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;

Weekly Chart:

Daily Chart:

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.

We are in trouble

As promised, I am writing a catch up post. Before I go about it, I am little overwhelmed by your good wishes in large numbers. I am really thankful to all the readers. Many of you have asked different questions about the this new business and all. I am little short on time and the whole business is still in nascent stage and I am also not fully sure what shape it will take by the time it is fully functional. So I will answer all those at an opportune time. But rest assured that this blog is not affected in any way due to it.

As I suspected I am short on practice and data updation for my charting software is taking lot of time. However, what I saw online on some charts, indicates that we may be in trouble, at least in the short to medium term. I need to confirm that with detailed charts, supports and resistances, moving averages and all. I will try and put that post today itself if everything goes well otherwise please bear another day with me.

Thanks for your wishes again and see you very very soon.

No Budget Post

You are not going to believe it but I have not seen Rail Budget or General Budget this time so there is no question of its analysis. Honestly, by the time I analyse it and post something, it will be a goner event and non-consequential really.

These days I am busy setting up a business and it is taking too much time and energy. Those of you who have started something on their own will know that initial days of a venture are really crazy. You got to do everything from the place, furniture, computers, printers, stationary, network, lights, water and what not all by yourself. This is off course apart from the business model itself. Well, I will leave all this cribbing for some other day... in fact will want to write all about it someday.

For now, good news is that I have decided that I need to diversify my thinking a bit and detach myself from this business for couple days to get fresh and recover mentally. And what best way for that than to get back to this blog and to all of you. It may not happen immediately or during the weekend but may be sometime next week... am counting on Monday, Tuesday. Lets see.

Will make an effort to recap market movements for the time I have been missing here and will try to set a expected move from here on. I may be little out of touch when I do that so advance apologies. Will like to know if you have any budget comments from your side though.

'Just Like That'

Hey Guys,

I am back... 'just like that'. There are many things to share as to where I been, what was I doing and what are future plans, etc. All those things can wait as I actually had a look at the charts today after a longggggg gap. Not many charts and not many indicators; just NIFTY.

To cut the long story short, on a daily chart NIFTY is in trouble. On a weekly basis however we have some margin before all hell breaks loose. Lets just hope that NIFTY doesn't breach 5950 on a weekly closing basis (if you are a Bull of course).

I am terribly out of practice so am not posting any charts today. Hope to do that soon.

I most sincerely apologize for taking off 'just like that' but I sure am happy to come back 'just like that'. Please forgive me 'just like that'. It can and will only get better from here.

Break-Up

Hello Readers, reason for my prolonged absence is a nasty breakup I had to suffer... No, no, not that kind of breakup... I actually quit my job.

It was my first and so far only job so it was very difficult for me to let go and apparently I was doing great so it was difficult for my company also to let me go. Anyways, the job was taking too much of my time and travelling was also increasing day by day making my family very unhappy. Final nail in the coffin was probably my travel during Navratri after which my family said enough is enough. I also thought so as work was getting monotonous... So I just chilled out and was busy last few days attending send-offs and then visiting my roots during Diwali vacations. Had a whale of time and fun.

Have so many things on my mind, a long to do list and off course this blog is one big priority. I have got couple of good suggestions for new posts and will definitely act on them.

Keep watching this blog for more and YES, thanks a lot for your patience. Happy Trading.

USA and India

As promised, I am back with second installment of my 'NIFTY Comparison with rest of the World' posts. We had already seen Europe and India at the start of the month and in fact it now warrants a re-look at the charts in that post. Will do that sometime. Today, let us see what the US Markets have in store for us. As all of us know that US continues to be largest and most influential market around the World and I do not see any short or medium term threat to its dominance. Any trader or investor anywhere in the World cannot ignore signals from US Markets and we have always been taking cues from it in this blog. Today though I am afraid that I do not have all the positive news for the bulls.

