mkt news

Despite the financial carnage on Wall Street, the SENSEX ended the week a touch higher after bouncing off the very solid 12,500 support level we have had drawn on the chart for some time.
On the face of it, that would seem like a spectacularly robust performance but the Dow Jones has done almost the same thing. While it is still trading as I write this, it looks like ending the week only marginally lower. All things considered, I find that pretty amazing.
The U.S. cavalry has certainly ridden to the rescue with the authorities taking on some huge liabilities in an attempt to calm the markets. But it is not clear whether this will work or that we won’t see more huge failures.
Early in my career I covered the 1987 stock market collapse and remember well the kind of panic we are seeing now spreading across the globe. The dynamic of the current crisis is very different to that of 1987 but two things never change in financial markets – fear and greed. At the moment fundamentals matter little, the key to the whole thing, and how it unwinds from here, is sentiment.
After the 1987 crash the authorities also threw liquidity at the markets but in the form of sharp cuts in interest rates to counteract the negative wealth effect on the economy. This actually led to economic overheating because stock markets recovered very rapidly after the 1987 collapse.
The sharp recovery was due to companies which had issued equity to either raise money or for M&A, taking the opportunity to buy back stock at rock bottom prices.
A fact well worth bearing in mind given the amount of equity has been issued in the past couple of years.
The chart is the same one I’ve been using for a while showing the SENSEX since the end of 2005. All the important support and resistance levels are shown and you can see just how important that 12,500 level is.
Another interesting development lately has been the correlation between the SENSEX and the other Asian markets, measured on this chart on the left by the MSCI Asia ex-Japan index.
You can see the correlation line is turning positive after being negative for well over a month. The decoupling the India markets enjoyed after the government won the vote of confidence lasted around six weeks, but that premium is now exhausted. The influence of other markets is getting much stronger again

Nifty CMP : 4245.25

There is a over exitement in the market. Now the Euphoria is about the
US government plans to rescue banks from billions of dollars in bad debt and the BAN on short selling in US markets for the next two weeks which further boost up our instinct for higher targets 4500 and 4800.

But my hourly charts shows limited upside may be extend upto 4330.
Hourly Charts are like shakira's Hip... Just remember "Hips Dont Lie...!"

And 4330 is the 61.8% retracement line drawn between the recent high 4558
and recent low of 3800.

In the Hourly Charts almost rsi and stocastics are in overbought levels(>80). So a limited upside is expected in short term. And the so called profit booking may emerge in short term. Though there is dragonfly doji or almost a Bullish hammer pattern is formed in weekly charts the overall week remains positive but with limited upside.So if you are choosing to trade in short term choose you stocks selectively. And dont got struck into the Euphoria... And do remember there is a small gap left unfilled near 4120 the Nifty Future which could be act as a current support for the week. And 4330 will act as a resistance for the current week. Hope market

return to the normal tune.

Looking at this weeks volatile moves gives us a false impression that we have done a lot of work but basically we were doing spot jogging ! Agreed, we touched the bottom at 3800 and bounced but week-on-week, we have gained .64%. So much for volatility!

The road ahead is difficult, as on the weekly charts the Jan low at 4420, the 20 period average at 4442, and the two recent tops 4564, 4654 will offer solid resistance. Besides, on the daily chart, we have a small gap 4371-4397 (blue spot, on the chart below) which can also offer resistance.

This down leg was easy and profitable for me but I missed the bounce and no regrets for that, as it is better to be safe than get yourself sucked in the volatility vortex. My strategy in the coming week will be to stay out and watch the fun. I will look for opportunities at the above mentioned resistances to initiate fresh shorts.

***Technicals
Nifty is in downtrend and is correcting upwards.
Upside targets of corrective upmove were 4130, 4220 which achieved today, above it target is at 4310 and maximum upto 4470.
***Derivatives (September 19)
-Nifty (September) future premium increased to 27 points and around 24 lakh shares were added in open interest with increase in the cost of carry, indicating new long position at lower levels.
-Nifty call option shed 42 lakh shares in open interest, whereas put option added 20 lakh shares in open interest. Thus open interest put-call ratio increased to 0.96.
-Implied volatility has decreased by 800-950 basis points (up to 36-40 %), which indicates stability in the coming days.
***Fund flow (September 18)
~FIIs net in Index fut. + 512 cr
~FIIs net in Stock Fut. + 44 cr
~FIIs in Cash Market - 599 cr
~Mut Funds in Cash Market + 940 cr
***total fund flow + 897 cr today & nifty was up by 30 points.
*** So far net fund flow of – 9190 cr in September series.

***Past fund flow
~ Net fund flow of -8071 cr in June series (Nifty -520 in series, closed at 4315)
~ Net fund flow of +6474 cr in July series. (Nifty +18 in series, closed at 4333)
~Net fund flow of -6641 cr in August series. (Nifty -119 in series, closed at 4214)