Wednesday

India NIFTY

2 Comments September 8, 2010 – 8:14 am |   | Permalink |  Print This Post |

A quick short on NIFTY 5587 $20/point, tight stops at 5607 (20 points) - $400 bet on a waterfall decline since China is down 1.3% and is showing weakness again. Markets can go against you longer than you can remain solvent - but we can take $400 the odds of a crash in the NIFTY. By the time we finish typing this, we could already be taken out! See you in the battlefield!

Note: India has been showing strength at the last 2 hours of trading in the last week (possibly more) so this could be risky

Update: still hanging in there. Whilst we do not know when and where the turning point will be, we are 100% sure that when it happens the decline is going to be massive. The NIFTY will go from #1 to last. In a way, we feel more confident with Darryl Guppy and the likes being bullish on the NIFTY technically. What are the odds that technical traders all get it right ? So the NIFTY goes up to previous 2007 highs, then a breakout to higher highs and a secular bull market. Our caveat to our short is, if this is a secular bull market and the worst is behind us, then quite possibly the NIFTY could go higher. There will no doubt be hiccups along the way, but our assumption (yes, we are making an ASS of YOU AND ME) these “hiccups” would at least take us back to 5100 levels. Our average entry level for NIFTY is now at about 5350. Significantly below current levels, and (very) painful to hold. (we just posted a new post on Mike Burry’s $8.4 billion dollar short on mortgage backed securities) Imagine holding $8.4 billion dollars worth of shorts on the most bullish and “fail safe” financial product in the market (read India in this context). Mike Burry started shorting back in 2006 (no one can pick the turn), and gradually increased his position to the time of the crash - he definitely deserves our title of BOS more (B-lls of Steel).

Looking at the chart below, can the NIFTY pull back 10% ? YOU BET! We expect at least a 20% fall at the minimum.

At the moment the path of least resistance appears to be up. Since the Indian market is 10% from 2007 top, not many long term investors would be down, and even those who are are not down by much. All the shorts have probably be cleared out by the huge 14% intraday rally, and since then its been up up up (its a game of musical chair - with everyone blind folded and taking a bite of a cake and passing it along. Question is, how much cake is left? SO far volatility is low)

India vs China vs Japan

Update: 30 minutes to close, still no decline.