Fundamental and Time Projections :
Before i start of with a view on time projections. Do have a look into the previous updates posted at the end of this article.Also have a look on the video posted.
November !!! This is yet again the zone of 21st month from January last year. Had mentioned about losing confidence in the month of Oct/November in my post in March.
So when we are in an important time period month as well as at a crucial stage in the extreme short term with extreme volatility and indecision in the markets.
Although trying to project time and price over such a long period is definitely a difficult task but there is no harm trying it. In the last 1 year have been accurate with the time zones but finding the magnitude has been real hard. October we did see economic data and confidence at lowest but index did more then what we thought. For Feb-March did point out the bottoming time and a re-test but had expected the rally to extend till May but it went much beyond till Oct.
Right now !!!
1) Time Projections
Sensex has seen a roller coaster journey from 21k to 7.7k followed that by 8k to 17k and is back at 15k odd.
On the time front November being the 21st month ( not exact ) i do expect the confidence levels of the market-men reducing with lots of talk and speculation. We do see markets react weirdly around this time zones but end up making a major top or bottom.
There are two viewpoints here — Me the BULL ! and the analytical Bear.
There would be a camp which expects a nice correction in the month of November ( already started couple of weeks back ) which may create an important bottom and set and upward welcome to 2010 !!!
The other camp is the one which believes its a major BEAR rally and index might have well made a major top in November and the next big dip is ahead of us which may take us to 12k-13k or the ultra bearish ones may even call it 10.5k !!
As always i would like to go wrong or very accurate then to be a diplomatic analyst and be right all the time with 4-5 alternatives in my hand !!
For me i do prefer the BULLISH Scenario.
The time projection for the same suggests that Index may see a good retracement bottom in the month of November followed by which next 3-5 months would see yet another upmove. This may also consist of a consolidation phase for 3-5 weeks which may be terribly boring also.
For the Bearish Scenario !
The people in this camp have been calling for a new low since march and a top since 12k !!. Index might have seen a major top at 17493 and should now well be on a major fibonacci retracement to the extent of 50% of the entire upmove. Ultra bears might even look for 60-80% retracement.
2) Price Projections
This is the most difficult part as projecting an accurate price target is next to impossible.
For the bullish scenario one would expect a retracement of 23.6% or 38.2% which would mean 15270 and 13900 would be a possible bottom area.If its going to 13900 then also it should see a stopover at 15.2k. Once the bottom is reached one can expect 17-18k to be tested in next 3-5 months. We would review the same in March 2010 !!
Some of fundamental supporting stuff for the same is …
Expect earnings upgrade to happen in Dec/March quarters with demand pick up by March. Also the low base in last 2 quarters of 2008 ( i.e Dec/March) would make the current earnings much better. Financial window dressing for Dec/March by Institutions and so on.
Although i dont prefer the Bearish scenario such a projection suggests that Sensex is close to a January scenario and a major margin based panic could see a sell of of 4.5k points ( Rising Wedge range 13.2k to 17.5k ). The targets for the same would be 12.5k in the month of November itself and then index embarks on a re-test of 15k/17k which will take a longer time.
Fundamentally supporting stuff :
Excellent earnings in June/Oct are due to cost-cutting, fresh-inventory build-up,lower raw material/labour costs. Margings have increased sales have not.
100% move up leaves a lot of profit on the table to give the first correction and a cascading effect of sell-off takes it further.
Economy may have seen the worst but still in lots of trouble.
Thats a whole lot of sentences with possible predictions but the bottom line is next few weeks could be tricky which will then set the tone for Dec to March. Remain bullish for medium term but short term volatility will give excellent investment opportunities.
BELOW ARE THE EXCERPTS from previous posts.
My expectation is that by end of October the major skeletons would be out !! although repercussions and lagged effect would stay till Jan 09 and a new thought process could emerge around March – May 09.
Ideally the best time to invest would be in Feb-March and stability or turnaround could start March-May . This has been the preferred guess from my side since a long time although levels went wrong in Oct maybe again we may or may not be exactly correct in next few months. But yes i do feel there would be ample opportunities in these 3-4 months as a sharp bear rally could also be there and gr8 investment/trading gains on cracks too.
So if one is a a very defensive investor and low risk apetite then can go SIP mode very very slowly in this period or rather have a fresh look around Feb-March whether index is at 7-8k or 12k comfort could be back around Feb-March and more confidence by May.
The next important time period comes around the 21st month which comes in November roughly where in we may see some uncertainty and loosing confidence also before we might get over the after effects of the bear run.