Withdrawal Symptoms

I have been writing my musings sporadically. The last note was sent long back in December 2010. I thought that I was over this need to write but I have been feeling the withdrawl symptoms for some time. Believe me when I say that I made a valiant attempt to fight this, but like many an addict failed miserably. So you will have to bear the consequences of my failure for some time to come at least.

Ok, to now really start the note, Nifty futures is still in a SELL mode. I will turn bullish if the current month futures starts trading above 5624. Of the other indices I track the following are in SELL modes-Nikkei(NK1 B only > 9931), HSI(HI1 B only > 23795), Kospi(KM1 B only > 287.20), HSCEI (HC1 B only > 13275) and Euro Stoxx(VG1 B only > 2935) are in a SELL mode. Only the S&P(SP1 S only < 1316) is in a BUY mode. Clearly risk trades are being taken off the table.

When I look at currencies, I see a similar pattern. The Indian Rupee (S only < 44.7375), EuroDollar (B only > 1.4443), Pound(B only > 1.6519), Australian Dollar (S only < 1.0609), Canadian Dollar (Buy at current levels with a stop at 0.9512) and the Swiss Franc (S only < 0.8948) are depreciating against the USD. Only Japanese Yen(B only > 82.24) continues to appreciate. Clearly Dollar is being bought in the last couple of weeks and that is also reflected in the Dollar Index (DXY). There are two trades that I can suggest. Sell the Australian Dollar if it trades below 1.0609 OR Buy it if it trades above 1.0890 and Buy CAD at current levels with a stop below 0.9512.

All the commodities that I track i.e Crude (B only > Rs5147), Copper (B only > Rs424) and Silver (B only > Rs71355) are in a SELL mode. Only Gold (S only < Rs21640)is trending up. Please open the attached sheet for more details on trades.

Finally, if you take a look at the 10yr US treasury futures(TY1 Comdty), the prices have been trending up (S only < 121.23). The trend of most assets in the last couple of weeks are therefore pointing to the reduction in risk appetite. Since this is just the beginning of this risk reduction, we could see a continued and a larger fall in the coming quarter.

But you never can say with certainty can you? I mean there was the Dubai World Crisis and then the Euro crisis of May2010 and then the problems of complete lack of financial discipline in the US and then to top it all the Nuclear Crisis in Japan. But through it all, the world assets have trended up and in a stupendous act of self delusion the world has acted as if all these problems did not really exist and were only figments of some fertile imagination.

That is why despite all the problems, I remain ready to buy at the levels mentioned in my note above.

Having said all this I will like to reiterate the trades that I have in this note. 1] Buy Nifty futures above 5624. Hopefully this happens only with a resolution to the Greece problem 2] Sell Australian Dollar < 1.0609 OR Buy it above 1.0890 3] Buy CAD at current levels with a stop below 0.9512.