Author: vtrender

We are at an interesting time in the markets.

On a longer-term chart of the US Vix, we can see that complacency in the markets is at an interesting point.This particular point where the VIX closed yesterday used to be the high ‘fear point’ a few years back between ’04-’07 when the bull market was in it’s full swing. A print above the 19 level as that point was when fear was at the highest and market would resume it’s bull run after the index moved below this level as can be seen in the oval points in the middle of the chart.

However between ’00 and ’04 and between mid ’07 to today, we can see that the market has been well over the trendline, but far removed from the highs of 80 it touched in ’08.So are we complacent now or are we returning to the ‘fear’ days.

Let’s look at the index chart-SPX

Overhead are 2 important points at 1146-1170 levels.

To summarize, we are calling for a pause at these levels, just noting that VIX is a contrary indicator and should resume it’s upward journey from these levels.The SPX should correct by about 50 points before it resumes it’s journey upwards.

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Vix and the SPX

The market justified the Open Interest data from yesterday by shaving off 48 points from the Nifty Futures.

I have updated the chart with today’s data which points to some more downside.The US markets are at an intersting point now ( 11.00 pm IST) and further downside there, should point to a gap down open tomorrow.

It will be interesting to watch the behavior of the 5200 PE writers in the first session tomorrow. Obviously they would expect the recent highs at 5180 levels to hold as support, but if they don’t watch out below! A liquidation of the 4.8 million in OI at the 5200 put strike can bring a quick move down.

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OI data from 12th Jan

Here’s a look at the Open interest table at the close of yesterday’s action in the Nifty ( 11th jan 2010)

The tussle between strikes 5200 & 5300 between the call writers and put writers has been on now for over a week resulting in the index moving in a small range for these past few days.

Around 5 million approx in OI at these strikes, a resolution to the impasse can lead to a quick 100 point move in the index within a day. The question remains- which direction?

The larger range for the January series remains 5300-5000.The OI at 5300 has been steadily building up and remains a formidable resistance for the bulls to overcome.

The bias is for a small smart move to the downside to pick up the momentum

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Open Interest for Jan 11th.

Here’s a closer look at the chart I posted yesterday for the Nifty.

The decade long rising TL was broken and retested, a test which failed resulting in the index losing 2500 points in a month.The TL was tested again to the upside and the index took over 3 months to rise above it this time.As can be seen, the test was successful this time and the market rose.

After a good 2009, for the bulls, the bears are calling for a repeat of 2008 for the year 2010.From the chart above the odds of a crash happening anytime soon are slim.We are in a cyclical bull market and the credit markets aren’t even close to signalling any kind of a dislocation in the near future. Sure, we are due for a correction and we should have one anytime now, but it would be just that, and one which should be bought.

The excess money provided by central bankers would find a way in some sector in the coming months leading to another bubble. In 2000 it was IT. In 2008 it was real estate.We’ll have to see what we have come 2011-2012.Inflation would rise as the liquidity ( caused by the likes of RBI, FED printing money in 2009) makes it’s way into our lives.

I’ll leave you with this chart I was emailed sometime back in 2009.

Just replace the words ‘ real estate’ with the next sector which will bring the downturn.

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Crash 2010??

Let’s have a look at the chart above. It is a candlestick chart without any of it’s parameters like price or volume specified.
If you considered it to be the chart of a stock, what inference would you derive about the stock?. One would certainly say that the stock looks very strong.It is rising for over a year and holding it’s uptrend.The immediate presumption would be that the stock can continue rising…

The chart is that of the daily price movement of the Nifty for the past one year.It certainly looks strong heading into 2010.

Let’s take a look at the weekly chart of the index for the past decade.

Now see our blue line is being supported by our decade long brown trend line.Now one can safely infer that the market would remain positive till we get a weekly close below our brown trendline.
Many a time we squander profits or end up with losses by looking a the micro picture.No wonder day traders have the biggest loss-win ratios in the market and investors walk away with the biggest gains.As a trader, short term or long term, a proper understanding of your trade in the context of the time frame helps convert that loss into a profit, other parameters being right.
What are these other parameters?The crash of 2008,put an end to the much talked about decoupling theory. It is now very clear that our Indian markets are affected by multiple economic relationships across globalised trends.Hence an upmove in Oil or copper or the Dollar as well as interest rates across the pacific can have a bearing on the sentiment here.
Through this blog, I intend to utilise the intermarket relationships amongst markets to bring to you profitable opportunities in diversified stocks and indices.

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Charts-The Story?