Sunday, January 3, 2010

Last Trading Day of Decade : Yuletide Spirit Prevails

Investors can finally look back at 2009 with awe and admiration. From a situation of gloom and doom, indices world over were sitting pretty at 18/20 months' highs on the last day of the decade gone by. There is a sense of higher expectations and a bullish tenor prevailing in all markets. As we bid goodbye to 2009 and to the decade, we acknowledge navigating two major humbling hurricanes in the financial markets - dotcom bubble and housing market bubble. We have been bruised and scathed, but we still have our spirits intact which can be judged by universal display of cautious bullish sentiments even after all that investors had suffered and endured through year 2000 to 2009.

This force of bullish sentiments will propel the markets higher for some more time. In short we have entered 2010 with a positive bias as far as stock markets are concerned. Given below are some of the reasons for bullish sentiments continuing in global markets in 2010 :-
  • Dollar index which has shown strength for better part of December 2009, is likely to cool down. Continued rise of Dollar index throughout last December had shackled the equity and commodity markets, including Gold, in the last month of the last decade.
  • In December 2009 Dollar Index had risen from level of 74 to 78. Going forward you can expect the index to cool down to at least 76, which is a reasonable expectation of 50% correction. Around that level of 76 the index will also find support from 50 day simple moving average. Even RSI in Dollar Index chart is indicating a fall for the index. If that happens then the existing inverse correlation will propel equity and commodity markets to climb higher in the initial trading sessions of 2010. Across all markets expect to see higher levels from closing prices of last trading day of 2009 in the near term.
  • Trading volumes are set to increase with greater daily participation from players of substance. The big bosses of Fund Houses will be back from their Christmas and New Year holidays. They are expected to start the process of investing with renewed vigour. In their absence their stop-gaps were holding the fort which is why there was such thin daily volumes of trade.
  • Once the big fund houses exhibit bullish sentiments then the individual investors sitting on cash will join the bandwagon.
  • And finally, as the scene unfolds in this fashion, the shorts in the system will be trapped. There will be a rush of short covering which will act as a booster engine for the rocketing markets.
The long and short of this denouement is that bulls can rejoice in the initial trading days of year 2010. Global markets will be in green for the near term in 2010. Indian markets will be no exception. In fact we may witness greater traction in Indian markets as it bounces to higher grounds in the beginning of 2010. This will have added propulsion from short covering. The situation of Bear Trap arising was earlier discussed in my post titled "Nifty - Crystal Gazing For Coming Week" dated 4th Oct 2009. Check the link here for quick reference http://archana-archdeb.blogspot.com/2009/10/nifty-crystal-gazing-for-coming-week.html

After having gone through this 4th October post, you would have realized that by reaching 10500 Dow Jones has behaved exactly as was predicted, but Nifty and Sensex have still some catching up to do. In that post I had indicated that with Dow reaching 10500, Nifty will reach 5500, as the supply zone of 5137 to 5300 will be used by bulls to trap the bears. Similar sentiments were echoed in my 08 Nov 2009 post titled "Sensex and Nifty - Expected Movement Ahead". Here's the link for your reading convenience http://archana-archdeb.blogspot.com/2009/11/sensex-and-nifty-expected-movement.html

Now the million dollar question is whether in the beginning of 2010 Indian markets will play out as per my calculations of Nifty and Sensex or not. Only time will tell! However in days ahead if things pan out in Indian markets as I had outlined in October 2009 post, do let me know through your comments which I shall truly value.

A very Happy New Year to all my readers and followers. God Bless and happy trading for all of you in this crucial year of 2010.