1- 200 days moving average and 50 days moving average are under utilised to look at indexes-- if you look back composite, OEX, SPX DJIA that is all major market indexes since begining of this bull run have respected over last four years 200 days moving average.
The bounce of a 200 ma which takes out the 50 days is one of the potent instrument that helps you to predict a run up. I have seen that 'voodoo' has taken over and these simple rationale tools have been undermined- the voodoo' operators go short on the same day when we have a bounce off 200 days and they remain short until we see a peak at 2028, we are right now in a situation where we are practically very near to 200 days ma- -DJIA at 8550 is sitting very near- OEX has never seen that 200 days ma since last time it visited this level in Oct-407.
One thing is very clear that OEX SPX DJIA Composite are going through this corrective cycle after 10 months at lot higher level this initself betrays the very logic that we are in middle of a bear market. The levels last time we visited were 407 on OEX, 1465 on composite , 845 on SPX and 6950 on DJIA- now bears have been making these comments that why this market not coming back roaring up post correction but are we comparing here apple and oranges- the correction on 28th Oct gave us one historic opportunity to get into markets at cut price now within this phase we are going through a correction which is at the top range and we are sitting on these 200 days averages on most of these indexes. Like OEX is at 533, SPX in four figures at 1184, DJIA 8552 and Composite at 1825. Earnings momentum has left that phase well behind rather it is even conceded by most pessimistic reader of the market that 7300 on DJIA is a buy.
I am surpirsed that arguments are being made about lack of buying on respecatable channels like CNBC and compaarisons with 28th Oct decline but my account shows no major impact for simple reason the correction has only hit underperformers a lot, RUT and some market indicators are sitting at far more closer levels to what they were on 28th Oct. So in my opinion a break and double close below 200 days moving average would be a sharp blow to this market and one needs to watch out for it.This is very important in my opinion from strictly trading perspective. So I think one should keep a religious watch of 200 days ma and 50 days as a matter of habit.
2- I think ASIAN investment is a minor element in terms of prospective capital exodus from the markets- I would think that ASIAN turnaround will give a much bigger kick to mid caps and small caps and the laggards, the exodus of capital will be compensated by far bigger force of global growth. I always have been proponent of this theory that US is not dependent on Japanese monies- it is the requirement of Japan that they keep buying the most efficient returns.One of the major weakness behind Yen is no confidence on Yen and as deregulation has started a lot of money is escaping the returnless society. ASIAN situation on normalcy may see return of this capital but as you know this bull run owes its very existance to macro economic factors. I assure you that ASEANs and Europeans were still debating until DOW at 5000 that it is one hell of a sell, they all missed this big move and really never got on to it in a manner they would have liked. it is also fact that as a result of 'greed money' inability to ride this thing up in US markets they are also unable to sell much, in other words their is no hot money to support US markets.
3-I think short term rates will move down- for me the real rate of returns are too high and the yield curve cannot stay like this I call it this as a downward movement of yield curve. I will be looking at increasing wage pressures with interest but anyway Im am thinking that rates will move lower, even ASEA requires rates lower.
Thanks |
