008, and since nifty firmly crossed 5137.45(January Closing) and whether it will clear 5223.50(February Closing) also today and close above it, will be watched by technical analysts, for monthly charts to improve the structure. Singapore Nifty futures are trading with 12 points premium currently, but profit booking can be expected in the later half of trading owing to a holiday."

This is what we have indicated in yesterday's posting! After opening with positive gap making new highs for the month, both indices have become volatile, due to profit booking, and bull unloading, a head of an important event(FOMC meeting) and a holiday on 01.05.2008, finally closed in negative territory. Positive feature being Nifty has held the 200DSMA(5160.86) and closed at 5165.90 at the end of the session, clearing Jan-08 closing(5137.45), a raise of 9.11% month on month, is a positive sign for further raise in the markets from here on sustaining 200DSMA levels, ending the bearish sentiment. However, Sensex is yet to clear 200DSMA which is currently placed at 17488.02, though month on month posted similar gains like Nifty.

VIX stands at 25.16 as on yesteday, being the lowest level since its inception, indicates lower volatility. Nifty futures have closed at hefty premium of 23 points with addition of open interest, indicates positive bias for May initially. FOMC has decided to cut the Fed funds rate by 25 basis points to 2.0% in the meeting conlcuded overnight, meeting the expectatons on the street, and observed that going forward 'inflation' will be targeted, since growth indicators are turning positive, and calmness is returning to financial markets. This statement indicated that Fed has done with the rate cut initiative for some time now, sent US markets give away all gains and closing in marginally negative territory, at the end of the session. Asian markets are trading with losses at the moment, with important events behind us, markets around the world shall now try to guage the corporate performance for this quarter and year, based on the current situation, and the month of May might see churning of portfolios, for identifying the winners in these uncertain times.

The outlook for May month will be posted in the next posting!