Like Europe, US also has a maze of various indices which you can look at and refer and trade upon. Not only US Dollar, Gold, Commodities, Shipping, Minerals, Oil, etc is decided in US Markets but hosts of Bonds, Money Market Instruments, Exchange Rates and all that has origin and maximum trading there. US Markets also track a variety of sentiments, housing prices, jobless claims and what not. Get the Alice in Wonderland feeling? What we know of them is just the start of the rabbit hole.

Anyway, we will only see the three most directly impacting indices today. Just to keep it simple.

S&P 500

Upward channel is broken as well as 50 Moving Average has been taken out convincingly. Series of higher highs and higher lows is also violated. Now if any of you follow cycle theory then you will know that it is not unusual for corrections in a left translated cycle to go below the earlier low... or in simple terms it may not be a sign of sure shot correction but it still is a threat and considerable at that. Caution advised.

Positive thing is that 200 MA is still at some distance and a close eye to be kept at that level. A bounce above 1435 will give some respite for Bulls though I will not count on that with all my bets.

DJIA

Quite the similar story here too though it is little more bearish than S&P 500. Both these indices are a close reflection of NIFTY in composition and both are showing signs of stress. Most serious signs of problems though come from NASDAQ Composite which may not affect NIFTY as much and as direct as these two.

NASDAQ

NASDAQ appears to be in serious trouble here. It is extremely close to 200 MA and looks to be in downtrend. It is also a victim of below expectations results from Google, Microsoft, Apple and other technology companies. Many of these companies also hold the key to general sentiments of US Investors and hence they do affect everything else indirectly. NASDAQ may bounce from its 200 MA and may go up to upper end of the channel at 3050. Beyond that, it is difficult to say the direction of next move.

Intriguing signals from US and surely interesting times for NIFTY. I am not really interested to drawing any conclusions here for NIFTY and will leave it to you guys to comment on. So let me know what you think of these charts and its possible effects on NIFTY... Will be very happy to have a dialogue on this so don't disappoint me.

Happy Trading as always.

Apologies

My apologies for this long absence. As I tweeted, I have been traveling a lot and hardly settling at one place to write something. There is absolutely no change in my stance and I will continue to write for time to come and this blog will remain free forever.

I am seriously hoping to write something soon but only constrained by the lack of time at hand. Did not have look at the markets too for some time. Will do that and further writing soon. Happy trading till such time.Will be back with next post.

Sent from mobile.

Europe and India

Well, just like last (MACD) post, I cannot delay this one any further. I have been talking about this post for  a while now. Just like I checked few stocks of NIFTY to see any sign of stress in this rally, I wanted to check few global equations as well. Lets get on with that.

Europe

I was slightly confused about which index of Europe should I analyse; choices being German DAX, French CAC40, UK FTSE100, Spanish IBEX or Italian FTSEMI. All of them have their strong reason to warrant a look but given the dearth of time, it was impractical to post all of them. Facing probably same dilemma, some noble fellow has already invented European Top 100 index which tracks the performance of most widely traded 100 stocks across 9 European exchanges and weighed according to total Market Capitalization and Gross National Product of each country. Details of these stocks can be found here. Here is the chart.

The Index has been nicely moving up since June. It has just now broken the lower line of the channel but that may not be a decisive move. Interesting part is about its close proximity with 50 Moving Average which is at 225.26 and present level of 227.37 is tantalizingly close to it. RSI is at an extremely comfortable level but MACD is showing little drop in momentum though it is not exactly at alarming level.

Very important level to watch out here is low of first week of September which was around 222. A decisive break of that low will mean a lower low negating the present bull run for the first time since it's start. Rest of the indices in Europe are more or less having similar charts and similar predicament. A few more trading sessions should give us some more clarity and possibly very clear (and beneficial) trading opportunity. As of now, as I said, I prefer short side in the present series.

If I wait till I compare everything I want, this post would probably never happen. So I want to make few more post with title like USA and India, Commodities and India, BRIC and India (hope you get the idea) to see how do we fare so far compared to rest of the World and how much steam is left before we roll over to some correction. Hope to get some real time for that which is becoming increasingly difficult. Wish me Luck. Amen.

