Friday, August 08, 2008

Market Mayhem - On the way up?

4645 is the next resistance to watch out for. With commodity price plunging southwards equity markets have started climbing up. As I wrote last time -

. . . . we should remember that the market is in a bear phase. These upmoves are a mere counter trend rallies which would be sold into. International macro pictures are not turning out too great to command attention . . .

I still believe we are in for a counter trend upmove. Markets from here on would go up for some more time and there is little incentive in being too panicky. S&P CNX Nifty has now formed a bullish inverted head and shoulders pattern. The target comes out to be 5160 with a risk level of around 4270.

On the whole the economic conditions are still fragile. Crude oil has fallen sharply from high and will continue to go down over the next few weeks. Inflation expectation has improved to some extent in western markets but I still feel inflationary pressure is too high for comfort in the Indian economy.

The price stability in Indian economy has been a major hurdle in economic growth. Poor price stability has lead to sharp fluctuations of 3% to 4% in long term GDP growth. Indian economy grows within a wide range and leads to volatile expectations as well. RBI would look to tighten even further. The inflation would rise to 14% as previously expected.

It would be wise to go with the trend and buy any breakout above 4680 on daily close and wait till 5000 levels. We must remember this is a counter trend rally and would be sharp and on weak hands.

Note that Gold has broken down significantly and made a low of $850.5 in international spot markets. Our target was $850, so lets wait for a bounce to sell again.

Current posts are short due to some computer issue. I will be writing full posts in few weeks.

Sahil Kapoor

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