iCharts Discussions

[rk_a2003]

Apka&Vinay,

May I request any one of you to post the chart or else atleast a table describing FII monthly net Inflows/Out flows including for this month.I don't have the data readily availlable.

It may help us to locate a possible reversal zone.

[vinay28]

[rk_a2003]

[apka]

Here you go RK.

And today's net stat:
FII: +2563.6crs
DII: -1398.05crs

Aren't the DII smart operatives, buying at lower levels inducing FII to take a u-turn

[rk_a2003]

[vinay28]

[rk_a2003]

Oh! ok, thanks.On 30th August?Any way still long way to go.

[apka]

[vinay28]

[rk_a2003]

What FED is going to do?

On September 18th the Federal Reserve must decide whether to begin to reduce the pace at which it supports the economy by printing money to buy bonds, from the current rate of $85 billion a month. If at all it decided to start tapering what should be the quantum to start with?

Before going in to this I would like to ponder on few more relevant points. On 18th by the time news reaches us will it lose its relevance leaving us no edge? Most probably true. But we can place ourselves a little ahead. How?

In Technical analysis what we do is to compare the price volume action, view at very recent past action and present action and also historical action; Compare them to decide the future direction (You may add some more indicators of your liking, which again analyses the same price, volume, time factors, relative performance …etc…etc… in their own way).This can be done in different time frames starting from tick charts to monthly. Whatever you do in T.A can be boiled down to this. You also will look at higher time frames and grasp the trend and move in to LTF to take up a trade in accordance with HTF at an opportune time. What you are trying to do with this extensive and exhaustive tech. exercise is just trying to read the market makers mind. Which they always try to conceal in a very innovative way from time to time.

Well, Fundamental analysis need not be limited to looking at balance sheets, Profit loss accounts and annual results. More importantly it is to have an idea that too objective understanding of the big picture. That is…. At what juncture this global economy exactly stands? And its possible direction forward?

This too can be divided in to time frames; what is the general direction in long term, medium term and short term. The events and news generated in near term will affect you in short term. It is true that Institutes and big names will know such releases well before us. Even the information was sold to them legally before releasing to media.

But here we need our analysis to know the possible outcome from FED meeting. We use the same methodology being used in T.A.

It was Fed’s plan to stop bond buying altogether by the time unemployment come down to 7%.The rate is now at 7.3% which was 8.1% a year ago.
It was the growing rate of default on home mortgages in America that precipitated the financial crisis five years ago. As the contagion spread throughout the financial sector in 2007-08, nervous or cash-strapped banks and other creditors stopped lending, thereby infecting the rest of the economy. A deep recession sets in. It took US government heavy involvement through bailouts for big corporations and mortgage bond buying through quantitative easing (Q.E) to induce liquidity, which was sucked out of the system due to losses on heavily leveraged CDO positions and through wide spread distrust among financial institutes.


The situation also demanded reduced Interest rates .The Federal Reserve cut its policy rate from 5.25% in the summer of 2007 to 0-0.25% in December 2008 and still maintaining near zero levels to discourage savings and to encourage spending among wide masses thus increasing demand. This also encourages more production and facilitates robust economic activity with the availability of cheap money working as a catalyst.

All these steps are being taken up to bring back the economy on to the track. Here one serious question arises. Why the strongest advocate of free market philosophy got involved in a proactive manner and buried itself deep in to this mess? straight away going against its strong advocacies like “let market decide everything”. “Demand –Supply is the prime mover of this system and it should be left free without any government intervention”?.

Even this gigantic U turn attracted a strong criticism like… through these acts “US government is privatizing profits and socializing the losses.”. Why the FED is unabated by this and continued its bail out programs and steroid injections through QE doses?The answer is quite obvious …to prevent the very collapse of the market economy..

Now in this back drop we understood that the prime focus of FED is to bring back economy on to the track, to create demand, to create employment and to reinstate faith in the market economy. So it cannot go against the very targets it sets in 4-5 years back even by sacrificing its own free market philosophy.

So the bottom line is it will taper the QE in a way which will not act against its set goals .It will take care of it. If at all it decides in favor of tapering it also ensures that the quantum will be with a minimum effect. After all it knows how to with draw steroids in a step by step manner. However, it even can not afford to continue steroids forever which may cause a possible death of the patient.

