The Bulls settled scores with Bears to cover their positions in the Banking giant SBI. The RIL has shown its strength lately but firmly. The infrastructure stocks sky rocketed as if there was a Bull run going. The net result is a gain of more than 132 points on Nifty.
I clearly mentioned in my last posting as …(.. The Nifty is weak below 2670-80 level but gain strength above 2705-11 that can fuel fire in Bulls to trap the Bears to cover their positions…). The RIL once crossed the resistance above 1093 shooted upto 1170, SBI is strong above 1085 made a low at 1095 touched a high of 1175 but the only special mention required is for ONGC, failed to cross the 680 level today and it has to cross the resistance.
The inflation was at 8.4% a considerable drop from a top around 12% a few months back is very encouraging. This can further fall if the petro prices are cut and liquidity is infused can kick start the economic activity back on fast track.The markets have good bounce with volumes in beaten down sectors like Reality and metals but the laggards participated with low volume, tech need no special mention.
The major economies like England reduced the interest rates and the France opted for a stimuli package to boost the ailing economy. We are no less than other but our heads need a stimulus to announce it.
As mentioned earlier posts that … The SEBI announcement of margin facility to all participants can improve the sentiment as the news flow in favour of Bull can propel the momentum in the Nifty levels back to 2800 levels. Now the markets are in different orbit will take time to make a significant move to cross the 3080 resistance but the bottom support is at 2635-45 level, which may be challenged if things worsen then we may test new lows again but it will be for a stronger bounce.
The kick start generated today may consume some time to gain the momentum as we are coming out of woods/darkness. The pessimism cannot be over lapped with positive feel with this kind of move but the foundations were laid.
Thursday, December 04, 2008
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This is what Vivek Patil says in his report in the icicidirect.com
This year, we were sitting on this very important cycle, which therefore, has thrown up similar possibilities.
Remember, every 8 years, market does see a deep cut in valuations. In the previous 8-year cycle top during ‘1992-93, Sensex lost 56% from 4546 to 1980. In the next cycle top, the cut was almost 58% from 6150 in ‘2000 to 2594 in ‘2001. Time-wise, ‘1992 cycle completed the bear phase in 12-16 months, while the ‘2000 cycle took 19 months only to hit the low, which was then followed by 19 months of base formation before bull phase could begin again.
I had, accordingly, targeted sub-10k levels for Sensex price-wise, and a minimum of 13 months into bear phase time-wise. Though the price targets have been achieved, the time targets are yet to be achieved. Remember, in technical analysis, both time and price forecasts must be achieved. Long-term investors should, therefore, wait till then. As long as Sensex keeps on making lower highs, the bear phase continues.
Besides price \ time damage, I have been mentioning scam as a usual occurrence after 8-year cycle top. In the current cycle, this may have, or will unfold further in the Global financial markets. The size of the figures will, therefore, be much larger than the earlier ones, and so will be the number of people involved in it.
Furthermore, the history shows that the bull always goes to jail.
Another parameter that leads to the actual lowest value of the bear cycle is the catastrophic event. Such event would be a terrible disaster or accident, especially the one that leads to a great loss of life. The last two cycles had seen terrorist activities, serial blast in Mumbai during ‘1993 and WTC tower collapse during ‘2001.
These events happen suddenly, without any warning, and their catastrophic proportions are not known even while they are happening. During ‘1993, one blast would have been normal, but 13 serially proved catastrophic. During ‘2001, 1st hit could have been an accident, but two in succession was catastrophic.
These events led to such desperation that the lows created thereafter were never ever broken again, Sensex low of 1980 during ‘1993 and 2584 during ‘2001.
Ironically, therefore, such events did, and will provide the best of the investment opportunity to an investor, who is able to take it when it comes. If so, we could be on watch, from now till whenever it occurs. Perhaps, the 13th month, i.e. February’2009 could be the focused time zone.
With the recent terrorist attack on Mumbai, such event has indeed taken place (though I had focused it during Feb’09 time-wise). But it did not generate the usual negative impact on the market usually seen at cycle bottoms.
The 8 year cycle is a good concept can be related to may areas of our life.
GOOD OPPORTUNITY TO READ.
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