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Another Great Trading Move

Once in a while you see a signal. Of euphoria, or panic. This time I’m seeing it again – the euphoria. It’s a great trading move – the Nifty and Sensex are at one year highs, the S&P 500 (US) has crossed 1000, and every market in the world is celebrating.

A lot of us have missed the bus. I have, willingly, as I cannot trade due to my job. And this is a trading market. What will follow, likely is a great trading move. In either, or more likely, both directions. So buckle up.

The fundamentals aren’t there yet. The Q1 results are good, no doubt, but nearly all of them have that feeling of one-time income around them. From DLF’s emergency sale proceeds, to ICICI’s surge in trading income while dropping regular business. So we gotta wait till the economy surely shows signs – and it will be the shortest downturn I have ever seen, if it is truly a turnaround. I’m skeptical, and willing to wait out a few months before I truly declare I was an idiot for waiting a few months.

Prices, meanwhile, dictate trading. And prices are declaring a bullish sentiment. If I were trading, I’d go with the flow – run it up, ride it up, keep a strict stop loss and remember to short the son-of-a-bitch on the way down. Oh, it’s going to be a fun ride; I participated the last time, I won’t this time.

What I would do is to watch carefully why the top line stocks like RIL and ICICI aren’t making new highs and slowing down on volume, while the mid-caps hit their peaks. Accumulation in the midcaps, distribution in the large caps? That is not a good sign, but surely a sign of a great trading move.

Happy Trading!

  • kvv says:

    >"remember to short the son-of-a-bitch on the way down"

    sounds like revenge. Not a good idea + euphoria can last a while (or maybe not who knows).

    Btw, on an unrelated note Deepak do you have a sense for how much FDI/FII is flowing into the Indian capital markets? Do you have any sites, sources you use to get that information? It would be much appreciated if you wrote on that topic! Thanks!

  • Anonymous says:

    >Hey the skeptical bear seems to be throwing in the towel finally.

    I think Deepak u got the call on the upmove wrong.

    What happened to all the prognosis of we going down big time? Are u making the mistake of now riding with the wave when u should be sitting back and evaluating why u were bearish at 12000? Have the variables changed to make u become bullish at 16000.

    Has the Nifty EPS changed dramatically or doubled from where u were looking at it. I remember u r estimate was forward EPS of 200 for the Nifty.

  • Deepak Shenoy says:

    >kvv: FII flow is present in the NSE site details – a daily value is there. Will graph it.

    anon: I'm still bearish! I just think there is a big trading move in the offing, and the index is likely to move dramatically in the next three months. In my view things will go up and then down – remember, things like the NIFTY EPS have stabilized at 222 due to some "smoothing" by companies.

    I could be wrong of course. I think there will be some great trading days ahead – big up and big down moves.

    On a fundamental basis, I wouldn't put my money into stocks. I'd trade this market if I could with my money, and this post was about trading, not fundamentals. Price says a lot to a trader.

  • shaq says:

    >Sir..since everyone has been tracking the dollar index and its co relation (with all the concept of flight of safety)..why is it so simple to say that dollar index starts rallying ,then you short equities…
    i am finding it difficult to understand the psychology of participants here…when everyone says it with so much conviction that dollar falls .stocks rise…then whats the surprise ..is it all granted ..are bears waiting for this..wont bulls know it then..??
    Thanks

  • Anonymous says:

    >Request to write on National Pension Scheme. What shud we do ?

  • LANKY says:

    >Dear Deepak,

    I have observed some of the big time bulls are returning to TV screens who were bullish at 21,000 sensex levels…disappered for long!Even the big time bears like Shankar sharma of First Global is turning bullish. I agree with you that this is going to be trading market….definitely the move is upwards…see how the sensex & nifty showing the streangth…Even the last bullish move from 14,000 to 21,000 sensex levels was a liquidity driven move! I believe markets tend to overshoot or underperform most of the times, never trades at fair value.This has more to do with technicals rather than fundamentals.

