WEEKLY OUTLOOK: 09MAR TO 13MAR 2009

FUNDAMENTALLY
All those "deemed to be ghost stories" of the past year are turning out to be true and everything is falling in place exactly as they were envisaged that time. The fear of bigger collapse is still looming large, but obviously not unreal. On top of that is the concern of rising unemployment as that could lead to more protectionist stance and policies etc.

Misery index of the U.S., over the last 60 years, has so far recorded the highest percentage of unemployment at 10.8 in 1982.
It started rising continuously from 7.5 in Aug 1981 and peaked in Nov-Dec of the year 1982. Then gradually, it took about two years to return back to 7.4 levels in May 1984. That was during the conditions different from the present one. This time, most of the lost jobs are not likely to be created soon in the face of businesses shutting down for good.

One interesting question, though very rightly being argued is about the authenticity of the composition of indices. Some of the so called blue chips have become penny stocks and they still are there on the measure of indices. This question surely needs some expert answers!

Now for the next week, Banks and the companies like General Motors would keep us on the tenterhooks in the near term.

Last time it was the financial sector that led the boom; and now we are going to have at hand a plenty of time to work out the next sector as markets could remain at lower levels for much longer time than anticipated.

Weekend reading:
Stock Markets: When Will The Bull Return?
When economy bottoms out, how will we know?

YouTube links:-
The Crisis of Credit Visualised -I
The Crisis of Credit Visualised -II


GOLD(comex $942)
It was a week of indecision for gold as it trended lower to take support at $900, its 50dma. But somehow manged to hold above our crucial trend deciding support at $890.
Now, if it manages to move above $965 this week then one more wave of uptrend would resume to brush past its 1000 mark once again. Our medium term target of $1200 is intact as long as above $890.


SILVER(comex $13.32)
This time it was felt prudent to include SILVER also in the outlook as its Long Term charts also are portraying bullish picture.
In the medium term, hold it with stop at $12.46 on the downside. It would have more bullish connotation on a close above $14.6 and would head towards its all time high at $21.22 in the medium to long term. So it is also a safe haven along with gold and could be entered into at current levels and/or accumulate on declines with stop at $12.46. Immediate resistances for the week are at $13.53 and $13.78.
However, it should be borne in mind that for novice traders it is a very volatile instrument to trade on the index and many prefer investment through physical and certificates.



TECHNICALLY MARKETS
U.S. DOW (6627): After recording another new low at 6470, Friday was a day of indecision. But still there is no sign of any revival as per the weekly Momentum Indicators(MIs). However, the daily MIs are giving signal of some bounce early next week but finally to be met with formidable resistances ahead. A close above 6835 could perhaps, bring some hope of arresting the decline in the short term.
This index is stuck within two important levels: 7200 on the upside and 6300 on the downside. Breach of either of these would determine the future course in the index. But guns are loaded more in favour of the bears. Breach of 6300 would bring into reckoning the levels of 5100 in medium to long term. While a breach of 7200 on the upside would signal the arrest of the downfall in the short term. But medium term turns positive only on a close above 7670.

U.K. FTSE100(3530): It is also halting confused at the lowest level though, the odds are still against the bulls. Only a close above its resistance at 3690 could bring some relief in the near term but further, even a failure to move past 3815 would help resume the downtrend.
Medium term turns positive only on a close above 4000.
Support on the downside is at 3200 though, the long term down target of 3000 has been projected earlier in previous week's posts.

JAPAN NIKKEI (7173) : Thus far, it tried its best to remain above its crucial 7000 level. But the chart patterns are portraying an ominous picture even for the medium to long term. As mentioned in our previous posts, a close below 7000 on this index means very bleak picture for this economy and this time perhaps, it may not hold this given crucial level. The mood is in favour of the bears.
Though unlikely, it needs to give a close above 7800 to mitigate the negative outlook for this index.

CHINA SHANGHAI (2193): The continuous uptrend in this index since November seems to be losing momentum. It is giving signs of reversal downward.
If it manages to sustain above its recent low at 2037 and move above 2315 in days ahead then it would be a very bullish sign. But the odds are against the bulls as it has formed an evening star pattern on its daily chart which signals the end of the uptrend. Further, a breach of support at 1945 would confirm that its 52week low at 1665 is threatened and may not hold in medium to long term.

INDIA BSE SENSEX (8326): It has closed below our crucial support at 8500. The long term down target around 6000 to 6500 comes into the reckoning now. It made a low of 8047 last week and a breach of this would be a signal to brace for a fall towards 52week low of 7697 in short to medium term. Further, a breach of 7697 would be a signal to brace for lower targets of 7000 to 6500 in the short to medium term. A close above 9000 levels is required to mitigate the negative short term outlook; but looks unlikely in the given situation.

How much time it would take to hit the lower targets is a matter of debate because the volatility around the globe including in our markets is cooling off. In the given scenario, there are also lesser chances of rising like a tennis ball from the levels below, though intermittent bounces are a part of every fall.
A robust rally is not anticipated unless we get some good signs from the earnigns next season and also the election results in May. Technically this view is also substantiated by the fact that the symmetrical triangle formed on daily, weekly and monthly charts has been breached conclusively and that signals of drifting lower; if not immediately then in staggered manner over the next few weeks.

INDIA NIFTY(2620): Nifty is also signaling of drifting lower in short to medium term. The 52week low at 2253 may not hold once 2500 is taken out. Any bounce from current levels may find it difficult to move past the resistances at 2720 and then at 2790. "Sell on rise" situation remains, and the stop losses for short positions would be 2800 for short term traders and 3000 for medium term traders.
Initiate fresh shorts on reversal from the resistances mentioned above. The targets for short positions would be 2260 and then 2200.



TECHNICALLY STOCKS
Times have changed and do not expect those large moves of the past couple of years. The bounces from the levels below could be lacklustre and the momentum of fall also could be of consolidation nature. In the given scenario it is much better for short term traders to book small profits on either side frequently.
The overall picture is bearish and trend traders could initiate shorts near resistance levels with appropriate stop losses. Also trade according to the overall sentiment
of the market rather than being contrarian always.

RIL (1170): Buy near lower levels for short term bounces from 1060 or 1110 levels for targets of 1250 and 1300. Stop loss is 1050 for short term traders, while long term accumulation is suggested at levels below 1100 to 1000 with final stop at 850.

SBI(940): Sell on rise with stop loss 1000, for down targets of 865. Long term accumulation suggested on decline, with final stop at 750.

INFOSYS(1219): Bullish engulfing pattern could cause a rise up to 1320 in this stock in the days ahead. Depreciation in rupee against dollar helps keep it buoyant from time to time. But a failure to move past 1260 would be a cue to go short for target of 1165.