Oil, US and Indian Markets

State of OIL hysteria:

Some of it can be estimated using technicals around primary indicators like: Crude Oil, Oil futures, stock prices of Oil drillers and refiners.

Last week’s short covering around OIL futures and Index funds.. and recent correlated down action on most energy stocks hints on deleveraging continuing around OIL/energy.

Crude action in next few weeks should confirm what is going to happen
a correction or another spike before true correction happens
as Crude is still sitting up without major correction. Crude price is is the primary indicator and it is contiually staying up, which is a little bothersome.

State of indian markets
Taking a major hit – Some say because of oil, CRR, etc. Oh Well !!! OIL, CRR may be the catalyst. I think this was all expected and it unfolded.

Considering the bearish action that started early this year.. on 20K to 15K correction and then an expected bounce from 15K~17K (all published earlier on my blog) and then further down-spiral once it hit 17K at 50DaySMA as resistance line.

I expect some bounce to 15.5~16K region [some kind of succor rally ], before it corrects to 12K~13K region over next 1~2 yrs. In my mind, the economics of Indian Cos. needs to improve by-and-large, to sustain next round of big move on Indian Stock Market.

What puzzles me is Indian Exchange Rate !! Despite demand on $ for buying Oil.. the exchange rate should have been 39~40 by now. RBI intervention is too high to keep it that low. And that it still floats in 42+ region. But 9+% inflation is going to push them to change their monetary policy to make INR a stronger currency to reduce of cost Oil imports and commodity prices. More sooner than later. The govt. is stuck between need for election-economic gimmicks on one side and need for truthful economic policy and reform needed on another side.

US markets:

Under continuous correction for last 2~3 weeks.
I expect US indices to touch and test these levels:

Dow: 11900 support
NASDAQ : 2300 support,
S&P: 1300 support.

Amidst all this doom-and-gloom news on the blogs and media, I think all this is getting baked into current market levels. Depending upon how “recession fears” confirm themselves and “quality of earnings” in upcoming weeks, Stocks could rally/bounce off these support levels, or simply loose/crash base from here. Interesting times to play game-by-the-time-tested-rules or be on the side-lines BUT not to speculate. Technically, looks like Large-Cap-Value Stocks would likely be safer bets, Mid and Smalls caps to correct more before LongTerm Entry levels can be seen. I expect an interesting bounce to trade some profits after this correction. But a turbulent Year ahead IMHO.

Enjoy the Game.