WEEKLY OUTLOOK: 16FEB TO 20FEB 2009

FUNDAMENTALLY
Fundamentals may not be dead as yet but there surely could be smokescreens created by stimulus packages, without letting people know the real hole in the bank books. There must be a plenty of zombie banks operating and the governments are only talking of tough times but not letting the cat out of the bag.

A couple of stories below would suffice our fundamental outlook this week:

Will the stimulus bill boost the public confidence.

Fighting recession has become a new kind of warfare.

Instead of stimulus, do nothing -seriously!

The stories above may be USA specific but its economy has the final say worldwide.



GOLD
As expected, the gold price is heading towards the rounded off figure of $1000. The short term to medium term targets could be $1000 and then $1200.
However, from the long term investing point, a contrary viewpoint is also making rounds. Please click here to read the detailed story.



MARKET TECHNICALS

CHINA SHANGHAI(2321): This time, China assumes first place here among the markets, technically. It would require a careful reading besides watchful eyes. This is because the index is rising higher and higher over the last 4-5 weeks despite weak signals emerging around the world.
Its 50DMA and 100DMA have converged and the price is well above these converging lines. Its 200DMA at 2460 is also not too far above.
At the same time, it is also poised precariously at the level of its September2008 peak of 2333. A close above this mark would be a positive signal; more so if it is a weekly close.
Further, it faces significantly stiff resistance in 2450 area where 200DMA and the Fibonacci reversal point are lodged. A move above here could remain a wishful idea, at least in the near future.
Although the indicators have yet to enter the overbought zone and there are no signs of reversal, a reversal from current levels could raise doubts about its sustainability at higher levels.
However, on reversal- if and when it happens- the index needs to hold above 1995 mark in any case to prove that it has placed a bottom for itself for medium term. Because a breach of 1995 would imply that the rally is not sustainable. Trend reversal would be confirmed on a breach of 1900 support.
The recent rise in China Indexes could also be seen through the eyes of some fundamental analysts and experts who doubt it. Please click here to read this view point in detail.


U.S. DOW(7850): Formation of bearish engulfing candle on the weekly charts of this index is a strong bear signal. Momentum indicators(MIs) are also pointing downwards and for over four weeks now, the index has not been able to give a close above its crucial resistance at 8400.
The given situation implies that the index might continue to drift lower in the week ahead. It would not be a surprise if it reaches and breaches its 52 week low at 7400 levels.
As mentioned in the outlook many weeks ago here, this index could land around 6000 levels in medium to long term if 7400 is breached on closing basis. To negate this negative outlook, this index needs to give a close above 8400.
Immediate resistance for the week is at 8240. Supports are at 7660 and then at 7390.


INDIA BSE SENSEX(9635): Will this index try to do Shanghai against all odds? Perhaps not! Because fundamentally, the outlook is very unclear in view of the impending general elections sometime this spring season. But technically, its weekly MIs are in the neutral area with positive divergence, implying that it can remain in sideways mode with positive bias in the near term.
However, on the weekly charts, the index is within a symmetrical triangle since first week of November (symm. triangle formation from last week of Oct has neutralised in the last week of Jan) and the last wave is in uptrend that can terminate in 10100 area or even before that. The resistance on the way up is at 9800.
This index would also take cues from the world markets and do nothing on its own for a few more weeks. Fresh longs above 9800 would require very watchful eyes as the index can reverse from any of the levels above here.
To sum it up, the strategy for the days ahead could be: Sell on rise with stop at 10200 and Buy on decline with stop at 9000. Another support before 9000 is at 9300 also where buying for short term can emerge.
Breakout above 10200 though not envisaged, has targets of 10700 and then perhaps 11500 also. But a breakout below 9000 would imply another bout of selling for new lows up to 6000 in the medium term.


JAPAN NIKKEI(7779): The weekly chart on this index also has formed a bearish engulfing candle. It is a signal for reversal down. MIs are giving mixed signals but in the negative territory.
Supports are at 7670 and then at 7400. Failure of 7400 would threaten its 52 week low at 7000.
It needs to close above 8500 to mitigate the negative outlook for this index.


HONGKONG HANGSENG(13555): It seems to be drawing some inspiration from Shanghai index, but was unable to surpass its crucial resistance level at 14100.
MIs are pointing up in the neutral zone, but in the face of weak triggers from around the world, it could also drift lower if fails to breach the above mentioned resistance at 14100 soon. Supports would be at 12730 and then at 12440. Failure of 12440 would threaten its 52week low at 10676.

INDIA NIFTY(2948): Similar to BSE SENSEX, this index is also charting a symmetrical triangle. But this one seems to be nearing its upper boundary soon. So, one needs to be very cautious from here upwards.
It faces resistances at 2970 and then at 3030. Failure to move past 3000 would be a signal of impending weakness.
The range for this index is 2800 and 3050 in the very short term. However, the medium term range is between 2200 and 3200.
The strategy would be to sell on rise with final stop at 3200 and buy on decline with final stop at 2760. Another support at 2800 could also lend support as bears could offload some of their shorts here also.
Only a close below 2760 would threaten the 52week low at 2200.



STOCK TECHNICAL

RELIANCE(1390): Reliance Industries manged to close near its crucial resistance area around 1400. If it manages to move above this level then it could be headed towards its medium term ceiling at 1500. But it may not be a confident journey upwards as it could reverse from any level below 1500. It has multiple supports as well. Short positions could be initiated for short term small gains once it nears 1500 with stoploss of 1505.

SBI(1194): State Bank of India also managed to close well above our expectations. Now it faces resistance near 1250. A reversal from here would pull it down towards 1150 and 1100, while on the other hand a move past here could take it up to 1350.

INFOSYS(1254): It is finding it difficult to sustain above 1300 confidently. Yet a firm close above 1300 could take it up to 1450. Supports are at 1220 and 1160.

To sum up the outlook for the stocks above, the situation is similar to the indexes: Sell on rise and Buy on decline with strict stop losses as long as they stay within the given outer levels above.