Home > Uncategorized > Market Notes: 8/17/2011

Market Notes: 8/17/2011

MARKET NOTES

The $ Index has been in a down trend since the 1985 high of 130, making a low of 81 in April, 1992; followed by a lower high of 120 in Jan 2002 and then again to a low of 73 in April 2011. The downtrend over a 26 year period has been severely tested the 74 to 80 range twice and held up well.  After a long correction, the $ looks technically sound on long term charts.  The prognosis for the $ through to 2012 is bullish and the $ Index could test recent highs of 87 during the year.  The currency markets don’t appear to support $ weakness relative to its trading partners.

The FeD has promised low interest rates through to 2014. 10 year treasury notes at 130 are at their peak valuation of 130.5 achieved in Dec, 2008.  While interest rates are at their lowest, they can continue to remain low but are unlikely to go lower. On the other hand, inflation has picked up slightly.  Hence going forward 6 to 12 months, interest rates could head up a little.  Their impact on currency and equity markets will be insignificant.

The Russell 2000 Index, a good proxy for the US markets, began its downtrend in November 2007, making a top of 860. Since then it has been in a down trend, hitting low of 350 in Feb., 2009. A corrective bounce from that low has seen it retest its previous top at 860 and fail. The downtrend continues. From the current level of 640, first support lies at 600, followed by a more significant support at 500.  The down trend is likely to continue in the next 6 to 12 months.  However, the slide could be punctuated by very sharp bear rallies since we are towards the end of the bear trend that began in November 2007.  Within the larger US markets, the NASDAQ representing the tech. and bio-tech sectors, appears to be the strongest.

The Shanghai Composite started its downtrend in the November of 2007 from a level of 6050 making a low of 1650 a year later.  Since then it has bounced back 3355 in November 2009 but failed to hold the lower high. The last leg of its current downtrend commenced 3130 in November 2011 and the market currently stands at 2550.  Its first support lies at 2340.  Among the world indices, it is closest to completing its downtrend that began in 2007 and should do so towards the end of November.  The last leg of the fall is usually marked with very high volatility. It is pertinent to note that the Chinese market nicked its long term uptrend that started in May 1991 in August this year.  It has since tried to climb atop the trend line.  As the break comes towards the end of the bear market, it probably represents an attempt to shake out the last of the stale bull. It is time to accumulate cautiously and slowly in the Chinese market.

The BSE SENSEX presents intriguing possibilities. Firstly the index continues in a very long term trend stretching back to 1979.  The lows of 2003 and 2009 tested this trend line and held up. Secondly, the down trend that started after nearly testing the previous 2007 top 20,900 has been very orderly and appears to be testing the 15,500 area of support.  Thirdly, the downtrend from Dec., 2010 should end by early October 2011.  That times nicely with the Chinese market.  Could the two together delink from the world market and chart their own course?  Barring a very unlikely scenario where the 15,500 area is taken out, Indian markets are worth looking at between now and October this year.

 

NB: These notes are just personal musings on the world market trends as a sort of reminder to me on what I thought of them at a particular point in time. They are not predictions and none should rely on them for any investment decisions.

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Categories: Uncategorized
  1. August 18, 2011 at 5:12 am

    As expected from you, the blog catches the complete world view and very rightly so.

    My only concern at this stage is the views of the FII on Emerging markets , which makes me to be bearish ,till such time I do not see the trend of FII changing , which accordingly to me ,will mirror the Q2 results of Indian industry.

    However on a macro level , no one has been able to map /time the lows of any markets from investment point of view, so , as mentioned by you ,one can start doing bottom fishing ,even if one has to invest a meager percentage in the Infra sector of NSE .

    Cheers ! Hope to read quite a few more from your end .

  2. August 18, 2011 at 5:19 am

    Thanks Sonali,
    It was nice reading your analysis…and more so…the stern reminder at the last….
    Its been a while have been on twitter…changed id due to trolls…
    anyways…take care .

    Adityakiran

  3. August 18, 2011 at 11:31 am

    Indian Leader are selfish and dishonest, they only thinks about their own interests. India’s Prime Minister is the puppet of Sonia Gandhi, and she is of Italy’s mafia.India is now surrounded by all the betrayers. May Anna Hazare could save us from such clever foxes.

  4. August 18, 2011 at 11:33 am

    nice Post ..dear .keep it up .i got your blog link from twitter

  5. 09mitali
    August 18, 2011 at 2:54 pm

    I always am greatly enlightened by your tweets and the links you post .. a good overall view .. thanks for putting it all down at one place .

  6. 09mitali
    August 18, 2011 at 2:55 pm

    I am always greatly enlightened by your posts ..a good overall view .. thanks for putting it all down in one place Mitali

  7. August 18, 2011 at 3:13 pm

    On Indian markets – I agree 15500 can be a good level as it will be 12X FY13 earnings of 1300. However mkt is facing both local and global headwinds. strong Dollar/ Re , political uncertainties , inflation , high interest rate , reformless governance , pledged shares , environmental/land acquisition problems etc can be deterrent. similarly risk aversion , France/Italy downgrade , possible greece default , reduced global growth rate to 4% , chinese real estate bubble , high crude prices are possible headwinds. hey , I sound too negative. So may be this could be capitulation phase and bottom could be near. Start SIP around 16K and increase SIP when market dips further can be good strategy.

  8. S Aiyar
    August 19, 2011 at 5:10 am

    very interesting! It is true that the optics of the dollar are worse than it’s reality. On Indian markets I am not convinced of an upside unless there are dollar inflows. And debt is an endemic issue in corporate balance sheets

  9. August 21, 2011 at 10:35 pm

    I’m not entirely sure that a strengthening dollar and rising Indian equities are a compatible hypothesis. I expect the dollar to head lower – what may work to make your hypothesis possible is a falling Euro. I definitely read long-term charts to suggest that India is headed a lot higher over time, while the US and Europe are in structural problems. Only caution is the 6300+ Nifty double top. Underlying trend looks fine, but double tops are tricky.

  10. March 26, 2012 at 10:40 am

    i am internet marketer and i like your artical

  11. March 27, 2012 at 11:18 am

    it is amazing post

  1. September 1, 2011 at 12:36 pm

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