  • Ak says:

    >Deepak,

    Shouldn't one look at sebi site for FII flows. I assume FII's would also invest in BSE.

  • kvv says:

    >Thanks, I found the data (along with archives) on the NSE website. Its very interesting to compare the cumulative buying – selling for FIIs vs DIIs. I'm not sure I'm interpreting it correctly but there seems to be a story there.. maybe useful.

  • Anonymous says:

    >"Shortest Downturn i have seen"

    Deepak how many downturn have you seen in your life.

    It is better that you are not doing things based on fundamentals cause your world is just inclosed in the index stocks. While the rest of the 6000 scrips in the market is to be ignored.

    Why not accept that yes i was wrong about the market.

    For funnymentals guys the buy time for the stocks was in the oct-dec period, and who have done it have minted money big time.

  • Deepak Shenoy says:

    >Anon: I've studied a lot more but have been part of three. This is of course the worst of them all, looking globally, and the shortest! I doubt we'll stay up too long.

    I'm usually quite honest about when I'm wrong – but then I don't know, sometimes I succumb to the "it will happen" mentality.

    About bearishness – yeah, I'm still bearish, and btw, the worst time was not quite oct-dec, it was in Feb.

    These "fundamentals" guys you talk about – they make money only when they sell; and I've seen enough that will not sell!

  • Anonymous says:

    >Remember ICICI will be at 200 and Ranbaxy will be at 700 call by you. They actually stand exactly opposite of what u stated. ICICI is above 700 and Ranbaxy is in the 200 range.

    Deepak u have been wrong on a lot of instances than u tend to admit. I can list a lot more. I dont blame u. It is easier to anchor the mind on things that go right and ignore the ones that go wrong. ( After all everybody one meets has always picked up a great stock trade.)

    How can u be bearish fundamentally and believe that the market is going to 12000 levels but bullish based on momentum that it is going to 17000. We are not talking about 50-100 points here but much larger movements.

    I personally thing you are a intelligent person who hasnt figured out where to direct his energies in terms of investing philosphy. As a trader it is important not to marry oneself to a position.

    A different anon from the previous one.

  • Deepak Shenoy says:

    >Anon: ICICI did go to 200, and there was a stop loss point at which I exited it in the short only strategy. And Ranbaxy was a call exited then itself. Not saying that I was right – but that when I was wrong I talked about them right then. I still believe ICICI will go down a lot more – it just isn't the right time to short, if it were, it would be in my SoS.

    How can I be bearish fundamentally and bullish on momentum? Er…these are different concepts no? Momentum on the upside can happen even with horrendous fundamentals, like we are seeing right now. Of course, at this point the index is crashing, so maybe it was a horrible time to have made a prediction!!!

    I agree, getting married to a position is bad. I don't trade anymore – maybe that's a bad thing – but not turning on a dime is very bad in this business.

    I should blog more, my 'turning on a dime' will be more apparent then, as my mind changes often – in fact, after this two day downmove, my "great trading move" has been proved wrong already!

    I think I shouldn't blog about market specifics if I'm not trading. Unless I have my money invested, there's no point in your listening to me on market moves – after all, words cost nothing, no? Should avoid – and I urge you to ignore me unless I say I have a position on 🙂

  • Anonymous says:

    >Hi deepak

    i am the anon who wrote the post about the oct-dec period.

    You are a smart person my only problem with you is that you have been disastorly wrong about the market you are not ready to belive that funda have changed in the real economy too, all the stell, auto, cement companies result reflect that.

    Plus i really don't understand how u grip about funnymentals side of things while u ignore all non index based stocks.

  • Anonymous says:

    >Forgot to add about the downturn stuff.

    Now in u r study did u not found out that software firm flourished in downturn so did PSU stocks plus pharma stocks.

    As shri buffetjee and shri peter lynch says ignore the prediction about GDP, market direction….as no one has predicted them correctly and ignore the pepole who do the same.

    Just put the energy in lookout for good company.

