Thursday, November 13, 2014

US Equity Markets Topping Out - Short Sell To Realize Profit

US equity markets have risen fast and furious in the last fortnight. Dow had closed yesterday at record high of 17612 and looks strong to rise even further. In my very first blogpost I had given the target of 18000 for Dow when Dow was sliding towards sub-16000. Though 18000 has not been achieved in Dow, right now I am of the opinion that its high time to short the US market for some handsome gain. The reason is that US markets are clearly making a top. Maybe an intermediate top, but topping pattern is sufficiently evident in Dow. And that is the reason for traders to go short and make money.

But what if I am wrong? Well the fact of the matter is that this kind of distribution can be sustained only for maximum another couple of hundred points if we are following Dow. In other words if Dow doesn't sell off from present level then it will certainly sell off within 200 points. That means the sell off zone for Dow is between 17600 to 17800. Hence traders in US equity markets need to take short positions now and rake in handsome profit.

For traders in Indian equity markets, this is the signal to go short. You can short all front-line stocks with gay abandon, especially the banking sector. As the US markets sell off there will be contagion effect in Indian markets. Decoupling is still quite some years away, so go short as US markets are topping out.

Saturday, October 25, 2014

Is Strong Weekly Rally In US Markets Convincing Enough?

US markets had another splendid day of trading, with bulls raging all the way. Dow closed with gain of 128 points and in the process exhibited some resolute buying action in second half of  trading session. The past week saw US markets register a strong rally after a long time. But since Dow closed at 16805, it is considered to be moving inside the correction zone of 16600-16900. Hence it is still susceptible to correction.

However in the end, markets will be markets. For all you know Dow can make a V-shaped recovery without much of a correction and go beyond its all time high. It is a possibility, even though a remote one. For taking action in the US markets traders need to weigh in all the possibilities and trade accordingly. That sounds quite cliched! Hence to qualify and quantify my statement I am going to discuss various levels possible in Dow and recommend action for successful trade.

From the present position Dow can move in the following possible ways :-
  1. Dow keeps moving northwards without any correction and reaches level of 17350 (its all time high). This situation is highly improbable. But if that happens then one can go short from 17350 level for quick profit of 400 points in Dow.
  2. Dow fluctuates in its correction zone of 16600-16900 and then closes above 17100. In this situation one should go long for target of 18000.
  3. Dow fluctuates in its correction zone of 16600-16900 but reverses direction without closing above 17100. In this situation one should go short for target of 15400. This situation is of high probability.
Tread carefully as you trade, its a minefield out there!

Friday, October 24, 2014

Dow Prances In Correction Zone

Dow gained healthy 217 points in last trading session. It was a bit surprising, but such movements can be expected once the index is in a band where correction has to take place. As I maintained in my earlier posts also, Dow has to go into a correction from its correction zone of 16600-16900. Within this band there will be volatile movements if you are tracking the index daily.

Yesterday Dow was buoyed by good set of earnings results from some Dow components. Today Dow is likely to go into negative territory with the Ebola scare in US. Such daily news will effect Dow movement in volatile manner till the time it is in correction zone.

News of major consequence is that Stress Test result of Eurozone banks are going to be to the liking of investors. The results will  be declared coming Sunday. Most banks are going to make the grade. Only a dozen of very small banks are likely to fail. This will boost investor confidence in Eurozone and is likely to propel  markets higher.

Thursday, October 23, 2014

Dow Nosedives To Negative Territory

US markets ended in red in yesterday's trade. Dow lost 154 points from previous close. The slide was significant since there was no real effort to recover from day's high during the entire trading session. That is not to say that all is lost and the slide has finally begun. Far from it.

In my previous post I had mentioned that Dow would gravitate into negative territory since it has reached the correction zone of 16600-16900. And yesterday we found Dow do exactly that. This situation should prevail till result of Stress Test of Eurozone banks are declared on Sunday. In other words we still have to endure selling bouts for two more trading sessions.

Today we may witness some bounce in Dow in initial trade. But in all likelihood this bounce will be sold into. 'Sell on Rise' may be the refrain in today's trade in US markets. The bigger question that begs an answer is whether consumer spending in the coming holiday season bring the much needed cheer to stock markets. Its a complicated situation mired in many 'ifs'.

Stay tuned to these pages and I will guide you through the noise and rumble of stock market movements. US markets are in focus for the present so that you do not make any cardinal mistake in trade in Indian markets. Before US markets are poised for their final move into the Bear Phase, I will announce the event so that stock market participants can exit Indian markets also. My focus on US markets will help in determining that day. Remember that crash into Bear Phase will be witnessed in tandem across all world markets.

Trust me to give you the call before the markets crash.

Wednesday, October 22, 2014

Dow Enters Correction Zone

When bottom seemed to be falling apart in US markets, I had predicted that Dow will bounce back to 16588 At that time Dow had breached sub-15900 with ferocity of 500 points intra-day dip. You can check out my post here.

