WEEKLY OUTLOOK: 23MAR TO 03APR 2009

FUNDAMENTALLY

Communism went bust long time ago because it made everybody poor equally, while their big comrades were busy using gold to decorate their toilets. But Capitalism should not be equated with that in terms of the ills of an ideology. People in general have enjoyed the fruits of abundance, just because of the success of free market economy. Yet, the capitalists became so arrogant with the ideology that they failed to recognize the consequences of an ‘unregulated’ free market economy that led to insatiable greed. The leaders are still groping in the dark and going to meet in London next week in the name of G20.

This summit could add a little to the already positive sentiment in the short term. But it can not come out with any quick fix immediately except for the long term. Still, the current sentiment is as such, that the markets are picking up only the positive triggers and overlooking the negatives.

However, the forthcoming economic data has not negated its negative outlook so far. The U.S. unemployment data is slated for Friday next week. Watch out!

WORLD MARKETS TECHNICALLY

Profit booking on last Friday happened amid low volumes, if compared with other days of rising markets. It means that the bulls are still hopeful of riding the tide higher in this ‘bear market rally’. Bears might not dare to initiate large-scale fresh shorts for the time being. But a correction to the recent gains is also due any time soon.

The feeling is that this negativity had crossed the limits and the bears must have developed cold feet in holding their short positions for such an overstretched period of indecision and unclear near term. At the same time, some divergent signs have also appeared in momentum and strength between Western and Asian markets. Chart patterns and Momentum Indicators of European markets are not as encouraging as those of the Asian; though the U.S. markets indicators are slightly better than the European.

So, in the days ahead, every market could be charting its own way, independent of each other and not following the DOW as strictly as they had been over the last one year or so. Asian markets are showing signs of having placed a “medium term” trough for themselves. But not to forget that this rally is just a counter trend to the ongoing downtrend and the long term picture has not ruled out those much lower targets in months ahead. So, enjoy the rally with a view that we are not out of the woods yet!

The outlook below is for educational purpose of the short to medium term ‘traders’ and not the ‘investors’! The current rally so far, can only be called a traders’ rally because there are no significant signs of value buying by long term investors in recent time. The bigger action is taking place in derivatives segment instead –implying that its traders’ doing mainly.

U.S. DOW (7776)

It formed peak at 7931 last week. This mark becomes its immediate resistance now. But its crucial resistance is at 8088. A move past here is required to play long safely for short to medium term. Then this index would have a target of 9000 in short to medium term, though with intermittent reversals caused by some resistances on the way up.

The index is halting tad below our 7780 mark mentioned last week, but it is not a negative sign.

Its 50dma at 7600 should lend support next week. Supports below here are at 7373 and 7200. Short to medium term traders could buy on declines near these levels with 7200 support remaining as final stop loss. No fresh longs on a close below here. But the Bears would restart their innings in full swing only if it breaches 7000, which looks quite unlikely in the near term.

U.K. FTSE100 (3899)

The rally was not as sharp as in the Asian markets. It meandered almost sideways over the last week. Immediate resistance is at 3960 but the hurdle at 4001 is proving to be formidable. Then further, a close above 4069 is needed to continue this current uptrend.

On the other hand, supports are at 3789, 3720 and 3664. A close below 3720 would be a signal for bulls to desist from initiating fresh long positions; and further a breach of 3664 would be a restart of Bear innings.

This index is not showing any strength of its own according to the chart patterns, oscillators and indicators. It needs very positive triggers to move up. The world market trend or the outcome of G20 meeting next week could perhaps, lend some support to the European markets. The favoured view would be to wait for a clear trend to emerge when it breaches either 4001/4069 on upside or 3720/3664 on the downside.

JAPAN NIKKEI (8627)

Three weeks ago, the market players had lost all hopes as this index was at the edge of an abyss to plunge below 7000 mark. But it did a volte-face from that point and rallied to gain handsomely. Now it is a ‘buy on decline’ market in short term to medium term. There are no significant resistances on the upside from current levels up to 9325.

On the other hand, it has left behind some gaps with high volumes. So, it could perhaps decline anytime to fill the gap around 8200 levels. Supports would be at 8200 and 8147. Buy near these levels. But desist from initiating fresh longs below 8147. Its 50dma at 7785 would also lend strong support on declines. So, this mark would be the final stop loss for short to medium term long positions.

CHINA SHANGHAI (2374)

This index has been in strong uptrend since November last. But there was no remarkable up move last week. It is facing stiff resistance from 2400 level. The indecision of Friday could also turn out to be an evening star pattern, a bearish formation, signaling downtrend besides a double top. So, it is poised at a crucial point from where it has either to move up soon to come out of its long term downtrend or restart another short to medium term downtrend again. A weak start on Monday would be negative.

But a close above 2400 would be positive, though it needs to give a close above 2450 to confirm that the low of 1665 on Oct 28 is its point of recovery for the medium term. But it may also not be construed as a long term recovery until much higher levels are breached. Yet, a close above 2450 would be a very good sign for the bulls.

On the other hand, there are multiple supports on the downside. The supports at 2300 and 2200 levels could be used for medium term buying levels on declines. Final stop loss for medium term long positions would be 2035.

HONGKONG HANGSENG (14120)

This index has also closed just above our given mark 14100 last week. Some more room is left for the bulls here also. It is also a buy on decline market for the short term. It could be headed up towards 15800 levels in the days ahead.

Immediate supports are at 13528 and 13350. It has also left behind a gap at 13400 levels which could be filled any time. Short to medium term traders can buy near these levels. Stop loss would be at 12800.

INDIA BSE SENSEX (10048)

The story is not different here either, though the indecision on Friday was not encouraging in immediate terms. On the upside, if there is a move above 10470 then the targets of 11000 and 11500 would come into the reckoning. But be watchful near 10470 area because a reversal from the zone below 11000 has a potential to trend down up to 8000 levels again. Short term traders can get knocked off in such reversals if they are not in a position to hold their long positions for a little longer time.

Still, it is also a buy on decline market in the short to medium term. It has multiple supports up to 9000 levels. The area around 9700mark and 9400mark would lend strong supports in the event of decline in the short term. Buy on declines near these levels. But avoid initiating fresh longs below 9365. Stop loss for long positions would be 9300 for short term traders while the medium term traders can place a stop at 8867.

INDIA NIFTY (3109)

Similar to Sensex, this index also faces resistance above 3150. So be watchful until it moves past 3200-3240 zone. If it manages to breach past this zone then stay long for targets up to 3500. But a reversal from the zone mentioned above has also the potential to touch 2500 levels again.

On the downside, 3000, 2900 and 2800 should lend support on declines. Buy near these levels with final stop at 2790.

STOCKS TECHNICALLY

RIL(1548)

Reliance Industries successfully surged past its medium term outer limit at 1500. Now higher targets could be 1650 to 1800 in short to medium term. Resistance at 1650 should be watched carefully.

Buy on declines up to 1400 with stop loss at 1380. Medium term traders can hold up to the support 1330.

INFOSYS(1346)

This stock also moved past its resistance at 1320. The next resistance is in 1400 area. Hold with stop loss at 1300.

SBI(1125)

State Bank of India surprised all the bears and surged ahead robustly. Hold with stop loss at 1050. It could move higher to 1170 and then 1250.