Sunday, January 20, 2019

US Equity Markets on Roll - How Long Before A Thud?

Keep your ears to the ground. This meteoric rise of US equity markets is unsustainable. It is bound to fall like a ton of bricks. Reason - the rise has been without proper foundation. It is as if some deep pocketed cartel has decided to off load its portfolio in equities and switch to some other market . To start doing that, the prices have been jacked up so that more investors join the band wagon, believing that bull market is intact, alive and kicking. That is far from the truth.

To understand what is happening in market, you will have to refer back to my last Sunday blog post here What's in Store for US Markets in 2019 ?

In my forecast for the month of January 2019, I had envisaged Dow going above 24000 level. But  not in such a fast and furious fashion!! I had also mentioned that Dow will reach 25000 by end January or February. But it seems that this market is in a tearing hurry to reach 25000.

What is causing concern to me is that the present rise is with low trading volume. That is typical of times when big players haul up prices as a part of process of distribution.

In any case we have the complete course chart of Dow for 2019.   Keep referring to it when in doubt. I will keep you posted of the developments. Traders should not think of buying at this point. For selling, let the current up-leg top out first, which I shall indicate in advance.

Remember it is still a bear market and 23000 in Dow can be easily achieved in coming days. So trade with adequate caution against upcoming volatility.

Thursday, January 17, 2019

Nifty Follows A Scripted Path - Comforting Situation

In the wee hours of last Monday, I had scripted a chart  for Nifty for the complete year 2019  in my last blog post. Idea was to test my understanding of the behavior of Indian equity market going forward. By doing so we will be able to gauge whether this understanding stands the test of time. At any juncture if we find Nifty deviating from the charted course, it will serve as an alarm bell and we can then carry out mid course correction.

So far in this week Nifty has done exactly as scripted. I had opined that Nifty will be range bound between 10500 and 11000. You can revisit my last blog post here Indian Equity Market View For Year 2019

In today's trading sessions, Nifty had reached level of 10930. If my script has to play out, tomorrow Nifty should be travelling southwards. Permabulls may please take note of this and try to be careful in tomorrow's trading session. Do not get carried away by the strong Nifty recovery in today's late afternoon trade from 10845 to 10930 level. Nifty finally closed today at 10905.

Why should Nifty fall tomorrow? It could be for myriads of reasons like Brexit woes, China slowing or market participants getting weighed down by domestic political risks. When the actual destabilizing news finally percolates down to retail investors, action would have already taken place in market. We will only be scrambling for cover. That is where my scripted chart will help you to be cautious. Keep referring to it for future guidance.

As per the strong form of Efficient Market Hypothesis, market is totally efficient with market prices quickly adjusting to reflect all types of information, both public and private(inside) information. This basically means that both technical and fundamental analysis of stock market is useless and investing/trading in such market is like throwing darts (random walk theory). With my script on Nifty's future path for the year 2019, I wish to debunk this theory.

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Monday, January 14, 2019

Indian Equity Market View For Year 2019

Nifty index is the bellwether for Indian stock markets. Tracking Nifty will essentially give us insight into expected behavior of Indian equities. It is the beginning of year and hence is good time to track Nifty.

Nifty is presently in sideways move, displaying very low volatility. It is expected to remain within the range of 10500 to 11000 for the next couple of months. That is primarily due to the upcoming General Elections and market participants are in no mood to fully commit themselves either way.

What Happens After March

After March things will crystallize to a large extent as to whether present incumbent NDA has the upper hand in the upcoming elections or not. Let us analyze the two outcomes :-

  1.  NDA Has Upper Hand : In that case you will see Nifty drift down to 10300 level. That will be for accumulation purposes for big market players. In other words, if you find Nifty at 10300 level in April, you may safely assume that NDA is going to win the elections, since the big boys of the market think so. Hence you should also accumulate stocks if you find Nifty at 10300 level in April.
  2. NDA Does Not Have Upper Hand :  In such a scenario you will find Nifty racing to 11200 level on low volumes. This means that movers and shakers of markets are expecting NDA to lose the elections and hence are carrying out the process of distribution of stocks. Hence you should also sell major part of your portfolio if you find Nifty at 11200 level at the beginning of April.
What Happens after the Elections

In case NDA wins the elections you can expect Nifty to make new highs beyond its all time high of 11760. But in case NDA loses then it is going to be be one hell of a slide down into a bottomless pit. I would not be surprised if we see 7000 level in Nifty if NDA loses the upcoming General Elections.

Your Views

Do express your views on the subject in the Comments Section. With your views we may be able to understand this beast named equity markets better!!
In case you have any queries, do post them here and I shall be happy to get back to you. Watch this space for I shall be updating you at appropriate moments as Nifty makes its moves going forward.

Happy trading and investing!

Sunday, January 13, 2019

What's in Store for US Markets in 2019 ?