Next day I reiterated my view and kept a buy for Dow in this post. And next day again I was certain of Dow cruising to 16588 in this write up. I kept up the target of 16588 and beyond for Dow for two more consecutive days with these posts : and

In yesterday's trade Dow reached 16588 and went beyond to close at 16615. That is completion of the first predicted move! You would recall I had mentioned 16600 to 16900 as correction zone for Dow in Now that Dow has entered this correction zone, we need to watch behaviour of Dow very carefully for signs of deep reversal.

In all likelihood, today should be a flat day for Dow. We can expect Dow to drift into negative territory till the result of Stress Test of Eurozone banks is declared on Sunday. There is rumour that 11 banks are likely to fail this Stress Test. Lets wait and watch!

Tuesday, October 21, 2014

European Markets Bounce Back - Will Dow Follow Suit?

Today European markets are in a tearing hurry to regain lost position. There seems to be yule-tide spirit in European markets. This buying frenzy can be a misplaced sense of celebrations in Europe, since nothing much has changed overnight for European markets to cheer so much. Given that European Central Bank(ECB) has indicated Bond buying program to stimulate its economy, but is that such a positive for European markets? So far ECB President, Mario Draghi has promised much and delivered very little to European Union in his tenure of three years. Hence this indication of Bond buying by ECB needs to be taken with a pinch of salt.

That said, the good investor mood in Europe should rub off in US markets today. Yesterday Dow didn't do much to help the Bulls. Today we have another chance for Dow to touch its 200 DMA at 16588. The same conditions hold for movement of Dow as I had mentioned in my last blogpost.

Watch as the story unfolds today in US markets.

Monday, October 20, 2014

Tailwind on US Markets - Will Dow Gain 200 points Today?

US stock futures are showing gains. There are more than one third of Dow components who will be announcing their earnings this week. So its a big earnings week ahead. It seems Dow is on course to cruise to its 200 Day Moving Average(DMA) of 16588 and beyond. In absolute terms this means we are about 200 points shy of 200 DMA in Dow. In today's trade it will be interesting to watch whether Dow can reach this target of 16588. This 200DMA being the first resistance for Dow on its present journey of recovery, it is expected to retrace its step from this level to some extent.

In short following are couple of interesting things to watch for in Dow today, if you are on the long side of trade :-
  1. Will Dow reach its first resistance level of 200 DMA?
  2. If Dow reaches 200DMA, will it close above it or not?
If Dow closes above 200DMA, then we can expect a move up to 16900 in this week. If Dow closes sharply below 200DMA then it runs the risk of  revisiting the lows of last week- a terrifying thought for the bulls!

Though Asian markets have done well for themselves today, European markets are down on bad news from a major German software maker. We need to see whether the tailwind of expected good earnings week ahead will work for Dow or will European Wall of Worry will drag it to last week's levels. Whichever way you look at it, today's action in US markets will set the tone for the week ahead

Saturday, October 18, 2014

Dow Witnesses Healthy Bounce

On 17 Oct 2014 Dow made a remarkable comeback to post healthy gains of 263 points (+1.63%). This was after posting steep losses for six straight days from 17000 to sub-15900. Yesterday's price action suggests that Dow is on course to reach its 200 day moving average line of 16588, which will be its first resistance level. In my last two posts I had held that view even when Dow was experiencing massive intra-day sell offs. It appears that my stance has been vindicated by yesterday's market action.

That said, we now need to be more vigilant of movement of Dow. If you recall in my very first blog post, I had given target of 18000 for Dow from level of 16400. That still remains a possibility in case the following conditions are met :-
  1. Dow during this present rally should not violate its hammer price of 15855.
  2. Even if Dow gets resistance from its 200 day moving average line at 16588, it should not close below 15855.
  3. After crossing its resistance at 16588, Dow should close above 17100 for it to reach its target of 18000.
In case the above mentioned conditions are not fulfilled then we need to be fearful. Let me explain. After reaching or crossing its resistance of 16588, Dow will be susceptible to reverse direction. And if it decisively reverses direction from there, then we can forget about target of 18000. On the contrary we will witness a huge bout of selling which will take Dow way below 15900. In fact it will officially announce the beginning of a prolonged Bear Market and then we can discard all notions of it being only a correction.

The susceptible zone from where Dow can reverse direction is 16600 to 16900. If that happens I would advice all to sell their entire portfolio and sit on cash - because journey downhill will be very steep and unforgiving to investor wealth. In such a scenario we will be looking at sub-10000 in Dow over two-year period.

Keep a sharp lookout for conditions mentioned above. For any clarification, do feel free to ask me through the 'Comments' section of this post. Best of Luck!

Friday, October 17, 2014

Deep Cuts in US Equity Markets

Dow closed at 16117, down 25 points, on 16 Oct 2014. This may be considered as a breather for traders on long side. It could have been much worse. Day low was 15935 and hence the hammered price of previous session has  held. You would recall that in my preceding post I had mentioned about "Hammer" formation in Dow chart on 15 Oct 2014; and hence the day low of 15 Oct 2014 of 15855 should hold for the time being.

