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Unlike yesterday I did not get up in the morning with a feel for the markets. Yesterdays feeling had turned out to be right. There was a small bounce. Despite the bounce, the equity markets around the world are poised. SPX, HSI, Nifty, Kospi etc are all a couple of days away from changing their trend from up to down.
The last few months I have tried to look at the Dollar and sometimes at commodities to get a feel for whether this rally could continue further. By now it is pretty apparent that their trends run concurrently. They certainly cannot be used as a lead indicator to determine the trend in equities.
Yesterday a friend pointed out to me that the Shanghai Composite (SHCOMP) could have potential as a lead indicator. It had peaked a couple of weeks before the world markets peaked in Oct 2007. It had bottomed out in Nov 2008 much before the world markets had bottomed out and then has formed a peak in the first week of Aug 2009 i.e. this month- a few days ahead of the rest of the world. So why not get a feel for where this market is headed.
A deep analysis, taking all of 2.5 minutes reveals that SHCOMP is currently on a strong trendline support. Similarly the 200 day ema is also a support. It also finds support at current levels from a 38.2% retracement Fibonacci level.
So where does this leave us. Unfortunately nowhere except to say that we are poised on the proverbial knife's edge. SHCOMP is already trading below RSI 50 ( my fav trend indicator) indicating the trend is down. However, as mentioned in the earlier para, three strong supports lurk close by. If the supports detailed above are broken then almost certainly we can bet on the rest of the world following suit in the coming weeks. On the other hand if the supports hold and SHCOMP rallies from here then we could see a big rally in world equities. What could be more knife's edge that this?
After all this deep analysis, I have to tell you that I bought Nifty futures yesterday when it traded above 4462. Will get out of my long positions and go short if we fall below 4350. As simple as that.
The last few months I have tried to look at the Dollar and sometimes at commodities to get a feel for whether this rally could continue further. By now it is pretty apparent that their trends run concurrently. They certainly cannot be used as a lead indicator to determine the trend in equities.
Yesterday a friend pointed out to me that the Shanghai Composite (SHCOMP) could have potential as a lead indicator. It had peaked a couple of weeks before the world markets peaked in Oct 2007. It had bottomed out in Nov 2008 much before the world markets had bottomed out and then has formed a peak in the first week of Aug 2009 i.e. this month- a few days ahead of the rest of the world. So why not get a feel for where this market is headed.
A deep analysis, taking all of 2.5 minutes reveals that SHCOMP is currently on a strong trendline support. Similarly the 200 day ema is also a support. It also finds support at current levels from a 38.2% retracement Fibonacci level.
So where does this leave us. Unfortunately nowhere except to say that we are poised on the proverbial knife's edge. SHCOMP is already trading below RSI 50 ( my fav trend indicator) indicating the trend is down. However, as mentioned in the earlier para, three strong supports lurk close by. If the supports detailed above are broken then almost certainly we can bet on the rest of the world following suit in the coming weeks. On the other hand if the supports hold and SHCOMP rallies from here then we could see a big rally in world equities. What could be more knife's edge that this?
After all this deep analysis, I have to tell you that I bought Nifty futures yesterday when it traded above 4462. Will get out of my long positions and go short if we fall below 4350. As simple as that.
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