Last week Dow Jones Industrial Average (DJIA) closed just shy of 24000 . This gave Dow an impressive 2.6% gain from the start of year 2019.

What next is the the million dollar question that begs an answer. I am going to provide some insights which should answer this question.

Forecast for Next Week

Come Monday, DJIA should see a steep drop. It will be due to the patience of the market participants running out over Federal Shutdown. Thereafter there will be volatility for the week with DJIA visiting levels above 24000 and below 23000.

Forecast for Month of January

Month of January will present a good opportunity for traders to profit from going long from sub-23000 level. From this level there is excellent chance of profiting till the level of 25000. This may not be achieved fully in January, but certainly by February we can see 25000 in Dow.

Forecast For First Half 2019

The first half of 2019 will be spent in volatility with Dow between levels of 23000 and 25000. I would expect the bias in this yo-yo journey to be southwards, but this can said with certainty as the action unfolds. I am basically saying that Dow will be moving sideways for the first half of 2019 between the levels of 23000 and 25000. However, jubilant reactions to some unexpected good news may allow Dow to reach levels of 26000.

Forecast For Second Half 2019

Second half of 2019 will see either continuation of sideways movement with southwards bias or an effort to reclaim level of 27000. High probability is the former case of slow Southward Drift so as to be positioned for a good sell off by 2020 -2021.

Here the reason lies in the inversion of US Treasuries' Yield Curve of 2 year and 5 year maturities. Now market participants will be keenly watching the yield curve of 2 yr and 10 yr maturities which is presently flat with narrow yield difference of 17 basis points. This hints that yield curve of these papers has high probability to invert anytime in future.

Early Signals if Dow Movements were to Differ From Above Forecasts

Let us now list the various early signs that will tell us that Dow will behave differently from what I am predicting :--

  1. If Dow fails to reach 25000 level and violates 22000 level on closing basis, then we will see much lower levels in 2019.
  2. Alternatively, if Dow crosses above 27000 level on closing basis, then new highs will be made.
  3. If sideways movement takes place between levels of 22000 and 24000, then we will find Dow at lower levels than 22000 in 2019.
Seeking Views

I have charted the entire Dow movement for 2019. Anyone wishing to seek the detailed reasons for each of these forecasts is most welcome to do so in Comments Section and I shall be delighted to provide the reasons.

I shall also be updating you on weekly movements as and when appropriate. Your views will be highly appreciated by me and other readers. Your views may provide some new insights from which all of us may benefit.

Keep trading in 2019 with profit!

Sunday, March 5, 2017

Trump's Era - Why Is He Not Your President?

First we witnessed widespread and sometimes violent protests saying  "Trump is not my President". Then there were protests to allow "Illegal Immigration" to carry on unchecked in US. Close on its heel came protests against "Travel Ban" from seven countries to US.

Then Michael Flynn had to resign from post of National Security Adviser due to leak that he had spoken to a Russian diplomat, Sergey Kislyak.

Now pressure is being applied for resignation of Attorney General Jeff Sessions for having spoken to the same Russian diplomat.

Phew! that's quite some action for Trump-bashers to orchestrate in such a short span of time. But you already have inside information on Illegal Immigration and Travel Ban through my post

Trump's Era - Acts to Save Democracy For Future Generations

As for conversing with Russians, you have the low down in my last post

Now let us understand the logic behind screams of "Trump is not my President" in US and other world capitals. And that is exactly what we are going to do today. 

To begin with, let us ask some straight questions to these protesters. And if they cannot answer these questions honestly, then they should eschew their unreasonable demand for Trump to step down. Here we go :-
  1. If a democratically elected leader is not your President, then who do you think should be your President - Army Chief, CIA Chief , Fed Chief or some Chieftain of your tribe? What twisted undemocratic logic, coming from those who plan to save US !! Will someone please tell them that US is the world's oldest democracy, and such wishes have no place in a democratic setup.
  2. Why were the protests happening even while Trump was taking oath of office? At that point in time, Trump had not signed any executive order or trampled any democratic value or violated any constitutional law. Then why, why, why? That reeks of well orchestrated plan set in motion by some shadow power. We may dwell on that at some later date.
  3. Do the protesters want Hillary Clinton, who lost the election to Trump, to be officially declared the President? In that case they have to first make amendment to Constitution to read thus " US Government will henceforth be of the protesters, by the protesters, for the protesters. Silent majority will have to remain passive spectators"
Think it over. This thinking exercise is meant both for the protesters and silent majority. After all it is your country and you have to decide whether you want to continue breathing in  a democratic setup or in a messy anarchic cauldron that the protesters are seeking.

Protest as much as you like, democracy allows for that. But at least protest with some democratic rationale. You cannot protest for removal of a democratically elected leader, just because silent majority endorses him and you do not. 

Time to wake up and spread the word!