Archive for March 21st, 2012

Historical Call

 

This is what we wrote on 31 Dec 2008

Kitchin doubts Recession 09 - 31 DEC 2008 - INDIA - There is not one place where we have not seen a reference of a recession in 2009. CNN carried an increase in unemployment and recession report. We have many other newspapers and journals talking about the same idea. Bear markets or recessions doesn’t necessarily mean negative prices. Recessions of multi years in the 1970’s and 1990’s US bear market has seen market in a trading range.

The 3.3 year Joseph Kitchin cycle, also known as the inventory cycle is witnessed in stocks and indices worldwide. But emerging markets lack price history when it comes to blue chip and sector indices. One reason why researchers have made little effort to look at Kitchin cycles in the Indian context. We have attempted this on previous occasions. We even talked about the Kitchin cycle on Sensex (Beating the market), similar to one seen on DOW (CYCLES.GLOBAL.151208). The 3.3 or 36-40 month cycle recurs with uncanny succession. The BSE500 illustration here (SLIDE1) carries two KITCHIN cycles from SEP 2001. We have also carried the SENSEX KITCHIN cycle from 1992 ahead (SLIDE2). Both the cases suggest that markets have possibly hit KITCHIN cycle lows or is near it. This means that not only BSE500 broad market Index should head higher for the next 15-20 months but also the other indices. This defies all recession talk and might confound conventionalists.

But considering investors have reduce appetite for carrying equity market exposure for 20 months (half of 40 month Kitchin cycle), one can look at smaller cycles. Cycles are fractals too. We have subdivided the respective Kitchin cycle into smaller 20 month cycles (CYCLE HARMONICITY) to illustrate short time up cycles. Even this suggests 8-10 months of positive move.

We will review how the KITCHIN cycle unfolds in the Indian context. Meanwhile, we have carried some other sector indices with their preferred and inverted views. We still don’t see an intermediate reversal and continue to look higher. NIFTY breakup on 3,100 and Sensex move up above 10,200 keeps us looking higher. On the downside we need a clear break below 3,000 (NIFTY) and Sensex (10,000) to review our preferred positive stand. And just in case, it has missed your attention, the first five days of Jan were positive. What this means for JAN effect will also be posted in later issues

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Mukul Pal, is a Chartered Market Technician, MBA Finance and a member of the reputed Market Technicians Association (MTA). He has more than a decade of Capital Market experience dealing with derivatives and global assets. He has worked for Bombay Stock  Exchange, multinational Banks and brokerage houses in leading research positions before starting on his own in 2005. He is the President of the MTA Central and Eastern European Chapter.


Chemicals (+short portfolio update)

 

We have filtered the BSE 500 stocks for best performing top ranked chemicals sector components. We have reviewed the respective stocks Jiseki cycles and screened ideas for new shorts. This is the third short idea screening we have done since 23 Feb. Barring ITC most of our shorts have delivered. We carry the short portfolio update in this latest ALPHA.

Mail us for subscription details or download the report from our Reuters store.

Mukul Pal, is a Chartered Market Technician, MBA Finance and a member of the reputed Market Technicians Association (MTA). He has more than a decade of Capital Market experience dealing with derivatives and global assets. He has worked for Bombay Stock  Exchange, multinational Banks and brokerage houses in leading research positions before starting on his own in 2005. He is the President of the MTA Central and Eastern European Chapter.