The Reliance Story

We have not seen any trend change in the last few days. Equities and commodities continue their uptrend. Dollar Index continues to move down. As I repeatedly said in the past, all one needs to do is to continue to ride the long position.

The question really is whether this trend is likely to continue and if so, how far is it likely to go?. The S&P has broken above a Reverse Head and Shoulder neckline and is now trading above it for the last few days. The price projection for the culmination of this pattern is 1200. The daily RSI for the S&P has crossed 70 for the first time since Jan 2008. According to my way of looking at things, this does NOT suggest that the S&P is overbought. It suggests that there is strength in this market and that we could rally further albeit with short term corrections in between.

Why so much attention on the S&P. Will S&P outperform the rest of the world?. That does not seem possible. But it is unlikely that the emerging markets are going to be totally decoupled from the US in any hurry. As long as the S&P is trended higher, we can be assured that we will have a rally of even greater magnitude in the Asian markets. We do need the S&P to the extent that we do not want it to crash.

You might now reasonably ask me why the heading which says the Reliance story?. Where have you talked about Reliance?. Well Reliance did give out its results over the weekend which is a first I think. Normally the results are declared with great pomp during the market hours. What did I think about the results? I dont know since I dont think about any company's result.

However the Reliance that I mentioned in the heading was not about the company. I was referring to the Emerging markets' continued "Reliance" on the US for direction. If the US does not move up slowly it is unlikely we can have our own breathtaking rallies!!!