Hopes of pullback rally sizzled off after a bad trading day on Friday. Nothing much can be predicted for the markets, it can go back to 3850 levels or even go up to 4400 levels. There is no confidence or conviction in the market today. Nifty will try and hold 3850 as a base. But, it is not a great market today.
The Dow doesn’t set us up well this morning?
It’s tough to say because of course Friday was such a jolt for sentiment for the bullish traders. Throughout the first half of last week everybody was hoping for relief rally and the way events turned out on Friday, first Infosys and then Index of Industrial Production (IIP); it left the bulls with bad taste in mouth. So I do not think there will be confidence or conviction as we go into trade this week.
Now whether the market breaks down completely from here or tries to just amble around in a range is the big question. My sense is that the market will probably try and hold a bit of a range for the moment and if there is more bad news which comes its way then I do not think it will hold out. But for the moment maybe with 3,850 as a base it will try and probably grind around a bit but sentiment is quite bad now so every short upmove; people will be quite comfortable selling after the reversal of Friday.
So we are not in a great market for sure, now question about that wheatear we break the recent lows is the moot point.
Asian Indices:
Asia is a bit of a mixed picture today but very quiet actually not much is happening across Asia as you can see Nikkei is the strongest market, the Hang Seng has turned actually was up in the morning now it is down 1%, China is quiet, Korea is down a 0.25% and Taiwan is getting on to 1% cut. So just about quiet the Asian markets this morning, no cues from there
It seems like the global situation is one lacking hope, the global mess seems continued to be unabated?
It is, the only thing is that the Fed is doing one more bail out and you will remember that the last time the Fed bailed out Bear Stearns, its sparked off a very-very substantial global equity rally. I am not suggesting this will be the case this time around and at that point a lot of people felt that with the Fed bailing out financial institutions that might have created a bottom for the market.
But now what we are seeing is that too many financial institutions are going the Bear Stearns way. Bear Stearns is a brokerage; it doesn’t matter to the market so much. Fannie and Freddie are absolutely intrinsic to the US economy; they need to be bailed out. The Fed may call it whatever it wishes to that they are injecting money into those two institutions or giving them a line of credit, bottomline is that those two have to be bailed out.
I know last time the markets rejoiced, when Bear Stearns got bailed out. This time too there has been a small reaction and a pull back on Friday evening that may well continue for a day or two, but I don’t think the fact that the Fed has to come out and serially bail out some of the larger financial institutions in the US can be taken as a big positive. It cannot be, you have to be a complete optimist to believe that one after the other the financial institutions are crumbling and they are being bailed out by the Central Bank and you start rejoicing by saying, okay they are not going bankrupt because the Fed is bailing them out and that is the reason for the market to rally. I think that is the kind of complete counter logic, which will not fly beyond a point. So it is possible that for a day or two the market can have a short covering kind of bounce but I don’t think Fannie and Freddie’s bail out will create any kind of significant market bottom that is what the hope is.
Also the volatility is rising which is never a great sign and the thing about volatility is that, when it starts rising you want it to rise really fast and get it over with because now we are about the mid point of the Chicago Board Options Exchange Volatility Index (CBOE VIX), when it started rising from 15, last time it went to 37, now we have reached 27, which is neither the lows nor the highs. You want to get it to 36-37, if it has to in the quick term that is when the market typically bottom out. So at 27 VIX, you are not getting the feeling that the market has had a climatic bottom like it had last time at 37 VIX. My sense is if you have to be hopeful from a medium-term perspective then you better hope that the VIX rises in the next few days by 8-10 points, the markets fall some more globally and then you create some kind of an intermediate bottom because otherwise you are just hanging out there, hoping that volatility will cool off.
-Udayan Mukherjee, Executive Editor, TV18 |
Offline
Moneycontrol 
Popular Boarders 7days