Jan, March lows most likely to be tested this morning

Our markets:

Bad news does not come alone it comes together. So everything that we have heard for the last ten days is been bad; the inflation number, crude promising to cool down and then going back to a new high which is so discouraging, fiscal numbers not good, the whole oil thing the way it was handled did not leave a good taste in the market’s mouth and the only hope which was that the global markets would pull up a bit that’s also come unstuck and the Dow is reeling under pressure right now. So local, global, FII flows been so negative; one cannot find a positive in the market.

This morning, I think everybody should be prepared to see the January and March lows once again and at the end of the day if we get a bit of a rebound from that we should thank the heavens because it’s not looking good for the market at all and that’s been the case for the last few weeks.   

Asian Indices:

Asia is not a pretty picture. The Hong Kong market is shut but most other markets are down between 1.5% and 2%. The Nikkei is down almost 240 points, Korea is down about 1.7%, Singapore is down 2.3%, China of course last tick was about 2/3^rd of a percent down but average Asian fall is about 2% this morning.

USD 140/bbl on crude, is just getting more and more impossible to absorb?

Though that looks like we are saying this on hindsight, one almost felt it was coming because just go back and play the tapes for the last one week and see how many people on this channel had already assumed that crude has hit an intermediate top. I am sure globally the voices would have risen to an even shriller pitch, saying that okay crude topped at USD 135/bbl it was just a matter of debate on whether it will be USD 100/bbl or USD 115/bbl or USD 110/bbl, that kind of an assumption and almost a done deal kind of a thing is a very dangerous in the kind of a bull market that crude is in.

So even if crude has to cool off it is getting the nagging feeling that it would clean out the shorts once before doing because were shorting cool saying we have hit a top now and of course there is a southward movement only by how much is the question, so go short on crude right now pile on its back, you never do that to a kind of a bull market. We have learnt that lesson in 2007 or lot of traders did shorting the Nifty at every big hike, every time it cooled off a little bit and those shorts had to be cleaned out and I suspect that a bit of that has happened over the last couple of days. Too early to write the obituary  for crude, it may well cool down but I think it will kill a lot of bears before it cools down, because its been the mother of all bull markets out here, those markets don’t fizzle out so easily.

So as I said and I have consistently said by the time crude is done you will find lot of obituaries written for traders who are calling crude, it will be the graveyard for a lot of traders because it is just too strong. I don’t know whether it goes to USD 150/bbl by July 4 as Morgan Staley is saying and then cools down but as long as it remains in this more than USD 125-130/bbl kind of zone, I think it will sit on our markets back very heavily. 

contd on pg 2..