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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

Stock Market Crash Alert for Indian Nifty

Stock-Markets / India Oct 10, 2009 - 03:59 AM GMT

By: StocksBuddy

Stock-Markets

Best Financial Markets Analysis ArticleThere has been some talk about Markets crashing worldwide from here on. But you also have lots of folks touting the upcoming festive and earnings season to help the market go even higher from here. Markets are at a very crucial juncture of 5K (Nifty) and it has been just hovering around this mark for a little while now. Neither bears nor bulls are able to make up their minds as to which way to go. However, bears seem to have the upper hand. At least volumes suggest the same with more Put options being traded than call options on the nifty in the last few days.


Let's dig deeper... Take a look at the chart below from StockCharts.com

The above chart is a 3 year WEEKLY Chart. As you can see, during the BULL run of 2007, markets were correcting every now and then. This is evident from the MACD rolling over. The Bull run ended with a thumping climax. MACD and markets zoomed through between April and december of 07. Then you have the crossover of MACD and rest is history. No point in talking of something that has already occurred. Even the downward journey, which was a very panicky ride, had MACD going up and down all the while it was traveling to the downside. In contrast to this, the upside that started in March 09 did NOT have a single MACD rollover. That's got to be scary. Let us see where we stand today.

  • MACD Histogram on weekly chart is about to rollover to the negative side. This will be the first time this is going to happen.
  • Almost every other technical indicator is in an extremely overbought zone on daily and weekly charts.
  • Emerging markets led this ride. Now China and Japanese markets are already showing signs of weakness as they start their journey to the downside.
  • US markets, which are clearly manipulated, have probably run their course.
  • Emerging markets are the priciest since 2007. Emerging-Market Valuations Reach Nine-Year High. Value investors look for bargains. And this ain't a bargain
  • Markets are rallying in India, but volumes say other story. Turnover of bourses dips 25% post-Budget
  • Indian markets are trading at well over 22 P/E for Nifty and over 18 P/E for the entire market. This is NOT a BULL market as everyone thinks. Lofty valuations need to be supported by reasonable expectations in the coming year(s). However, with no clear indication of world out of the woods, these valuations are NOT warranted for. Mkt expensive in short term: Kotak Inst Eq
  • An interesting analysis.
    Treasury sales by many promoters, renewed issues of FCCBs and equity linked instruments to raise funds are raising fears that they will suck liquidity from the secondary market. Greediness of promoters is best reflected in the revival of Reliance Infratel IPO by ADAG Group. It is interesting to note that after every major IPO of the Ambani family, markets have ‘crashed’.
    Will it work again? Fund raising may suck market liquidity
  • Exports have literally crashed. Exports down 19.7 pct in August
  • Though NOT a great indicator, Shipping companies should really do well in a real bull markets. Why? Because they ship. However, if you see, almost all of the shipping companies are currently trading at less than 10 forward P/E whereas almost 90% of Nifty companies are trading at or above 25. No room to grow from here for sure.
  • 5K is a round figure that will definitely stay on investors mind for a while. Numbers such as this one need a "Bang" to go forward. Meaning, a huge breakout has to happen with over 20% expectations in near term. However, there are NO indicators that state this will happen.

StocksBuddy.com urges investors to act with caution and definitely NOT build any new long positions here. Remember, historically one makes more than 50% when invested in markets which are down 50%. When you invest in markets that have risen 100%, you are bound to lose more than make anything in the near term.

Check it out yourself. US S&P 500 returns after Bear/Panicky market Downside correction could be in the range of 20-45% from CMP of 5K for nifty.

Invest Wisely and Profit. Do NOT Chase the market. Let it come to you.

Source : http://www.stocksbuddy.com/blogs/?p=9234

http://www.StocksBuddy.com

India's No.1 Trading Community From the desk of StocksBuddy.com Analysts comes the above article. SB Analyst team comprises of experts from varied fields such as Technical Analysis, Fundamental Analysis, Macro-Micro Economics, World Affairs, Currency and much more. Apart from user contributions, our analysts post analysis on StocksBuddy.com on a regular basis. For more details, please visit us @ http://www.stocksbuddy.com/blogs

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Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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Comments

anish shah
18 Mar 10, 14:14
indian market

is the correction is due for india market when and why a reason for that



19 Mar 10, 10:31
nifty

Nifty is on its way to 5500 & this is no bear mkt either Short term corrections though can & will happen.


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