    And about funda guys who just buys well didn't pepole made fun of buffet on his buy calls and now buffet has minted money big time. I have seen funda guys who have made money big time.

    maybe time to change your circle

  • Deepak Shenoy says:

    >Dude, there are always good picks in the market – regardless of when you look. Take the last three trading days. Market's down over 5%. A stock called Astrazenaca is up over 12%. You can find good buys in whatever market you want.

    Hmm, going back I had said "I wouldn't put my money on fundamentals on stocks" – which still is true, but that doesn't mean YOU don't put your money into stocks. 🙂

    Btw, in the 2000 downturn, software stocks were down like crazy – they only recovered early. Infy fell from 14K to 3K, and stayed at the 3-4K levels for nearly two years.

    Shri buffettji got saved because of govt.intervention – otherwise he would have lost some $20 billion by now. Even he's sitting on the edge of his seat – one more big downmove and the stuff he has: GS, AmEx, Moodys, Wells Fargo – all of them will come down to difficult levels.

    I've seen fundamental people and traders both making money and losing money big time. If you only see one side you get lost. I don't think the "fundamentals" made money in this rally – the fundamentals are still rotten. It was a rally on price which happened, barely anything to do with fundamentals.

    Must say though, that I missed most of the rally – without having money in the directional market, I haven't really focussed on the price action. I'm doing some arb stuff at this point which doesn't really depend on market moves.

    And of course, you're free to have your opinion, but I think we have some of our troubles ahead of us, a lot more than are behind us. I just tend to disbelieve fundamentals at this point (it all looks like window dressing).

  • Deepak Shenoy says:

    >Must thank y'all for the comments – I think I might have been getting overly pessimistic and overly optimistic at the wrong times.

  • Anonymous says:

    >well deepak i really like the discussion with you.

    About shri buffet, so everybody knew what happend after lehman fall the us gov had no option other then to bail out the sick banks, so he placed his bet. The only thing i see is that old bag made money by sitting on his ass.

    He has lived through more crisis then any of us.So the experience helps plus he not onlu lived through it, he was in the market too.

    About software scrips they fell big time after going up big time and creating big time wealth for likes of shanker sharma, samir arora, the smart ones would have sold infy when it was quoting at 200 pe,thats where the funda of PE helps plus mcap.

    Also after 2000 crash PSU stocks stood up big time so did pharma. why ignore that. You only need one super multibagger to change your life

  • Anonymous says:

    >Anon 2 here

    The point is not about my ignoring your predictions. Without any offence meant I ignore it anyway :-). I visit u r blog for the information that u churn out from multiple locations and i must compliment u on that.

    Like I said the point is not about ignoring u r predictions, the point is and my suggestion is do not misdirect u r intelligence & energies in making predictions.

    Its a suggestion which u can chose to ignore 🙂

  • Deepak Shenoy says:

    >anon1: I agree on the one multibagger to change your life bit – if you put enough on it 🙂 Little bit of a risky deal but yeah, deals like Praj or Titan would make one rich.

    Anon2: Much appreciated. I think I lost sight of the "no predictions" benchmark I had set myself (other than the one diwali post). If I wanted to predict I'd put money on it otherwise what's the point 🙂 It's easy to say stuff when I'm on the sidelines!

  • Chanakya says:

    >Prediction is of 2 kinds. The first one is good, the second is bad

    1. You say this will happen and also tell the reason why you think it will happen. After the fact, you acknowledge if it didn't happen and why. Everybody involved learns about stuff and get to exchange ideas. Doesn't matter if prediction was true or false, if it results in good discussion it is useful.

    2. You tell people "I have this gut feeling / intuition / sixth sense". No reason / justification. Wastes everybody's time.

    So far you have been falling into the 1st category, so I would say go on predicting.

  • The Green Man says:

    >Hey Deepak,
    I was to share a crazy story here. A friend of a friend put some 2 lakh on Satyam when it hit the ground about 4 or 6 rs, then he just held on to it till it went up to 125 rs and then sold it off. Now he doesn't trade in the market anymore.

    Effectively his 2 lakh became 1 crore in about 4-5 months.

    Yes one multibagger can change your life