Saturday, December 22, 2012

Weekly Review - 24.12.2012

Dear All,

Market So Far :-

Marked ended Lower last week, especially on friday due to worries from US Fiscal Cliff Danger after a US Republican proposal failed to muster support raising worries that the US can avoid the 'fiscal cliff' which calls for spending cuts and tax hikes starting January 1, 2013.

Markets are hoping for a solution to the US ‘fiscal cliff’ issue because if a solution is not reached, it can impact sentiments negatively

So whats a Fiscal Cliff means:-

Ever since the global economic crisis hit in the year 2008-09 the world economy importantly the US economy has taken a severe beating. Globally to avert the crisis the central banks have relied on the deficit spending including the US. However the deficit spending also called as money printing and the quantitative easing by the economists came along with huge burden of debt. Similarly in the year 2011, when the US wanted to borrow more money it had to raise the debt ceiling because there is limit to its borrowing which can only be increased with a vote of congress. In the same year the US passed the bill and extended the debt ceiling to $14.3 trillion.

This would not have been possible without the government’s promise of controlling the spending and restoring the tax cuts and other subsidies in the stipulated time so that the fiscal deficit could be controlled. Thus the Budget Control Act 2011 was passed, which said that if it fails to do so and achieve the desired economic growth than that will automatically trigger the restoration of the tax cuts and subsidies. Spending on different programmes like administrative and the defence spending will be cut automatically. Unfortunately the time has come when all these terms of Budget Control Act will expire by the end of December 2012, which is also known as Fiscal Cliff. So the Fiscal Cliff was created due to the series of such actions including the approval of Bush era tax cuts in 2001 and 2003.

How far its Danger :-

Including all the automatic tax increases and spending cuts the estimates suggests that the US economy could take a hit of about $500-600 billion, which is about 4% of its GDP and good enough to take the GDP back to recession. On an average about $2,200 extra in taxes will be paid by the average family.

So its no doubt that a failure in fiscal cliff may certainly hit the world markets like Europe China and India too.

Finally :-

Last Week debacle in the US House of Representatives, where Speaker John Boehner failed to secure passage of his own bill that was meant to pressure President Obama and Senate Democrats, only added to worry that the protracted budget talks will stretch into 2013.

Back Home :-

1) Mean while RBI left its Key Rates Unchanged on Tuesday and hinted that it may cut rates if the Inflation shows way for it.

2) The Lok Sabha, late Monday, cleared the Banking Laws (Amendment) Bill, 2011, after Finance Minister P Chidambaram agreed to drop the contentious proposal on allowing banks to do futures trading.

3) Also Finance Ministry cleared the ways to Issue Banking Licences to New Player and said they may infuse fresh capitals into Major PSU Banks if needed.

4) Further, the Lok Sabha on Tuesday approved the much-awaited Companies Bill, 2011, making it mandatory for profit-making companies to spend on activities related to corporate social responsibility (CSR). If a company does not do so, it will have to explain the reasons for it.

The changes in the Bill include provisions that make it mandatory for firms — those that have reported profits of Rs 5 crore or more in last three years — to spend at least two per cent of their average net profit on CSR activities. Companies failing to meet the obligation and not disclosing reasons for it in their books of account would face action, including penalty.

>>>NIFTY - Daily<<<<

>Click the chart to see on full screen<

Nifty on Friday broken the Support 5848.

Also closed below 20 Day Simple Moving Average, which may be a first sign of bear.

But Price should break below 5815 for more weakness.

>>>NIFTY - Hourly<<<

>Click the chart to see on full screen<

Above Hourly chart with Andrew's Pitchfork - Broken the median Line, suggest a more fall ahead, may touch the bottom Support Trend Line.

>>>> Nifty Hourly - Alternative <<<

>Click the chart to see on full screen<

Its a 4th wave expanding triangle still moving as W-X-Y.

Earlier I have marked as end of 4th wave and upmove assumed at 5th wave, but fridays down move below 5848 suggested an alternative count for 4th sub wave as W-X-Y.

As every years December should be a Bullish Year, Unlike this year inspite of several positive approaches from Govt side and Many break out on stocks like Banking and Steel suggested that Bulls are not tiered, but instead lets assume that there may be some more consolidation in Nifty.

Possible move are charted as above. So it seems like more volatile ahead. My advice for Nifty traders, don't take any aggressive Shorts or Longs until there much more evidence or confirmation on chart, means Stop Loss may hit on both sides in coming days, if I am not wrong.

Lets see..


>Click the chart to see on full screen<

Opto Circuit - Medical Device Manufacturer issued 20 Lak Convertible Warrants to Promoters for Rs 145 per convertible warrant or as per the pricing formula as stipulated in SEBI's (ICDR) Regulations 2009, which ever is higher. Opto will get Rs 29 crore through the issue.

So technically there is a Positive divergence on the daily chart and volume shows some accumulation happening. Price has retraced exactly 78.6% from the high of Rs.260 to 98.6.

More Upmove above the Trend line as shown on the chart.



>Click the image to see on full screen<