What Next

                                                WEEKLY   ANALYSIS

                                             (30 May To 4^th June 2011)

Dear Investors

 Last week was one of the most volatile week. Markets

 Swung from down moves to up on the back of, good

(Few) and bad (most) news and events. Good part was, week

Ended on a positive note. Nifty swung 150 point

During the week ( Sensex 160 Points)in 5328 and 5486 level

Ultimately the week closed on a positive note,

But, in a Negative territories as far as week on week

Is compared. The low during the week was at

5328, which was most important support level

Now. It has to be seen whether it is holds the gains during

Coming week or not?

It was the week of results by Indian Major corporate

Houses, most of them barring few came out with

Disappointing results, leading to some doubts regarding

Growth projections

. Volatility was at its high and Global

Markets were in bad shape, worries related to

Europe, Greece, Spain and Italy, erupting on the horizon

Of world economy.

Chinese monitory tightening and lower PMI data (Purchasing

Mangers Index) created shivers in world markets, and

Commodity prices

US housing and Jobless claim data was also disappointing

And talk related to QE2 withdrawal led to ups and down

In Dow and S&P,

Most important Indicators were

Fall in Commodity prices

Fall In crude prices

US GDP Lower

Chinese PMI lower

$ Index moving to 76

Rupee getting strong

Indian GDP projected lower

Indian Inflation on rise

 The news from Federal meeting, Euro zone debt default and

 Chinese manufacturing growth and Results from Indian

Industrial houses kept markets, all over the world, in Volatile

 And Nervous state of mind

Indian markets saw one of the bad weeks in last few and Nifty

Tested the long term support level at 5330, which is a make

Or break level for India markets

 Market(Nifty) Have, technically, gone in to lower top and lower bottom’

Trend and is at a vital stage of going in to a bear market or

Reverting to an up trend. but , All depends on

Local Factors like..

Inflation in next few weeks

June RBI policy

Monsoon’s arrival and progress

Remaining result season

Governments stand on Oil and Gas Pricing policy

Governments stand on different FPOs

Governments stand on FDI in retail and so on

FII Inflow to emerging markets and India

Globally factors..

 We are still not out of ‘Euro’ factor

 EQ2 withdrawal or continuation of stimulus package by US Fed

 authority

 $Index

Crude has done ‘U’ turn, has to see how far it moves on

Commodity prices

Effect of Chinese monitory tightening on growth and commodity prices

US Data on: Jobless claim and ISM index( which is 58 at present)

(Institute of Supply Management Manufacturing index,

 A monthly index released by the Institute of Supply Management

 which tracks  the amount of manufacturing activity that occurred in the

 previous month. This data is considered a very important and trusted

 economic measure. If the index has a value below 50,due to a decrease

 in activity, it tends to indicate an economic recession, especially if the

 trend continues over several months. A value substantially above 50

 likely indicates a time of economic growth. The values for the index

 can be between 0 and 100)

COMMENTS

All in all

Along with India, world looks a lot more vulnerable than what it was

Last year , with number of negative events and data looming on the

Head it could become really risky and volatile during next few weeks.

Slowing global growth

Slowing FII flows

Increasing inflation and rising bank rates in India

Government’s apathy as far policy front is concerned

Revision in GDP on lower side

And many more local factors like 2G,Land Acquisition, Political

Instability, Postponement of divestment…

 So What Next is the real question, because 

All these will keep Indian markets to perform a ‘Balancing Act’

(Tilting Negetive balance to a positive one)

It has to be seen how far Investors and Speculators manage the

Markets to keep Indices above ‘water levels’ or they get drowned

In the depth of uncertainties is the prime question

The only hope of Life is, Monsoon, Monsoon and Monsoon

Technically:

Technically market is on the border line of ‘Bear Phase’

And ‘Bullish reversal’ Last week Nifty bounced back from

Most vital support level of 5330(5328, Intra day) and then

Went on closing above important resistance at 5450.

Market movements in next week will show whether this

Is a ‘Bounce back’ from over sold positions or it was (fall

Up to 5328) was a correction in ‘Upend’

Next resistance for Nifty is @ 5515(18180), 5595(18665) and

5609

Nifty has closed above all the short term moving averages

Like:

5 DMA, 10 DMA and 20DMA indicating that the short term

Trend is up.

The first stop at upper level may be at 5559(18344), where Nifty had

Remained stagnant for long before falling,

 Unless Nifty moves beyond 200 Day Exponential average

@ 5581(18611), 100DMA @ 5595(18663) and50 DMA @ 5630(18770),

It will not be called as ‘Reversal of the trend’

More important than all the above ‘Up moves’ is ……

Where Nifty moves? in case of continuation of further

Selling and shorting, leading to a  ‘Down move’, Nifty will

Have

Support at 5380(18006) and 5330(17800)

, AS LONG AS Nifty maintains above these levels

Market is in a position to get ‘Reverted’ to an ‘Up trend’

The ‘Key’ for up trend is 5330/5310 range (17800/17728)

Any close below 5310(17728) will take Nifty to lower levels and ‘Bear Market’.

5280 and 5224can give some support to Nifty’s downward journey but

Real support will be at 5177(17296) (Feb. 11 Intra days low)

Technically indicators suggest that

Market is headed lower, when and how fast is to be seen.

Technical indicators like

Nifty forming Lower tops and Lower bottoms

Nifty remaining below 200DMA and 200 Day Exponential average

Breaking of March 2009 low or trend line

Taking support at 100 week moving average @ 5300

Getting nearer to the recent lows

Rising Volatility

Higher volumes on Down Days

Are supported by the fundamental facts

Like

Lower participation by Retails, FII withdrawing money out of Indian

Markets, Rising $ Index, Increasing Inflation, Lower than expected

Growth and earning by corporate

Global problems

All this has created nervousness in stock markets, events during

Next few days will decide future for next phase

So watch for

5300/5310 for Nifty on downside

5515/5550 for Nifty on upside

Any move beyond these levels will be decisive for the ‘Future’

Of Indian markets in ‘Medium term’ period

Market Strategy during the week

Go long (Buy) as long as Nifty remains above 5400

Keep stop loss at 5330 and book profits around 5550

For all fresh as well as existing long positions

5515-5550 should be treated as ‘No trade zone’ (For fresh

Trades)

Existing short positions should have a stop loss of 5515.

At current levels avoid going shorts

Fresh shorts can be created above 5553 and at and below 5300

With a target of 5220/5177

Long term investors should wait for buying till the ‘Bounce’ get

Converted in to an up trend above 5706/5754

Or

There is panic selling leading to Nifty levels of 5250 and below

All long term purchases should be in small lots and for a

Period of 12 to 18 Months

A list of shares to be bought for long term will be posted at

Appropriate time

 

     IMPRESSION

After going through the…….

   ‘Fundamental Facts and’ Technical Data’

  ‘Local Environment and Global Factors’

  ‘Desires and prevailing sentiments’ of Investors

  ‘Interest and Inclination of individual investors and FII’

I personally have a

   ‘THUMBS DOWN’    impression

Read Market for Monday as a separate article

Thanks

Dr. Vasant Bele

All the views are personal, invest with caution and after

Consulting experts