Saturday, August 10, 2013

Future of stock market.

I am listening the same music during last few years that market is going to crash but up to now it acts totally opposite for Dow Jones and also to some extent for Emerging markets and Euro zone. Recently Emerging markets have faced little volatility due to that US Fed’s tapering and currency related matters but that is far from a market crash.

As a trader I always feel that market is going to surprise many of us and recent cycle in Dow Jones I.A. is a good example of that. As we know that during last few years, Dow is not moving fundamentally but on easy money. If this trend in Dow continues then we may not see a major correction or I would say a big crash unless US economy finds itself on good track or I would say that US citizens can afford that. 


In the last day Dow’s intra-day reverse movement was better but it is getting good resistance at around 15450 range. So long Dow Jones I.A. maintains 15400 ranges there is a chance that it may again reverse in the upside but if it drops more and breaks that range then there is a chance of more corrections. In that scenario I may think about an initial support at around 15240-60 ranges if Dow breaks that then its support will be around 15160 ranges (50% Fb. Ret. range). I want to give more emphasis on 15400 level, below that Dow has the option of giving big negative days but if Dow respects this support range then it may again move in the upside, in that case I will be looking on maintaining 15550 level first. If Dow able to maintain that higher levels then it may be heading for a new high.


In this moment US market is not facing any major new threat from domestic reason except that tapering thing. Markets elsewhere are not facing the same weather. Japan was in problem because of that natural disaster but that is long and since then even after utilizing full capacity of their printing machines, they are not much successful on growth front. In turn inflation is eating up the income of the individual. Though Nikkei has shown good moves this year but any threat to individual’s income may hurt it indirectly.

Last day's move in Nikkei was not good in fact now if it breaks this 13550 range then there is a chance that it will be close to triggering the bearish pattern in that case 16000 level will be far from it. If that bearish pattern works out then Nikkei can test level below 12000 range. But to get assurance about that bearish pattern first Nikkei needs to stay below 13550 range and then it needs to go further down at around 12400-450 range.


 On the upside if Nikkei maintains its move and stay above 13550 ranges then there is a chance that it may test 15000 range again but for that first it needs to break 14450 range first. If Nikkei able to break 15000 range then it may create a bullish pattern but we need more time to get a picture about that.

I was reading news something about cutting excess production capacity in China, if that is true then it is indeed a bad news because they are indicating indirectly about less GDP figure in coming future. In this era of globalization if you guess that any negative news for Emerging markets like China is going to be positive for nations like US then think twice, for say that if China feel more pain with their credit problems then companies which are operating in China and listed elsewhere may also feel that pressure in their earnings and ultimately into their stock prices.

I feel very strange about Shanghai Composite, even after liquidity infusion in to their banking system it is not much responding. So many are asking when it is going to do! 



2050-70 ranges are acting as a good resistance for Shanghai Composite. From May 2013 top, Shanghai composite has already given 50% Fb. retracement (around 2092 range) but that not means it will not give more up moves. I think if it able to maintain around 2000-20 ranges then it has the option of giving more up moves but for getting assurance we need to look its movement above 2100 level. It will be hard times for traders if Shanghai composite likes to move in between 2000-2100 ranges.
On the other hand if Shanghai composite breaks 2000 range then its initial support will be at around 1920-40 level, right now it is better to think only about this level in the downside because things could be problematic like October 2008 if it breaks that.


During last few years European debt problems were covering lot of headlines, I am not saying that is over now, political and economical problems are still there but Somewhere I was seeing a report which says that European economic growth rate could climb to around 1.7% (quarterly basis) by the end of 2014 if that becomes true then it will be a big achievement comparing the negative growth which it is facing over past year. 


It is good to see that German Dax is still maintaining the support of 8200 range and in the last day its close was better. If Dax is able to maintain 8330-50 range then there is chance that it may go more in the north side. But if Dax does not able to maintain around 8200 range in the downside then there is a chance that it may drop below around 8150 range. Here I will give more emphasis on 8200 range for any decision making about short because things can be very monotonous if Dax moves between 8200 to 8400 ranges. Dax is showing sign of breaking 8400 level in the upside but once it breaks 8200 then it has more options in the downside.


Markets are concerned about US Fed that they may taper their $85 billion monthly money printing system (probably in coming September) but will that be so easy!  

I don’t think so, as we are watching that mortgage rates are rising though it maybe not affecting significantly now but if it continues then it may again create another problem for US housing market. Decline in pending home sales for June is a good example of that. I strongly believe that all these have started with US housing problems so if we want to see market on a track then these housing reports (though I don’t have much faith on these things) would be better and that would be on a consistent basis, at least that may give a hint of recovery.

Here a question comes about addiction of housing market on these artificial money but what are the alternatives! 

If Fed starts this tapering then US housing market may face another recession and it will also affect not only US but most of the nations and stock indexes, and next time Dow may not react like the previous occasion. Like many trader I don’t think that US Fed is going stop this money printing, they may try to change the number of this $85 billion, especially when there is no limit of their balance sheet.


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