Markets For 25-03-2008

1. TREND of the Nifty for 5 days: Sideways to upwards

(+) Most index drivers bumped up in the last hour at the NSE yesterday.

(+) Short covering did come in at 3.00pm yesterday, but expect more of that panic-closing today.

(+) Either a pre-result expectation rally has started, or some short covering has, ahead of Thursday's expiry.

(+) Noise is about buying of short term losses by those who have short profits in their books. Talk is they'll pullup the index drivers and the two indices so that small buyers come to buy midcaps. When midcaps rise, these players will sell theirs onto them. Those who sell "entries" will do their job today till Friday as there are just three trading sessions left for this year.

(+) While all the negatives still weigh, a rally could run for a couple of days.

RECO: Close the Nifty and Bank Nifty shorts at the opening today. Book the profits for now and wait for this small rally to stop...and then we go short again.

For now, stay out of the short side.

If you wish to trade the long side, buy the Nifty and Bank Nifty this morning and carryover the position with a 75 point stop in the Nifty and a 175 point stop in the Bank Nifty.

2. Yesterday

Positive for stocks: (+) JP Morgan quintupled their $2 offer to Bear Stearns to $10 a share.

Positive for stocks: (+) Tiffany's sell expensive jewellery to the well-heeled. Their December ending profits were more than expected. Proof that the wealthy continued with their business till Christmas 2007.

Positive for stocks: (+) A housing trade group said more houses were sold in February. This was a surprise for all as it is housing that's brought out all the angst at Wall Street.

Positive for stocks: (+) US Bond prices fell and yields rose after bond street took a view that it was worth lightening up a bit in bonds and participate in the rally of stocks at Wall Street. Yiled on the 10-year bond rose from 3.34% of last Thursday to trade this morning at 3.55%. A positive for stocks.

Positive for stocks: (+) Money moved further away from gold after those US bonds too fell.

3. View

A. People believe that "events" produce the trends and turns in social mood.

This is backwards. Instead, social mood drives the trends and turns that produce "events."

The chattering classes make it out that current events, social commentary and cultural trends are produced by "events" happening in the next moment. Wrong.

Watch this film by award-winning filmmaker David Edmond Moore: History's Hidden Engine,

http://www.socionomics.net/films/history/default.aspx

B. The ET says RIL "may" shut all its petrol pumps after sales fell to Nil ever since their retail prices rose above that of the PSU oil pumps. The ET says RIL, Shell and Essar have asked the GOI to give them subsidies or else they will

become unviable compared to HP, BP and IOC because those PSUs get lots of subsidies.

Ambani asking for subsidies?

Meanwhile, today's BS says RIL "mulls" a third refinery at Jamnagar.

How does one marry those two opposite reports?

4. Seriously-negative risks to the long side in stocks:

Existing risks:

>Credit-inflation funded by petrodollars and cheap-interest money

>Housing loan defaults in the US

>Credit card default in the US

>Sub-prime blowups of banks, brokerages and investment banks in the US

>Personal-spend dropping in the US

>Consumer confidence in the US falls to a five year low

>US home sales fell to their lowest in nine years

>The S&P Case/Shiller Home Price index at 20-year low

>Construction loan problems for banks in the US and India.

Trends

NIFTY trends

TODAY : RALLY today

Close carried-over short in the Nifty and Bank Nifty at the opening itself

today...And buy both for the day alone.

WEEKLY : BEARISH

WEEKLY: SIDEWAYS to a Likely RALLY

Do not keep short positions this week.

MONTHLY :

BEARISH

We stay bearish about the markets for the next month once the resutls start off

around the 10th of April. Weaker pricing power in the hands of corporates is the

key guidance that'll emerge from one and all. Expect the bear to come back in

the US, Europe and wherever else a trading rally is going on since the past two

sessions...especially from the horrific losses of the past two weeks.