Weekly markets analysis for week ending 14 august 09

Although last week saw nifty cross the psychological level of 4700, it could not sustain above it & the last 2 days saw massive correction to fall from the weekly high of 4731 to week end low of 4464 to finally close at 4481 just above the critical 4477 support level. The fall was induced by met wizards who said that although july had a 95% of rain fall, august 1st week had 65% less rain fall. (oh, what a comparison? & next time dont be surprised to find a day wise comparison of rain fall with a day of this year to the same day of last year) this coupled with time & again repetition of the same, by some interested news channels who presumably had shorting interest, saw markets crashing by 254 points in nifty in just 2 days from thursday highs of 4718 to fridays lows of 4464.
Although the correction was due, but the lightening speed surprised many, as there were not much of fii selling nor internal fund selling & it was much of retail liquidation out of fear. This more than 5% fall in just 2 trading days brought down nifty on a week on week closing basis to close down by 3.3% compared to its previous week ending 31 july. So one can safely say that nifty took a well deserved pause after 3 consecutive weeks of mega rise from 13 july low of 3919 to 4th aug high of 4731.with this weeks closing, indian markets have under performed compared to rest of the world markets.
Comparing with previous weeks close, as per closings of all the indices on this fridays close, in us markets, dow had a 2% rise & had a consecutive 4th week of rise, s&p500 performed much better having closed above 1000 mark. European markets had a consecutive 4th week of rise, australia, brazil too had a consecutive 4th week of rise, among asian indices, japan had a consecutive 4th week of rise. Singapore after 4 weeks of rise corrected this week. Korea surprisingly had a 7th consecutive weekly rise. China after 7 consecutive weeks of rise, fell during this week, so also taiwan after 6 consecutive weeks of rise had a fall this week. It was only hong kong which like indian indices had a weekly fall after 3 mega weeks of rise but in case of hong kong the weekly fall was less than even 1%.so, indian markets having under performed rest of the world markets, may show a sharp rise much faster than rest of the world markets perhaps from this week starting 10 august only.
As was written many a times earlier, the cross over of 20 & 50 day moving average has a great tendency of pulling the indices towards it & as on friday 7th august, 20 dma at 4470 was above the 50 dma at 4413 & one could notice how nifty came down to touch 20 dma & one should not be surprised to see nifty touching or even breaching 50 dma to induce an overall bearish sentiment before the next sharp up move to shoot high above the last weeks high of 4731 to move towards much higher levels. Long term investors must make full use of such falls in markets to quietly add on to their long holdings gradually.
Stock market cycles are unique and the impact of met, corporate results etc have a temporary effect on it. Be absolutely sure that new bull cycle has started from 6th march 09 and has a long way to go & one should not miss such "once in a life time" opportunity. One may be surprised to hear next week that met conditions are far better than last week or govt has taken adequate measures to overcome the poor rain fall condition. In fresh long term bull markets, there will always be corrections & these corrections in most cases go beyond ones expectations to induce fear & bearish feeling as had happened between 6th july to 13th july or on 21 & 22 july or on 28 & 29th july but the markets kept on moving up & up & one should not be surprised to see markets moving up & up again. Because the markets had gone up much higher from july lows of 3919 and also had crossed july high of 4670, it is now correcting to retrace a portion of the up move from july lows & once this cyclic retracement is over one will surely see a much sharper up move to record highs of the year beyond ones imagination.
Although the savage fall during the last 2 days of the week has shattered the hopes of many bullish swing traders who fear that the previous swing lows of 4420 or 4380 may be breached, they must realize that except for the announcement on uncertain met, there are no other negative news & the met conditions are such that it can change overnight. This type of met announcements are nothing new & similar predictions were also heard during june also but markets moved up only. So the met impact will be short lived & the markets are likely to resume the bull run.