March 06, 2013
May not be Deep Trouble
Last time I posted NIFTY Chart, it was October 2012, NIFTY around 5600-5700 and things looked very positive then. Our optimism was not for nothing as NIFTY made high above 6100 and looked all set for more. However, looking at the present chart, there are signs of trouble. See below;
US S&P 500:
First about the NIFTY. It has broken the channel after a nice run up. It is stationed between 50 MA and 200 MA now and it is basically in no man's land. After looking at many things I am still not totally convinced that we are in a downtrend. Sure, the correction has been deep but it is not unusual. There have been headwinds in terms of macroeconomic indicators like GDP growth figures, Purchasing Manager Index (PMI) showing slowdown in growth and lack of good news. At the same time there is little positive as in a rational (and not populist) budget, steps to spur growth and some respite in S&P 500 chart.
All in all, 5555 which is around 200 MA is a key level for NIFTY. We may see a play around and may be even test of this level before we get a clear picture.
S&P 500, as you will recall, I think has close relevance with NIFTY is slightly more comfortable though it may be due for a small correction. It definitely seems to be in a better shape than when we last saw it in October. However major risk seems to in terms of US Dollar. It seems to be gearing up for a short to medium (or even long) term top after which a correction becomes due.
What follows with a Dollar correction is a spike in commodity prices including Oil, Precious Metals like Gold, Silver and also Industrial Metals. This strokes inflation around the World and it can spell trouble for the fragile growth that India is aiming for.
I am still trying to catch up with many things. Being away from Markets have given me a fresh perspective and also my thinking is not clouded by barrage of information which sits in subconscious. I will keep looking for some firm cues to find out any trades. At this point, I think it may be a good idea to pick and choose some blue chips for investment purpose. I am having a re-look at some of my long term investments and will try to post more on that. I hope you won't mind if I post some idea (my thoughts) for long term investment rather than positional trade. Anyway I will be looking for Derivative trade also and it may just beat the investment idea to the next post. Whatever it is, it shall come soon.