Our current view -

After the last 2 days of significant declines on the DOW and FTSE, it is a good time to revisit the market as a whole. Before we go with the view, let's take a look at what has happened so far:

US & UK:
DOW: Corrected from 13757 to 13466 = 2.1%
S&P500:Corrected from 1541 to 1517 = 1.5%
FTSE:Corrected from 6686 to 6523 = 2.4%

Asia:
Asian markets have had one bad day and looks like one more to come today
HSI: Down from its highs. Interestingly Sensex trails the HSI by a few days. (HSI Chart)
Nikkei:Finally managed to sustain above 18000.Been relatively immune so far.(N225 Chart)
Sensex:Corrected from 14683 to 14256 = 2.91%
Nifty:Corrected from 4363 to 4198 = 3.8%

So where do we stand. From our old view as jack_stockpicks summarized below:

My personal view is that Wave C will start after we take out 4250. Remember May 2006 was Zig Zag, and since corrective patterns should alternate, we will have a flat this time. In a flat the Wave B should move above the start of Wave A, giving an impression of a new rally before Wave C begins. I would say maybe 4300 should be a target.

As can be seen, our old targets were easily achieved. We still maintain that we will see 15000+ before the Wave C begins. Some reasons for our bullishness:

1. Individual stocks that we track on the Indian markets are showing signs of strength without looking like topping action.
2. The DLF IPO is between June 11-14. We feel that the big IPOs are kept just prior to the correction. In addition they are preceeded usually by nervousness.
3. This recent weakness is caused by interest rate hikes. Interest rate hikes are usually signs of bottoms and not tops.

That being said - where will this weakness find support. We feel 13800 offers support. A breach of 13800 implies that Wave C has begun and we will hit 12350 again. However the more important thing will be where the next rally will terminate.

Is 13800 a buying opportunity? We feel that it is not the right time to buy. The time to buy was mid-March and April. The risk-reward is not in favor of buying right now. Out view is that we will make new highs. But we always believe that the market is king and with the adverse risk-reward ratio, it will be better to stay on the sidelines for medium to long term investors. This bull run will offer plenty of opportunities in the next 3 months. Staying on the sidelines will help preserve cash, confidence and the mental strength to make use of these opportunities.

For the short term investor, if the move to 15000 happens we will see very good returns in the midcap section. The question is IF!!

Catching the recent correction

There is another forum which I frequent where I made the following comments -( Click here ). The details are posted below:

A month later we still remain bounded by the trendlines. Most stocks look to be in a distribution phase. Another week or two left? I have closed all longs and getting on the short side

What would you do?

Our Top Picks - US Updated June 17th 2007

As we have had a bearish view on the US markets, we have been short. Our current short activities. Click on the individual security for some more information:

1. ATHR
2. AMAG
   

Click on our real time Gain/Loss Tracker.

Our top Picks - India Updated June 17th 2007

Here is a brief snapshot of our current picks and our view. Click on them for individual analysis:

USHBEL: CMP 245, Target 310, Upside Potential 25%
BANIND: CMP 199, Target 270, Upside potential 36%
MORGOK: CMP 546, Target 1 775, Upside potential 42%.
RAICAL: CMP 41, Target 56, Upside potential 36%

Please note that predicting targets is a fool's business. A stock will know no highs and no lows. We are looking at targets in an ideal world. The targets are issued so that we can periodically book our profits and convert paper gains to capital gains. Whenever you have concerns abt any of the targets or stocks, pls leave us a comment or a note.

This Gain/Loss tracker will help us to track our gains and losses real time.

Real money thru Real Estate - Peninsula Land

MORGOK: Initialy screened at a price of 350, the stock has done really well. We sold off 10% of holdings at 450, followed by another 15% at 520. With the upcoming IPO of DLF to be started tomorrow, we should see some nice action on this stock

We give it an immediate buy call with an intial target of 775. The SL for this stock is at 490.