Exhausted
| Fortnightly Close | Dow Jones | Nasdaq | Nifty | Gold | Crude Oil (WTI) |
US Dollar Index (DXY) |
|---|---|---|---|---|---|---|
| Previous | 28133 | 11313 | 11333 | 1940 | 39.50 | 92.97 |
| Current | 27657 | 10793 | 11504 | 1957 | 40.97 | 93.01 |
| Change (%) | -1.69 | -4.60 | 1.51 | 0.88 | 3.72 | 0.04 |
Exhausted?
The toll of previous fortnight’s action was indicating a spiral down on NASDAQ and it did exactly the same and corrected almost 5% in the last 15 days, most of the downside came in the last three days this week.
Why is it important?
The swing down has got us to a point well below the moving averages of 20 days -11300 and 50 days -10997. This is a clear sign of exhaustion of the bulls on NASDAQ.
NASDAQ is a leading index and was the strongest of all other indices in recent years. We need to see if money moves into value stocks gradually, moves into commodities or NASDAQ bounces back into action.
What has been our observation?
We are seeing action in the commodities side so our belief is all the commodities are set to rally; of course not all in one go. Precious metals, industrial metals, and agro-commodities have their own long year patterns and we see money moving into commodities.
On the domestic front, NIFTY managed to stay in the green over the last fortnight, thanks to SEBI to give a booster by bringing a circular by which setting minimum allocation based on the market capitalization for the multi-cap fund. That spurred a rally on many mid-cap stocks as most of multi-cap funds' current portfolio are skewed towards large-cap. Fund houses will have time to rebalance their portfolios and will also have the liberty to merge their multi-cap scheme with other existing schemes. Let us see what fund houses decide and how it shapes up for the mid-cap and small-cap stocks.
But if we take a clue from the global markets then I believe we have sea of red coming for the domestic equities in the coming weeks. 20 Day Moving average at 11470 and 50 days Moving Average at 11260 looks vulnerable for now. We may soon be seeing similar action as happened in NASDAQ which may take us sub 11000.
What can be the trigger?
- Weak economic data
- Indo - China Border is a looming issue, which keeps revisiting
- Derivatives positions are loaded
Market Commentary
Equities:
Volatile days are on; lower rates may not be a great point of buy as indices may be gearing to go below the moving averages.
Currencies:
The dollar index (DXY) seems to have found its new home at 93, keep the range of 91-95, and use it based on your exposures. Our stand remains biased towards 88 on the USD index (DXY). Exporters need to get on to hedge their exposure sooner before the favorable rate disappears.
We believe short selling EURO is the best of trade in the currency pack in terms of risk-reward ratio. USDINR range has shifted down as RBI stopped absorbing USD, big indications for exporters to get ready for eventual 68 on USDINR. Get the hedges and protect the business.
Crude Oil
As expected crude oil went below $40 and now back to the upward move. We believe we have good risk-reward trade on crude oil and we would like to trade this theme through global ETFs
Metals: Gold Silver Copper
No major action indicates that we may do a swift down move before the next rally on gold and silver begins. Keep plans to buy this week at key levels for Gold $1860 and Silver $24.We would add more platinum and hold it as an investment for the next few months to ride this rally in the precious metals.
We have a list of US ETF to invest and ride this rally.
Copper and other industrial metals Copper is leading from the front on industrial commodities, a clear sign of money moving steadily in the commodities. Use declines to buy and ride the rally.
Advisory
These are information, views of best of minds, and my humble opinion, take the trade and investment decisions based on your risk profile, objectives and asset allocation. There are times we need to sit on cash and wait for the market to correct and there are times when we have to stay invested and allow the market to move up. In short, inaction in the market is the most rewarding act, once you are set on a clear plan. So fill up buying orders on asset class where there is a need to allocate funds and reduce priced up assets to keep cash for better times.
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