Happy Trading in the meanwhile.

Support and Resistance

My apologies for not making the post as promised. Having some trouble getting the global charts as I want. Nevertheless I can tell this much that last week we have formed a doji on NIFTY indicating first sign of 'halt' in this rally. Expect some sideways movement if not outright downward.

Even my Twitter handle is having some trouble tweeting a image hence posting Support and Resistance Levels for 01st October here in the blog.

There could be some issue with Java and/or flash, both of them, I updated to latest version. Will sort it out soon but I can say that if at all I am trading October series, I am trading it on short side.

Happy Trading.

MACD

MACD

Its been long time since I posted any tutorial. MACD (Moving Average Convergence-Divergence) post has been in work for past 2-3 weeks and other post took precedence due to very dynamic moves in the markets but I will feel guilty to delay it any further.

We have already seen Moving Averages which are trend following Indicators. We have seen RSI which is an Oscillator. Both have their own advantages and downside. MACD, to start with, you can say combines best of both Worlds. MACD takes two trend following Indicators (Moving Averages) and turns them into an Oscillator. MACD gives us valuable information about not only the trend but also the momentum (strength) in the direction of the change. Before deliberating further, let us see how MACD is defined and constructed.

MACD consists of three components usually defined as MACD (12, 26, 9) which is most popular combination. 12 and 26 here depicts that MACD is using Exponential Moving Average of 12 duration and 26 duration (Days, Weeks or Months) for calculating MACD Line. Third letter, 9 indicates Exponential Moving Average of MACD Line for 9 duration which is used as Signal Line. MACD Line is calculated as 12 EMA Value - 26 EMA Value and Signal Line is calculated as 9 EMA of MACD Line. Histogram that you see with MACD is the difference between MACD Line and Signal Line. The centerline around which MACD Line oscillates is also called as zero line. You can use other durations for constructing MACD depending on your time horizon and sensitivity requirements. Please see the MACD in the chart below to familiarize yourself with above terms.

Reading MACD

Let us now see how exactly we get information from MACD. As per above formula if 12 EMA (which is faster, more responsive) is higher than 26 EMA, the MACD Line is in positive territory. Positive value increases when 12 EMA is increasing at a faster speed with respect to 26 EMA which also indicates that the positive momentum is increasing. Similarly when negative value increases, it means that 12 EMA is lesser than 26 EMA and the difference is increasing indicating a stronger negative momentum. This is the most basic reading of MACD.

MACD Signals

Traders use MACD is varieties of ways to identify trading signals. Some of the popular MACD Signals are listed below;

• Signal Line Crossovers
• Centerline Crossovers
• Divergence

I will make another post to explain each of the above strategy in details and with examples.

In a nutshell

MACD has the unique advantage of identifying trend as well as strength (momentum). Unlike RSI, MACD does not help in identifying overbought or oversold conditions and it does not have any upper or lower levels which limit its movement. Since MACD is a difference between two EMAs, its value depends on value of the underlying and it may totally differ for a stock worth 10 Rs or for NIFTY at 5700 level. Hence don't compare MACD of two different scripts or underlying with each other. Also, we can use different durations of EMA to change the sensitivity of MACD e.g. MACD (5, 31, 5) would be more sensitive than MACD (12, 26, 9). I prefer to go with the standard used format of (12, 26, 9). Never felt the need to try any other combo.

Now, after completing this post, I am feeling a lot better and lot lighter. Will quickly complete the follow-up post on MACD Signals with more graphs and little commentary to close this chapter. As usual, will lover to know what you think of the post so go on and let me know. Happy Trading.

Is this Rally for real?