[rk_a2003]

Larry Summers withdrawn from FED chairmanship contest. Larry is being considered as a key force who contributed in liberalizing. During his time as Treasury Secretary in the Clinton administration, summers earned his reputation as a deregulator. Summers urged Congress to repeal parts of a Depression-era rule called Glass-Steagall, which prevented financial institutions from simultaneously acting as investment banks, commercial banks and insurance companies. This move paved the way for banks to become larger than ever. Also in the late '90s, Summers pushed back against a movement to regulate complex derivatives. Some say, both those decisions played a role in precipitating the 2008 financial crisis.

In the present scenario Obama administration knew it that with this kind of reputation they cannot choose Larry as FED chairmen and must have shown him door. They cannot make a dent to the reinstating of confidence by appointing Larry as chairman for the reason that there could be some people who may believe that Larry could continue his devastating liberalization mission as a FED chairman.

At this juncture for the reason he won’t fit in to the grand revival plans of America and he was sent to recycle bin. They appear to be correct in their short term reading as global markets are celebrating it with a rally.

Ha..Haa..Haaa It appears that American administration is calling all their short term calls in right direction to meet their goals. But they are aiming deep recession on long-term and have no clue to avoid that catastrophe.

[rk_a2003]

As I wrote in my last post The American think tank is determined not to derail the efforts that were put in place. ‘Summers’ withdrawal was another clear indication.

But, whatever the quantum of tapering could be, there will be some effect though minimal. Can you imagine steroid withdrawal without relapse however slow the withdrawal might be?.

Emerging economies are more prone to that effect and were poorly placed. So we may expect some sort of jitters at least on temporary basis in case even 10 billion$ tapering is announced .

Look at the $-Rs movement, $ is again gaining strength deriving it from possible tapering relapse effect.

But incase tapering is postponed as of now (which is quite unlikely).There could be a rally in our markets along with rupee.

[rk_a2003]

The US recovery is hollower than we suspected. Here is the proof.FED postponed the tapering. Which we considered as unlikely, but still as a possibility. The price action of the Global markets hinted us lite tapering it turned out to be a no tapering as of now. Is it Insanity to continue steroid infusion or a compulsion out of ground reality? Whatever might be the reason? It’s not declaring anything optimistic over the economic health of US.

Obviously global markets are witnessing rally, SGX nifty at upside frenzy. The question is how long?

Now we have a clear call at what could be the next possible bubble. Most likely it is going to be a sovereign debt bubble.

FII’s net infusion in to Indian markets was 7059 crores for this month.Look for a figure above 10000 and expect a correction/retreat/reversal from that point .
Has anybody gone for investment when this thread suggested going for it?. When rupee reached lower levels around 66+ and nifty was around 5300 levels. Those positions are in good profit.one may start to book them before Diwali judging each scrip on its individual merits.

[rk_a2003]

US Media started blaming that Bernanke lost his credibility. They must understand that FED must be in real discomfort to postpone the tapering but read this part of one of my earlier post on 15th September.

“So the bottom line is it will taper the QE in a way which will not act against its set goals .It will take care of it. If at all it decides in favor of tapering it also ensures that the quantum will be with a minimum effect. After all it knows how to with draw steroids in a step by step manner. However, it even cannot afford to continue steroids forever which may cause a possible death of the patient.”

Hint for tapering in September is not unconditional. Look at the way bond markets, US markets and emerging markets reacted when FED announced tapering and also when it postponed tapering. FED has blown its balance-sheet up to $3.6 trillion and held rates at zero since 2008 but achieved below mediocre results in return. It clearly signifies the bad health of the US economy and the reality that it cannot survive even with the tapering of steroid dose. Then what will be the logical end?

The World is not going to take up this monetary assault of US silently. They may intensify the remedial measures already taken up by them. There could be a demand for the reintroduction of gold standard, which will lead to the end of the US $ hegemony. To avoid this FED will be forced to end its liberal monetary policy and QE in haste and we all know the consequences.

[rk_a2003]

FII's net inflow in this month till today is 10592.Expect a correction at any time.What could be the possible triggers?.Explore.