Rallies into resistance

Good results from General Motors/ Murdoch`s win of Dow Jones got today`s session off to a positive start, but the market failed to hold onto the gains as the afternoon approached. The turning point proved to be a report from American Home Mortgage Investment (AHM) that it has missed a substantial number of margin calls from its lenders, and has hired advisers "to assist in evaluating its strategic options… including the orderly liquidation of its assets." The possible bankruptcy of American Home ( No, they do not offer subprime mortgage loans) – reignited investor fears about housing sector weakness. The shares of AHM lost 90% in the day`s session as a result.

The Dow Jones skipped to a triple-digit gain within the first hour of today`s trading, boosted by GM`s earnings -however, by the closing bell, the index was resting on a triple-digit loss of 146 points.The S&P gave back 18 points by the session`s close, while the Nasdaq fell 37 points. Finally, the Russell 2000 Index rounded out the losses as it edged 8 points lower.

September contract gained $1.38 to close at a record high of $78.21, after surging as high as $78.25 in intraday trading. The close marks the highest level at which a benchmark contract has closed on the New York Mercantile Exchange. The rally in the oil pits, combined with the dollar`s persistent weakness, led August gold to a gain of $2.80. The front-month contract closed at $666.90 per ounce. Other metals stocks gained in sympathy; September silver rose 11.4 cents to finish at $13.01 per ounce, while September copper added 6 cents to close at $3.64 per pound.The high level of risk in the financial sector is one major reason why we have been advising readers to buy gold and silver on dips. Remember, these precious metals have no accounting games attached to them

Did one of the anchors on the comedy channel say the VIX ( Volatility index) had fallen ? ( what are they looking for a 1k intraday move instead of 300?) The rest of the bulls on the comedy channel continue to paw the ground with ferocity - dips are the best to buy appears to be their mantra - but is it possible that analysts are being too quick to discount the ferocity of the carry unwind ? Use your noodle on this one folks - and I repeat and the cost of being a bore -avoid getting shanghaied by what you hear. On the USD -it was very,very close last night The US Dollar Index went as low as 80.02, so very close to breaking down through though critical support at 80 and then pulled back. We think that the next time the USD tests 80, it will break it. More on the yen - the ruling government coalition in Japan has suffered a crushing defeat in Sunday`s upper house election and lost its majority by a wide margin.A move on the yen to 118 per dollar today is the trigger for the sushi pack to unwind further. The yen is currently at 118.65 this morning.

Readers will recall we were among the first to give you the de-coupling arguement for the initial rally post the March selloff. We feel that theory/ the Indi-Chini growth story etc etc are now factored in fully and markets have run thier course. Case in point - SBI which is now at 2 times book value ,implying that all the arguments of business spin offs/insurance biz lPO etc etc are fully priced in .From a short-term perspective, most global markets have breached thier 10-day and 20-day moving averages and forcing these short-term trendlines into a bearish crossover. These levels now have the potential to act as options-related resistance.

Asian gave up most of its gains of yesterday and most emerging markets Brazil/ Russia/ Chile were down 1% but yes ,the casino is still holding out ...so does the circus back home do a Shanghai ?For the day - expect the Indian bond market to rally significantly. Keep watching the rupee and the yen.

Support 4310 / 14790 and 4430/15115 Resistance 4590/15675 Weak below 15495/ strong above 15580 BSE PCR 1.43

Reddy surprised all right and so did the bulls ! Did we see some NAV boost buying last evening or was it a case of Sensex looking to test the gap resistance of 15500/ 15580.? ( net effective gap from Thursday`s low to Friday`s high was 15654-15495. ). For the rest of the week now the situation if the Nifty spot comes down from the 4590 - suggested pullback recovery targets then it will be a classic case of h&s reversal.

No two ways about it - the market is seriously in the hands of a few speculative players.The question now is whether they have got enough oomph behind them to sustain this.? Will RIL`s news flow help provide the fuel ?

Everon`s listing is expected to fuel Educomp – we reserve our judgement as the valuations on both are bordering on the sublimely ridiculous. Straight sells on rallies .

We should gap down and once again attempt to pull back -watch 4545 on the spot Nifty - failure to take out 4545 will lead to further weakness. Negative RSI at its peak.

Positional trades from here on are for traders with deep pockets. Low risk investors are advised to use the options route.


Dark Horse ZEE

High Risk Reward

Nifty Aug Fut Buy declines to 4470 stop 4465 Target 4545 and Sell rallies stop 4545 Target 4470 or lower- a consistent trade below 4465 will see the sell off continue . Do not initiate the buy call if markets gap down below 4465.

Positional traders your trailing stop loss on a closing basis is at 4525.

Divis Aug Fut Sell rallies stop 6820 Target 6529 or lower
Grasim Aug Fut Sell the break of 2960 stop 2980 target 2930 or lower
Zee Tele Aug Fut Buy stop 322 Target 345+