(Caution: Time reference of this post is Friday 22nd September 2012)

Whoa... NIFTY made a 52 week high today. What a rally. Honestly speaking, how many of us were expecting it? We were around 4770 in June with all gloom and doom. We usually have these extremes moodswings before any turnaround. In Jan 2008 there was this height of optimism where one could easily hear all our everyday friends like Chaiwale Bhaisaab, Doodhwale Bhaisaab, Autowale Bhaisaab talking about Sensex and all rag to riches stories that they had to share. And just at the start of this month there was so much pessimism regarding Government, Policy Logjam, Coal-Gate, Parliament Adjournment and what not. Then this massive move today made my last post expecting some fight between bulls ans bears look like a silly joke... so much for news based Markets. So are we out of the woods really... is this rally real and is actually start of a massive Bull Market?

Obviously I do not know. Definitely not yet.

But let us see some facts. That's what we can do and try and decipher some signals from those facts. Today along with NIFTY, there are not one or two but 20 stocks which are close (within 7%) to their 52 weeks highs. Many of them are real close within 2% and some 5% while 4 of them have actually made these highs today itself. These 4 are; Grasim, ICICI Bank, Kotak Bank and HDFC Bank and real close are L&T, HDFC and Ambuja Cement. No wonder most of them are Banking stocks (that actually worries me as well) with all reforms, CRR cut and all that. It may take me few months to write everything about these stock from fundamental analysis point of view and by that time data might have changed already... ruining all my efforts. So I will do what I can do in lifetime of this post... post charts. I will post only one bank stock so that we also cover many sector's stocks in the process (note that stocks here may not be true indication of their respective sectors).

1. Grasim

Found really nothing remarkable about the chart. Just that it is following up NIFTY movement. RSI is in overbought zone but it can stay there at higher levels for longer time. Just look at RSI in August.

2. HDFC Bank

Nothing special again. This script has been taking good support and resistance levels from Moving Average lines. Multiple occasions can be seen above. Right now however, it is comfortably placed above MA lines.

3. Larsen and Toubro

Move from 1300 to 1600 in less than 4 weeks. Very impressive. This script is one of my long time favorite for intra-day as well as long term investments. Its been a laggard for some time in tracking NIFTY but surely trying to play catch up.

4. Ambuja Cement

4 out of 4 charts are showing a Golden Cross where 50 MA has crossed 200 MA from below.
4 out of 4 charts are showing no serious overbought condition.
4 out of 4 charts are showing good moves with above average volumes.
4 out of 4 charts are showing values stretched above their MAs

I am trying to see some sign of exhaustion in the rally and unable to see anything wanting serious caution on NIFTY or its components as of now. What this entails is enjoy the rally while it is in play but keep strict profit targets and stop losses. It is very easy to make notional money in the present market, difficult is to keep it.

Wanted to do this post on Friday itself but was unable for one or the other reasons.... very sorry. I will make another post on similar lines where I will examine major World markets in details to see if they help us in understanding the trend and timelines for this rally.

I should be able to do that tomorrow. Happy Trading till then.

Interesting times as usual...

Happy Ganesh Chaturthi to all my readers. May the Lord Ganesh bring happiness, health and prosperity to all of you and your families.

Well, coming back to Blog, I hate to boast but NIFTY just touched 5650 and turned back. It made a high of 5652.2 briefly on Monday and settled to 5600.05 yesterday. If you recall last post, I had hoped a return from the very same level based on plotted Fibonacci levels on the chart. Now I know the next question to your mind is how deep this correction will be? Well, the answer is not simple. Let us try to see both sides of the coin here.

First of all, I am not saying that this is correction at all. I just thought that markets will feel exhausted and run out of steam and will take a pause and it was true for markets around the World. I surely expect some more downward bias courtesy Mamata Didi. She did what she does best and put a spoke in the reform cycle. She would surely have her arguments and (misinformed) advisers to think that FDI is against farmers and 24 cylinders a year is the right amount for a poor household. Her withdrawing support to UPA when she had the option the stop FDI and increase no of cylinders in West Bengal on her own is real hypocrite behavior but it also throws up a real opportunity for UPA to get rid of her for good. She has been the main reason for delay and paralysis on reforms in UPA. Hopefully Government will survive and we will have more steps taken to revive the economy.