As long as this hammer price of 15855 in Dow holds, we can be sure that prices will drift northwards. This upward movement should take Dow to 200 day moving average line of 16588. However this journey is expected to be volatile because deep cuts take time to heal.

Thursday, October 16, 2014

Mayhem At Wall Street

On  15Oct 2014 US equity market collapsed to such an extent that it felt like a mini crash. Dow Jones Industrial Average capitulated from day high of 16313 to a day low of 15855, finally closing at some respectable score of 16141. One can well imagine the plight of traders on the long side who had to endure a plummet in Dow of 458 points in single trading session. It must have felt as if the Day of Reckoning has come.

The silver lining to this scary tale is the closing point of Dow. The recovery in late trade was remarkable and it is harbinger of better things to come. Technical chart of Dow is showing a 'Hammer' in candlestick pattern. This means that Dow for the present should not go below 15855. In coming days we can expect Dow to rise from this hammered price of 15855 to at least 16588, which is the 200 day moving average line.

Good Luck!

Wednesday, October 15, 2014

Dow Witnessing Tug of War Amid Bulls & Bears

On 14 Oct 2014 Dow closed in negative territory, down a mere 5.88 points or 0.04%. It was the straight fourth down day for Dow. This happened after Dow steadily climbed above 16450 in morning trade. The slide was unnerving for some. It showed how all strengths were sold into. Sell on rise must have been the call amongst influential traders. Bulls must be licking their wounds after this sustained Bear hug in second half of trade yesterday.

Now the clamour has grown louder that Dow has entered Bear territory. "Sell your portfolio and sit on cash"  is the advice from experts. They are pointing out that Dow has decisively broken below 200 day moving average. This is construed as significant pointer to Bear market and a clear signal for the end of Bull run. I beg to differ.

For last two decades, every time Dow has violated 200 day moving average it has bounced back with fresh vigour to go beyond its previous high.  You can check the veracity of my observation from record of Dow movement in recent past. In June 2012 Dow dropped below 200 day moving average almost to a level of 12000. Within about four months it rebounded to above 13500. Again in Nov 2012 Dow pulled back below 200 day moving average to level of 12500, only to bounce back with vengeance to 16600 by Dec 2013. In Feb 2014 it again violated 200 day moving average of 15500, only to spring back to 173500 in Sep 2014.

My short point is that closing below 200 day moving average encourages Bulls to pick up stocks at relatively comfortable prices. And that is what is expected of Dow in coming days. If that doesn't happen then Dow will make history of sorts by not bouncing back above its previous high after breaching 200 day moving average for the first time in 25 years!!

Now lets wait and see in coming days whether I am on right track. If you recall from my preceding post, I had set the target for Dow to move from level of 16400 to 18000. We are witnessing these gyrations and volatility in Dow as precursor to positive rebound, which will take it beyond its all time high. Isn't it how Dow has behaved in the last 25 years? So stay invested and trade on the buy side.

Tuesday, October 14, 2014

Dance of Dow

Whichever part of the planet you may be inhabiting, you need to keep an eye on Dow Jones Industrial Average if you want to trade safely and profitably. Major turns in any market are foretold by Dow. And a trader knows how painful things can become if he is sitting on wrong side of a trade when such inflection points come.

It is with this thought in mind I got down to analyzing  the various aspects of Dow movement with a keen eye. My sole aim was to discern future expected inflection points of Dow so that I could be make myself safe, trading in Indian equity market. This was essentially required in order to know whether we have  meltdown of US markets on the cards. Of late noise of imminent US market crash has been growing louder from across the Atlantic.

On thorough analysis I came to the conclusion that Dow has still some steam left to chug northwards. I posted my findings as comments to an article in MarketWatch on 13 Oct 2014. I commented verbatim as given below:-

"You are right Michael. But one can expect a bounce in DJIA from 16400 level, which can take it to about 18000. From level of 18000, Dow should fall by about 1500/2000 points. It will again bounce back and reach level of 20000. Finally from level of 20000 Dow can lose more than 10000 points. Bulls still have some time to cheer!"

To this comment I got a prompt reply from MarketWatch moderator as follows:-
 "@Surajit Debnath

So, let me get this right; you're not just making one future call but 4 !!
1) Market will bounce from 16400 to 18000
2) Market will then drop 1500/2000 points
3) Market will then rise to 20000
4) Market will then fall to 10000
You must be the richest person in the history of mankind if you can make calls this accurate."

My reply:-
"@M W Watch the story unfold within a year"
Why don't you go one better and make a real name for yourself. Setup a website, disclose your actual name, contact details etc., post these predictions, put your money on the line (like you expect your readers to do), scan and post the broker notes, and then remind us all in a year about your success. Do it all up-front, not after the fact. Then I will buy whatever newsletter, advisory service, asset management service, whatever you have to offer."

Well folks, such is the genesis of this blog. From here onwards I shall be keeping you posted on the expected twists and turns in Indian equity market. You will also get to know what Dow is doing and what is expected ahead from Dow. I shall be posting clear trading opportunities as they present themselves. These opportunities can be grabbed to take Stock/Index Futures positions. So wait for my next post to enrich yourself. Cheerio!