Monday

India’s Bloodbath

Post a Comment July 6, 2009 – 9:31 am |   | Permalink |  Print This Post |

We have scoured for blogs covering the NIFTY and most are bullish, citing technical indicators confirming an uptrend. The first few hours of trading saw the NIFTY defy gravity as world markets take another beating. Our order to short at 4500 missed the mark by 20 points - the NIFTY is now trading down 5.9% at 4140 ! How the mighty have fallen (again!). We have reanchored all our shorts which we got out at 4200 the last fall last week. We are holding this one to our initial intended target of 4000 (At least). We went crazy shorting the NIFTY in our personal account, and may not have done justice shorting it here on our public portfolio.

The fundamentals simply do now support the technicals - a confirmed uptrend for NIFTY at 4400 when everything else around it is collapsing? More importantly at 4400 the NIFTY has regained all of its losses from the crisis. As much as everyone is outsourcing their IT /etc needs to India, we dont see the NIFTY going up indefinitely. As markets go higher or lower to the zone of no where, it makes taking a position harder. The argument of hyperinflation boosting equity markets versus poor fundamentals (record unemployment etc) may mean markets stay sideways for decades. But when a market diverge from global markets in the midst of one of the greatest economic recessions and rallies 19% because of a landslide election victory - that does not make any sense.

Our attention tonight will focus on our analysis of a breach in low breakout point. there has been only 54 events since 1967. 50 of 54 had a intraday high exceeding the close of the previous day (ie Thursday’s close). With the Dow futures now down 76 points at 8220, we hope the odds are with us. This is a riskier and short term trade obviously - so please stay disciplined. Markets have been moving in unprecedented ways, so backtesting to 1967 is by no means definitive.