On the other side, I do not expect the downward move to be very steep or deep. PC has been very active in Finance Ministry since taking charge and has already made statements that more announcements are in the offing. He has virtually said that RBI will cut interest rates on October 30th (almost) as Government will be taking a lot more fiscal consolidation steps between now and then. Markets will be all ears and will be averse to go down too much anticipating some measures.

Let us see if any clue with Technicals on the chart;

On the chart front, there is hardly any movement since I last posted expect that RSI has turned down a little on daily basis (not shown here). The trendline shown above and also the 50% retracement from Fibonacci levels in last post, both indicate a support at aroud 5430. Now that is pretty deep cut from current level of 5600 but that is a very strong support I would say for the short to medium term (till next week). I will not rule out its possibility completely as a lot will depend on not economic but political news in next few days. I will not underestimate capacity of our polity to spring few surprises. Also we will have some F5 (refresh) movement about problems in Europe and QE3 euphoria will likely take a back seat for some time at least.

Just to summarize, expect a tug of war between Bulls and Bears for some time. Expect good moves on either side and sideways movements, some consolidation (all that) till we get some more clarity about World economy and situation close home. Undoubtedly, we live in interesting times.

All in all, a very uncertain time ahead for next week and half. May Lord Ganesha, Lord of Wisdom give much needed wisdom to the people who matter and they take all the right steps. May everyone is this country and in this World benefit from these steps and lives of all the people get better and better.

Happy Trading.

Forget Fed... its all happening in India

Friday evening, Government of India made some bold announcements. There was nothing new or radical but these announcements came at a totally unexpected time and pace. Following up the Diesel hike and subsidized LPG cap, GoI cleared FDI in Retail, Aviation and Cable. Government also cleared divestment in four companies. PM statement that, 'If we have to go down, we will go down fighting' makes one think that GoI may be serious this time in pushing these steps through. Mamata tried (as usual) to play the spoil-sport by giving 72 hour ultimatum for rollback which will be ending tomorrow evening. There will be a meeting of TMC on Tuesday to decide further course of action. Been tweeting about it and I hope you guys are reading those tweets on the blog.

But focusing on the positive part as of now; what these announcements did is more than the symbolic value of their benefits (which is huge). Suddenly there is a sense of hope and a sense of purpose or direction within the UPA Government. These moves may well serve two big purpose in the immediate term. First, it may just save us from the shame of becoming the first BRIC economy to loose investment grade rating. Now this again may or may not be a big deal for India but it would have badly affected the already in trouble Private Sector. Maintenance of the rating will help Indian companies to keep cost of overseas borrowing in check (though it is already bad due to change in INR/$ equation)

Secondly, it may just give RBI some room on Monday to start thinking about cutting rates. There is more than just whispers by Pundits that RBI may continue what GoI has started. There is widespread belief that RBI may join the party and cut the rates today. If you remember the last policy statement by RBI it was clear that RBI wanted some policy actions from Government before any rate cuts. Though the Inflation (around 7.55%) is hardly anywhere near the comfort zone of RBI but slippage in growth may just prompt them to take some risk,

Till Friday, I was thinking that 'QE Unlimited' would be a big thing but all these developments have pushed it in the background at least for India. Make no bones that QE3 will have far reaching and good/bad consequences not only for India but for the entire World in the long run but in the immediate term, I think events unfolding back home will have a much larger impact on NIFTY. I did not want to post any chart as there is hardly any change from when I last posted one but still here it is. Looking better and better.

I have given some Fibonacci levels for the correction from 6300+ levels to around 4500 level on NIFTY. We have 61.8% of this fall (which is pretty important) at around 5650 and we are about 75 points from that level. I am very much sure that this level is pretty much in sight and reach.

