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.

Trans Atlantic Triggers - Did You Receive Those Signals?

Did you receive those wealth creating signals we discussed in the blog post on 08 Nov 2009. For your quick reference here's the link - http://archana-archdeb.blogspot.com/2009/11/sensex-and-nifty-expected-movement.html. In that post we had understood that Nifty and Sensex will get a boost to scale higher heights only if there were positive signals from US markets. In that scenario Dow would close above 10160. We named those signals as Trans-Atlantic Triggers or TAT in short.

On 06 Nov 2009 Nifty closed at 4796 and Sensex closed at 16164 before the weekend. After markets opened from weekend break, Dow roared across 10160 and closed at 10227. Benign signals from US markets or positive TATs have helped Sensex touch 16914. Similarly Nifty could manage to touch high of 5018. If you were able to discern those positive TATs then you would surely have made some neat profit in trade.

Now is the time which is baffling and puzzling. As discussed in the last post (http://archana-archdeb.blogspot.com/2009/11/is-dow-jones-following-rule-book.html) Dow Jones has reached its target of 10360, which means that there will be serious correction in US markets from here on. However Nifty and Sensex have yet to reach their short term targets before tipping over. Nifty should find rigorous selling pressure in the selling zone of 5320 and 5580. Sensex on other hand should experience serious selling bouts in selling zone of 18000 and 18880. All these selling zones have already been discussed in my 8th November post which can be accessed from the first link on this post. But the dilemma is that since Dow has achieved its target, will Nifty and Sensex now achieve their targets as outlined above?

Lets see what the future holds for Indian markets from here on. Nifty and Sensex should reach their respective selling zones before correcting. Whatever be the case, its time to observe some caution on the long side since Dow has reached its short term top.

Sensex And Nifty - Expected Movement Ahead

The correction in Indian markets has been swift and surgical. Now the pullback to the correction is in place. This throws up the most important question - how far will this pullback reach in Indian markets? That's a million dollar question! To find answer to this baffling question, we will resort to some calculations and some crystal ball gazing. Let us embark on this interesting voyage.

First of all we need to realize that from here on Sensex and Nifty will move in any direction as per signals received from across the Atlantic. Let us call these signals as Trans-Atlantic Triggers or TAT, which basically are triggers from US markets. In case there is absence of TAT then Indian markets will just drift sideways. This situation is of low probability. To make comprehension easier we shall deal with each situation separately as outlined below:-

• Absence of triggers from US markets will result in sideways movement in Indian markets. In such a situation you will find Dow Jones oscillating between 10150 and 9650. Likewise Sensex then could be lolling between 15000 and 16000, and Nifty could be lazying between 4700 and 5000. But if you ask my frank opinion, I will promptly label this situation as least probable.
• If there is positive TAT, then you will find Dow Jones closing above 10160 and racing towards 10360/10500 in subsequent sessions. In that situation you can expect Sensex to reach its tipping point between 18000 and 18800, and Nifty could be seen at level between 5320 and 5580.
• In case there is negative TAT, then Dow Jones will be closing below 9645 and tumbling towards 9100/9000 in subsequent sessions. In such a case Sensex could be seen trading between 14800 and 14200. Similarly Nifty could drop down between 4400 and 4200.

Whatever be the scenario, there seems to be one certainty. In next couple of sessions, Sensex will move to the zone between 16410 and 16660 and you will find Nifty trading in the zone between 4860 and 4930. After that, the story will unfold as per TAT received. Keep your antennae operational at peak performance!