Happy Beariness (WHERE IS THE BOTTOM??)

Some time back when the Inflation in India was on the rise and prices of essential commodities were rising, The Indian Finance Minister was heard saying that one of the major reasons for the rise in prices of essential commodities was the unabashed speculation that the Commodities Future market afforded and that to curb the tendency of these items to be dearer would be to curb the use of Futures trading in these items. Perhaps he was right to some extent. The Inflation as we are observing in our economy today is, as I can read, a Demand side Inflation and supplies are not sufficient to appease the soaring demand. Perhaps for that too, the Finmin is to be blamed. Last year, when the economy was expanding (and expanding way beyond expectations) the Finmin in its enthusiasm was supporting the banks in affording even more credit (read loans) thereby helping innocuously, the overheating of the economy and thus the present state.

Moreover, the Government kept silent on the oil issue when the global oil prices were rising and it was wise enough to increase prices of oil products in those good times. A one rupee hike in the prices of crude products every quarter if not earlier would not have made matters as worse as it is now. And to spill oil over the Inflationary flames literally, when there arose a moment to soothe the Inflationary flames, the government had no option but to raise the prices of oil.

But then, that is all history now. What is in the news though is that yesterday, the US House of Representatives approved a bill aimed at curbing “excessive energy-market speculation”.
The bill, which passed 402-19, would require the Commodity Futures Trading Commission to consider using position limits, or constraints on the size of the stake each speculative investor can own, and raising margin requirements, the money required to trade (Our Finmin has scored a point here).

While it helped in easing the steam off oil by around a dollar, that it will not rise again and rise up to 150-170 as the OPEC President said, is a scenario only with the “Koop Mandooks ” or the frogs in the well as we say. The demand for oil has been on a rise ever since man can remember. That the speed of price hike may slow down by a mere 10% or odds is a given. But the impact this oil business is having on the world economy is devastating especially when it comes on the back of a back breaking Sub Prime crisis. While we were all watching the markets world over stabilizing post the Sub Prime crisis, the oil bomb hit us all hard and now it seems has taken over the stage from the Sub Prime in eating all the economic growth the world over.

The Dow yesterday fell a whopping 358.41 points, indicating that it is poised to remain sub 12,000 unless and until a wholesome recovery occurs in the economy (p.s. rephrase and read it as oil too). The S&P 500 fell by 2.93% (a higher than DOW fall in a long long while) while the NASDAQ fell by 3.33%.

The Indications are no good. With Asian stocks also falling like nine pins, it is time India followed suit again after the smart recovery in the last two trading sessions. Expect a bear day (range 13,650-14,100 with closure near 13,900 on the back of some oppurtunity buying) and a Bear week in the days to come (WHERE IS THE BOTTOM??). Especially with the Inflation figures expected to worsen………Happy Beariness (and I am not being pessimistic you see…..just flowing with the current).

The Bears Rule

The markets since I last wrote have been in a swing .....up down up down. But what happened on friday 20th June was what I had been expecting for some time, though not entirely for the reasons it happened. The trigger was the Inflation figure of 11.05. But what will follow in the next downtrend should follow what I have been saying so far. The US is not having a great time and if you look at one of my earlier posts on Forexpredictionstoday (http://forexpredictionstoday.blogspot.com/2008/03/quite-in-line-with-what-was-being-said.html) I was talking of the Dow breaking the 12,000 levels and a slippage of the BSE below 15,200 simultaneously. Now that the same has happened convincingly (after testing it for a couple of days) and at the risk of sounding pessimistic, I go back to my forecast of a 13,400 to 13,800 for the BSE in the very near future. The only saviour can be some godsend like some good news on the Inflation front (single digit even if it is 9.99) or a renewed interest of Investors in a more affordable market. That I may be proven to be wrong (and I pray for the same) may be because no government/regime wants to be in a negative growth pattern and will strive to do all to reverse it. But then one look at the negatives in the markets and the gut feel comes..... It may be difficult to get out of the rut in a hurry. Any revival may take months to come. As of now...the Bears Rule.