However, I think the Euphoria on QE3 as well as all these positive steps will take Markets up to a level which may be more than it deserves. Also we have seen some pretty impressive moves and profit taking is due and also as a consequence of rubber band effect, I expect correction in second half of the week (it may happen as early as Tuesday). I probably (if I get time) will take a contrarian view and open a small PUT position for NIFTY tomorrow at around 5645-5650 with strict stop loss of 30-40 points. Beware, sometimes I trade only on hunch.

I am back in Pune just today and was catching up on many things hence cannot write more. Have to take your leave as another week starts now and have to prepare for it. This will be a wonderful week with Ganeshotsav starting on Wednesday. I pray and hope that Lord Ganesh will bring best of health, wealth, wisdom, peace and prosperity in the lives of all readers. Happy Trading.

A Positive Move...

Government finally bit the bullet...

Hiked Diesel price by Rs 5 a Liter and limited subsidized LPG cylinder to 6 per family per year. Now this is very very long overdue step and one surely in positive direction. For, first, Diesel subsidy is hardly useful to poor people (apart from lower transportation costs) and it is mostly used by affluent middle class for their SUVs. Second, the poor people for whom the LPG subsidy is intended will usually never use more than 4 cylinders in a year. They have probably single stove and make simple food (hopefully) twice a day and for that 6 cylinders are usually more than sufficient. It was always the best way to  solve the wrongly directed LPG subsidy. I have to say, got a pleasant surprise with the news.

NIFTY today made a doji and Bulls and Bears were really fighting hard for an upper hand but given this development, I do not think that we will have a reversal tomorrow (with the rider that US Markets don't spoil the party).

US Markets as of this moment are in positive territory and if they close like that (or even stay flat) we should see positive opening tomorrow. We are not in any danger area as far as RSI or MACD are concerned and I am pretty sure that had it been otherwise... even then Markets would have cheered this move emphatically.

I can only hope that Mamata Di or someone similar do not start some political vote bank drama and push for rollback by blackmailing the Government. Lets hope GoI shows some spine this time.

As for my end, then I am stuck in 'Aamchi Mumbai' for some conference and usually having working dinners everyday. Will be back in Pune on Sunday and should be able to chill out a little then. Sorry for repeated  delay in tutorial post. Thanks for your comments, mails and wishes for 100th post. Happy Trading.

Addition:
I am modifying this post a little as just reading the news that Fed has decided to formally announce that they will continue with Quantitative Easing and this time it will be open ended. This is very very interesting. Fed has never committed itself to such a degree before. Will have to read between the lines and see what prompted this.

It says it will continue with policy action till it sees 'substantial' improvement in employment conditions. I am too tired to go through the Fed statement fully but can sense that it can actually start a short term rally afresh (as if we are not in it already). Very interesting times and I am ruing the fact that I am short of energy to grasp everything right now. Guess, will have to write about it during the weekend if I observe something unusual. Please blame Fed not me if tutorial post gets delayed again... I know you won't mind it though.

Fed says no QE3... Really?

I am sorry for this abstract post in between. Actually idea of this post appealed to me so much that I postponed the idea of technical tutorial post for the time being.

Last week I was listening to recent speech of Federal Reserve's Bernanke where in he was saying that he is ready to start next round of Quantitative Easing (QE) if economic conditions need it. Now as readers will recall that we have had two rounds of these QEs already where Fed has printed (not literally) more than $1.5 Trillion to infuse liquidity and stabilize the markets. Europe followed it with a fancy name of LTRO and even China also played on with some heavy infrastructure investments. (If you really want to know how much is $1 Trillion, I really recommend looking at this) This money cannot be really printed and it stays in existence only in the form of Treasury Bills which the Fed buys. One common thing about QEs in the past has been increase in price of commodities and equities that they result into. We have seen rallies in almost all asset classes every time QE has been announced with the periods of higher inflation in developing markets.

Anyways, that is not what we want to discuss here. What prompted me to write this post is my doubt about the validity of Bernanke's statement that he WILL start QE3 if needed. Now we all know that Fed is not an institute who has taken an oath of speaking truth all the time. All the data they publish has to be taken with a pinch of salt and many time their data have been published selectively, with a lag or not at all (caution: these are unsubstantiated statements... obviously). So I have my own doubts that QE3 is already in play.

