Markets News

Market Waves..
Forewarning what to expect in the next sequence of...
Waves Up 1-2-3-4-5....to.... Waves Down 5A-5B-5C

Wave 1......Up........ .Rebound from recent Bottom. Mass pessimism ebbs here.
Wave 2......Down.....Test of Lows...But previous lows not hit
Wave 3......Up..........Powerful Wave...Strength, Breadth, Easy-Credit , Real
prosperity
Wave 4......Down.....Surprising disappointment...Signals that best part of
growth over
Wave 5......Up..........Final Advance...Psychology creates overvaluation.
Leverage at highest.
Wave 5A....Down.....Breakdown...Inexplicable fall. Viewed as buying opportunity
Wave 5B....Up..........Narrow, Emotional Advance...Aggressive euphoria+
denial <----You're now HERE
Wave 5C....Down.....Worst of Bear market...Strength, Breadth, Fundamentals
collapse
(From Frost and Prechter)


Nifty
Today:
The RBI's decision will govern movements after noon. If they hike, then
all will fall, especially Banks, Autos and Housing company shares. But IF they
don't hike, then expect a huge pullup. The markets have assumed the worst
when they hiked the CRR last week and anything contra-that continuance, would
be excellent for the bulls and bad for shorters. Meanwhile, Indian bond prices fell
even more yesterday on assumption that the RBI will not hike today.
Do anything in the Trading a/c today only after the RBI starts getting priced in at
noon.
Anything that rises from 10 am till 12 noon will fall off by that end-time.

Next five days:
We stay trading-bullish in the Nifty after the Fed's decision is
priced in on Wednesday night. However, if the Fed say that they're stopping
future cuts because of rising inflation, then the markets will trade down from
Friday onwards...for a couple of days at least.
In case the Fed say they're stopping more cuts this year because they think the
credit crisis has beenn "licked", then expect Wall Street to really celebrate.
For a few days.

Short term:
We see "macro" issues of US subprime delinquencies/housing
debts/credit card overdues/falling house prices etcetera, overtaking the market's
headaches.
Medium to Longer term: Wall Street's headaches will overtake this temporary
trading rally.
We stay bearish for the medium to long term.


Bank Nifty
Today: Allow the RBI's decision to get priced in at noon.
If hike, then a slip.
If no hike, then a rise.


Gold
If the Fed do not signal an end to further cuts, expect gold to rise.
It could go to $930-950. This is a probability that nobody can write off.But all you have to do is to wait for such rises, and then add more shorts.The price action made during the past six sessions looks like a trade-up might be in store for gold. This could take gold from the current $894 to a possible-high of$ 950.
We'll know better after the Fed announces on Wednesday night.
If conditions change, temporarily at that, for a trade-up in gold, then we'd say you must add more shorts in the carryover mode after it pulls up. However, if you're trading gold for one-three days, then, but only after Wednesday nights' decision is priced in, should you book profits in your trading shorts...stay out of buying.... and be ready to short again at higher levels. Some explanation for the future bearish trend of gold is that the Fed might want this weak dollar to stop falling. If they say or imply something like that, expect a rising dollar to make Funds shift more monies to the dollar...and sell out their longs in gold bought in leverage since 18th January.
All know that gold has no industrial use like silver has. Gold has no other reason to be bought except as a "hoarding" thing when people get worried about the future.
Once again, the paradox of stocks versus commodities is: Stocks go up on Hope. Commodities go up on Fear.
And when the dollar rises, fear pervades the gold market that countries like China and India may dump their gold andf shift monies to the dollar. Especially these two newly-developed countries because ALL their reserves are parked in the dollar.



The Mood
>Expectation on The Street:
Quarter point cut on Wednesday, and then no more for the rest of the year
The mood has been tempered about expecting any more cuts by the Fed. Somehow, the Fed's snoopers and insiders manage to get Wall Street to "expect" correctly !
>US bond prices rose during the wait last night. Yield on the 10 year fell from 3.86% to 3.83%
The dollar stayed where it was yesterday: 1.5655/euro.
The yen too: 104.19/dollar
Oil too stayed at $118.59.
Everybody are waiting, nervously as always, for the Fed to start their two-day meeting today and announce tomorrow night.
Our markets will be closed on Thursday and thus be able to factor in the Fed only on the morn of Friday.
>Bad mood:
GM to lay off 3,500 by axing 1 shift each at 4 pickup, large SUV factories due to weak sales.
...Sagging pickup truck and sport utility vehicle sales have forced General Motors Corp. to shut down one shift each at four North American factories and lay off about 3,500 workers.
...The world's largest automaker by sales said Monday that the cuts, to take effect starting this summer, were brought on by weak demand due to high gasoline prices and an economic downturn.
http://biz.yahoo.com/ap/080428/gm_cuts.html
>What The Street would prefer:
If the Fed says they're cutting now but won't for the rest of the year because it's
"working", then players would be alright with that.
But if the Fed says they're cutting now and won't for the rest of the
year...because of inflationary pressures...THEN The Street would be awfully
upset ! We should expect a drop in Wall Street.


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.