So, having gapped down on monday on the back of Dow's 280 point crack on friday last, where is Nifty headed from here on ? For one, FIIs sold over 2700 cr on monday in both cash and F&O. That should set the tone for further weakness to the downside. However, Dow surged today to recover the entire slide of friday last, which would give bulls the firepower to gapup ther nifty on tuesday, just as the bears did a gapdown on monday.
Question is, which of the two views are real and which one is just a decoy ? Dow's rally today was largely based on two factors ... one, an almost 5% fall in crude prices, which is probably the biggest single day decline in last 6 months. Two, an expectation that Fed will offer some solace to the markets in its policy statement on tuesday by indicating some sort of support for credit markets suffering from subprime virus.
The fall in crude is coming on the back of a strong surge in its prices in the recent short term and to lend too much credence that oil prices would keep falling from here on wouldnt be a wise outlook. It seems to be more of a profit-taking in crude after a sustained rise, than anything else. As far as Fed is concerned, it is highly unlikely in my view that we will hear it offer any sort of relief to bail out the credit market woes ... remember, Fed has been warning over and over again about subprime fallout and for it to offer a bailout package for the same now ? I mean, that would be dumb ! If it had to eventually bail out the markets, then why let it reach this stage ? wouldnt it have been prudent to do the same when the problem had just started rearing its ugly head ? Also, Fed isnt likely to cut rates either ... which I have been saying since the beginning of this year almost.
If things pan out accordingly, then we will see Dow go down again after Fedspeak ..... which will reflect in the global markets on wednesday. It would be prudent to exit longs in the gapup we see on tuesday and sit on the sidelines. Let the markets sort itself out !
Question is, which of the two views are real and which one is just a decoy ? Dow's rally today was largely based on two factors ... one, an almost 5% fall in crude prices, which is probably the biggest single day decline in last 6 months. Two, an expectation that Fed will offer some solace to the markets in its policy statement on tuesday by indicating some sort of support for credit markets suffering from subprime virus.
The fall in crude is coming on the back of a strong surge in its prices in the recent short term and to lend too much credence that oil prices would keep falling from here on wouldnt be a wise outlook. It seems to be more of a profit-taking in crude after a sustained rise, than anything else. As far as Fed is concerned, it is highly unlikely in my view that we will hear it offer any sort of relief to bail out the credit market woes ... remember, Fed has been warning over and over again about subprime fallout and for it to offer a bailout package for the same now ? I mean, that would be dumb ! If it had to eventually bail out the markets, then why let it reach this stage ? wouldnt it have been prudent to do the same when the problem had just started rearing its ugly head ? Also, Fed isnt likely to cut rates either ... which I have been saying since the beginning of this year almost.
If things pan out accordingly, then we will see Dow go down again after Fedspeak ..... which will reflect in the global markets on wednesday. It would be prudent to exit longs in the gapup we see on tuesday and sit on the sidelines. Let the markets sort itself out !
1 comment:
very convincing analysis madam.i wil keep a track of ur blog hereafter.
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