Why do I say that? Just look all around us... every asset class is suddenly on fire.

1. Gold

Gold has broken out of its long consolidation and gone up by more $100 in a very short time. This is when very few analyst were expecting it. Also see the improved volume.

2. S&P 500

S&P has recently made 4 year high. Care to tell me some fundamentals reasons that may have prompted this?

3. Crude

I am posting Brent Crude chart as it is more relevant to India. In spite of all issues in Europe, slowdown in China, Crude has seen some handsome rally.

Not all asset classes see positive movement with QE. Obviously if you print more dollars you will see its value going down. Let us see the Dollar Index.

4. US Dollar

Dollar which was inching up nicely till June and even in July and August suddenly lost all the steam and is now below its 200MA also.

If all this was happening in expectation of QE3, we should have seen a sharp reversal after Bernanke's statement. All these assets would have shown the shock over Feds decision not to start QE3 immediately. Did not happen...

Apart from above, just look at the interest rates, bond yields and everything seems to be supporting this hypothesis. This post is also not about discussing whether QE is a good thing or bad thing in the long term (we can have that some other time in a separate post) but what is more important is what does it mean for our markets and our trade strategies. As I had said in last few posts that I would have expected markets to go down in this week and start (slow) recovery sometime next week or so... BUT if QE3 is in play, then all our prediction go out the window.

We do not know if QE3 is actually in progress and it is just a guess. If our guess is right, then we do not know how much money is being printed, how it will be spent and how and when exactly it will be deployed. There are too many ifs and buts and in such case I advice weak hearts to stay away or bite only what you can chew. It is very difficult to predict how long and how far this rally can and will go. At most we can wait for some indecision or reversal signal. I will be on a lookout for same (not 24 hours) and will let you guys know if I find something.

I am happy to be finally able to complete this post and I can now actually look to pick up the technical tutorial post from where I left it. Hope to complete it and make it available to you guys during the weekend itself if possible. Please let me know what do you think of this abstract post and whether you will like more such posts in between.

One more thing, I just realized that this post happens to be our 100th published post. Now that is some milestone to feel good about. Honestly, I never thought that I will be able to continue to write for so long (its over a year) and will reach 100 posts someday. This is your comments that have prodded me into writing more without any doubt. Keep them coming and I will keep writing. Happy Trading.

Special Trading Session tomorrow

Hello guys, we are having a special trading session tomorrow between 11:15 to 12:45 on both NSE and BSE. Hope you are already aware of it.

As for the NIFTY, it has been brilliant week so far. However the sharp pullback by markets make me think that my in-work QE3 post is much more relevant now. Today's Gap Up opening also reminded me that I have not written about the Gap Chart Pattern still. There are so many things to write and so little time. I am trying to finish the QE3 post first but not able to sit down with the right frame of mind. Have involved myself in too many activities and stretched wide and thin.

More than than, I think I am facing some mild kind of Writers Block (did not know there was a word for it till yesterday). Anyway, bottom line is I am hoping to overcome it soon and will definitely write during the weekend. Keen an eye on my tweets for updates in between. Happy trading till then.

Follow @Ethical_Trader

Small Update

Sorry guys, left the tutorial post in between. Actually working on a very interesting post in between about Fed and QE3... not getting sufficient time to pen down all thoughts. Please bear with me.

Excel file which I spoke about in the above post will take some doing. It may not happen very soon but rest assured that once it is ready, I will make it available to you guys without any delay. Want to make it little professional this time and have only some sketchy details in my mind about it. Will have more problems once I actually get down to making it and in any case its been really long time since I actually did any coding. I expect some inertia as well as some bluntness in my logical thinking but will do something about it.

In between, Markets so far have not let us down. What I hoped for in the last post is playing out perfectly. Will write more if I see any change.

Will finish both the in work posts as soon as possible. Happy trading till then.

