Inching closer to the doom?

We saw the red signals yesterday and accordingly started moving into cash. Let's see what we can expect:

The DOW and the S&P500 both closed almost unchanged. However the Nasdaq was up .45% and closed at 2656.65. With this the Nasdaq has the hit the 38.2% retracement of the corrective from its 2001 peak. It is natural for this to be a very strong resistance.

The DOW is stuck in a range and it can move either way. However we feel that most likely way is downward. Accordingly our bearish view continues as before.

The Nikkei and the HangSeng both opened in the red. But the Hangseng has since recovered.

India:
Up strongly in the morning, the Sensex hit 14964 and then went down from there almost 230 points to hit 14730 before recovering from there to close marginally down. The resulting doji leaves a very bearish cloud hanging over the markets. Accordingly we moved signifincantly onto cash, with some holdings still left (Click here for current holdings and past performance).

Charts:
If we see the charts below for the Sensex, DOW and the Nasdaq, you will see that all 3 are now hitting resistance trendlines. They have also shown the doji on the charts. The markets remain overbought and our preferred view is that they should correct. See the chart for more information.

Another round of selling

We sold another 25% of MORGOK @ 477 and 50% of our second position in BANIND @ 219.5.

No puts as yet. We will initiate puts once we have started trading below the channel that we talked about.

Some more positions closed

We closed out our old position in BANIND at 221.5. That leaves us with the new position we started at 192.

We sold another 25% in MORGOK. Average price of 481. That leaves us with 50% position still remaining.

Moving to Cash

The Sensex crossed our expected target of 14950 to hit 14964 and thereafter it broke 2 criteria:

1. Broke the lows of yesterday.
2. Also came very close to the falling channel.

Accordingly we have started moving to cash. We closed out all our positions in RAICAL at 41 and sold 25% of our holding in MORGOK at an average price of 491.

Perfect day for a debut

The long awaited DLF listing is going to happen today. All the factors point to a good listing:

1. The Nikkei is up 100 points and HangSeng up marginally. So no negatives from them.
2. Vishal Retail achieves a 181% rise on the listing day.
3. The Sensex has broken onto new levels.

That being said, we would advise a sell on listing, hopefully close to 600. The long term outlook for this stock, and the entire realty sector, is strong. But our overall short and medium term bearish view on the market makes us inclined to sell this on listing or shortly thereafter and get back in at a later time. We will wait for the listing and make our decision based on the actual performance.

A chart worth taking a look at is the Blackstone IPO. Like DLF, this was a mega issue in the US. Like DLF, it had a lot of concerns surrounding it's listing related to valuations, but still had a blockbuster listing, before finally going below the lower band of its IPO. Can we expect a similar listing for DLF? Let's wait and watch.



On the overall markets, given the reasons mentioned above, we should be able to enter the crucial 14950-15100 band, that we had been anticipating, today. We will naturally turn cautious. Watch for any topping signs.

The DOW should also show some negative moves tomorrow. It is now at a crucial resistance and we can expect it to react from there and this will have some implications for the Sensex on Friday

Will the new highs sustain?

We made a new high on the Sensex. However before we get into a discussion on that, let's look at the US markets.

The DOW closed up abt 45points. The narrow 20EMA-50EMA band that we spoke about has been broken. However, as we have maintained, we still maintain a bearish view. Previously we said we will change our stance only on hitting new tops. However we are going to change the view slightly. We will now go bullish again on breach of the trendline(refer Chart). Giving it a slight leeway, the new mark for the DOW will be 13710 . We still remain highly cautious and still maintain that we will open up the Wave C downwards shortly.



India:
The new highs that we had been talking about, has been made. As peviously stated, we will now look for topping signs. The new target to monitor will be between 14950 - 15100. Once any of this has been reached, we will monitor for topping signs. A suggested strategy will be to sell calls instead of buying puts. However we will watch the action instead of building our own conclusions. Take a look at the chart below for some understanding of crucial resistance and support.

Office Toons

What to expect in the IPO week - 2

In this post, we will deal specifically with DLF and some sister REALTY stocks.

As we all know, the DLF IPO will list this week. We will take a look at 2 realty stocks - MORGOK and UNITECH, we will see that they have just broken out of a triangle. The volume dry up as the stock moves lower is also bullish. With this IPO listing on 5th July, we should expect some good moves in this week.

Please take a look at the chart for more details.

What to expect in the IPO week - 1

As we saw, over the last 2 days of the previous week, the DOW jumped over the 20EMA, briefly, before settling back within the band of the 20EMA and 50EMA. Our bearish stance on the US markets continues and accordingly we took some new short positions. The bearish stance will be lifted only if we cross the previous high at 13740.

India:
An interesting movement happened in the Sensex on Friday. The falling channel was conclusively broken and we closed at 14650.51, abt 80 points above the falling channel. We can now expect lifetime highs. The falling channel and the gapup around 14550-14575 will be the crucial support now.

But a caution needs to be adopted because of the gap up opening. The first gapup, ie, the breakout(which we had said will be crucial support) was followed by the second gap up opening on Friday. This is called the continuation gapup. We now need to watch out for the next gapup,which is called the exhaution gapup. The moment we see this we will need to be very cautious. However we will deal with it once it happens.