Week of 27th July 2009

nifty shuold rise on month on month and daily basis but may fall on weekly basis.

will follow gold as well going forward. Gold seems will fall from daily and intraday rsi ew etc, but should gain on weekly basis. There is a price vol divergence, but negative stochs, rsi so may rise after a dip, whether the dip will be day long or hour long i dont know.

Week of 20 July 2009

Clearly, news seems to be more important than many other fundamental factors in recent times, so in that sense, macros are ruling as of now.Now, with the new government not having announced anything in the budget, its obvious that they will keep announcing one reform here one there, so probability of positive news coming in from time to time is high in the next one year. Yes, negative economic data will come from time to time from the US ( e.g. CIT going kaput), which will drag the market lower but will have less impact than the positive local news. With this hypothesis, overall sentiment seems long to me in the medium term. Why its not so in the long term is because lending still hasn't started yet. Whatever little is happening, its by the governments, so without any capacity building in the private sector, where is the 9% growth going to come from, something to this effect was pointed out by my able friend Ken. so, up for 6 months yes, then either drag, stagnation or some fall back in the markets cant be ruled out.

Now to the charts:

Nifty - I think looking at only daily data makes sense for main theme, which only should be confirmed by weekly or monthly trends. So what am trying to say is, daily movement should be the guiding factor, more so with the way things have been in the current market when:

stage 1. news comes, market moves in one direction for 3-10 days,
stage 2. if more news comes, move continues else market starts to turn choppy
stage 3. opposite news comes, and a revese trend starts for 3-10 days.

clearly, by the time things start reflecting on monthly data (weekly will still be ok), things start changing.

Daily - Stochs positive, RSI positive. momentum about to turn positive. Elliott wave upward 3rd point to be formed so room for more upside. previous highs were 4390, 4424 and 4517, 4655. current close is 4375. good candle (don't remember the name). just outside KLT but within BB.

Weekly & monthly data : room for upside as seen in KLT. stocks negative and RSI is alos about to head in overbought zone, overall seems like the week's 10% positive run is about to reach an end, but may take a few days, to go up it needs to break the 4424 level on weekly and 4448 level monthly, awfully close, which i think can be a kind of momentary stop before the market chooses it next course.

Other thing to watch will be the earnings, which am not so worried about, clearly all analysts were playing safe by being overly pessimistic. However, CIT may have an impact, not in this week but in the weeks to come, if there are too many strings attached.

consumer backdrop

Before money finds its way into each of the asset class , we mention all important american consumers whose spending happen to be the drivers of US economy and some may argue drivers of exporting economies also. Having lost around 20% in their house value, combined with 10% unemployment rate, which is having every 10th neighbour without a job, the consumers have suddenly realized importance of saving more than speding. also evidenced by the personal income and consumer spending number which came after they received tax credits from obama gov.

Asian consumers are also not in the best mood to spend, as linkages of global recession have not eluded them completely while their respective government stimulus may cover up growth at interim but they would definitely end up being far inferior in capacity creation than corporate spending of the same magnitude.

Where is the money?

First whether there is money?. Central banks have outdone each other in terms of flushing the banking systems with liquidity from eonia to sonia to libor to desi mibor all of them easily closer to their historic lows. So, plenty of short term money but what about long term money? its definitely not cheap as the yield curves across the globe are steepest again at all time kind of levels. but that is not the problem, problem is demand? there has been 0% credit creation in India, one of the fastest growing economies in the world, in this current year so far. just wonder what would be happening in the Recessioning nations. whatever loans and credit offtake is there, it is for substituion or repayment or some such thing. So no fresh credit demand from corporates i.e. no capex. (ofcourse credit creation is getting substituted by huge government borrowing but for expenditure not capex) So from the money supply side, world economy resembles a patient who has very good life support (money market) but no outlook on when he could have his steak and fine meals(capital markets).

So bottom line there is money, but very hot, can disappear easily.

Now where does the money go?