Off the Track...

I thought of making a trading post but then I realised that this is the expiry week so trading post can wait for some time. We can do that for next (September) series in a couple days and we will still have ample time for trading.

As I said in last post, I have been feeling like making a philosophical post for some time now. Have so many things which create lot of thoughts in my mind like situation which is (still) unfolding in Europe, Anna's failed campaign, Blast in Pune, Coal-Gate, Maruti Violence, Apple vs Samsung, North East issues and ban on social media and so many other issues. It is commendable that an average Indian still goes about his life in usual way and does not loose sanity with so many mediocre things around us.

But before I go about my ranting, NIFTY weekly chart gave as clear a 'Shooting Star' as possible.

This is as clear as it gets. Though not as strong as Gravestone Doji but Shooting Star is also a trustworthy pattern in its own right. Moreover there are too many things pointing southward journey for equities in the short to medium term. If I am forced to, I am trading short. (Ignore the last candle which is for current week and it may change by Friday).

Also I wanted to write about few specific stocks if you remember. And when you talk about NIFTY you cannot escape talking about RELIANCE.

Reliance price has broken from its very long channel and is decisively above it. It has also broken its long term moving averages from below and right now comfortably above all of them. More interestingly it is all set for a Golden Cross in coming few days which may also coincide with price taking support either at 200 MA or upper line of the channel. It can see a bounce back from there. I will wait for confirmation from few more indicators and trade long if I have to without hurrying into it.

If NIFTY has to get to new highs; change in trend for Reliance is (almost) must. It has lot of weight in NIFTY and will have to turn around for NIFTY to have a reasonable chance to go up.

It took me some time between writing that first para and then posting these charts (a day in between actually, started writing this post yesterday and had to leave in between) and writing about them. Lost the steam to rant about issues mentioned. May be some other time. Hope you will like what has become of this post. Do let me know. Happy Trading.

Hat-trick Post

Wow, this time around I could actually do it and I am back with my third post in three days. This goes to show that nothing is i-m-possible.

After thinking about what to write, I decided to let it flow freely without any particular agenda. So even I do not know what will come out of this but before that let us have a look at the NIFTY Chart below;

Of particular interest is the last candle on the right (candle of today). I do not know if you also see it but it appears a close 'Shooting Star' candle to me and if you have forgotten what it means, you can read it here. If true, it simply indicates that the uptrend is near an end for the time being and we may see some correction. Also, if you will notice you will also see an 'Inverted Hammer' around 25th July followed by bearish 'Marubozu' and subsequent change in trend in next couple days. Candlesticks continue to amaze me.

Usually whenever I come across something like this, I like to test my hypothesis on a larger data set. NIFTY and SENSEX with all the data in them have the limitation that they represent 50 and 30 from thousands of stocks in them. This sometimes limits the universality of our analysis. Just to weed out this factor I had a look at the NIFTY 500 chart; and behold the Shooting Star in all its glory.

Shooting Star is much more clear in case of 500 NIFTY stocks. Now this also coincides with an (over)due correction in S&P 500 of US which has defied all odds to go past 1400. It surely needs a breather. Have a look and notice that the last up move has lasted without correction a lot longer than earlier 4 cycles since June.

Almost every chart I see is calling for some correction (or at least a halt in the uptrend) but will it happen? I cannot say but all the needed signs are in place. (Cannot help but mention that; Look at the S&P500 chart and series of higher highs and higher lows since June.. classical) One more thing to note is how much the price has stretched above 50 and 200 Moving Averages. Usually prices tend to come back to MAs and larger the stretch, more violent is the retraction.

In all probability we are in for a small correction. It may be a small counter trend move as usual and may not mean much in the larger scheme of things but nevertheless it may give us some opportunity to initiate a trade.

Then, its been long since I made any philosophical post and I am feeling like giving it a shot. Stay tuned, it may be just around the corner. Right now, this post has stretched a lot so will stop now. Will be back, who knows, by tomorrow. Happy trading till then.