Tuesday, August 23, 2011

Positive sign on DowJones Technical Chart | 22-Aug-2011

DowJones chart has come to one interesting point, which I'm explaining below. I've used Ichimoku indicator on chart. Time duration - last 3 months.


In the last session, DowJones closed at 10854.65. Now, look at all the components of Ichimoku on the below chart.


 


 


 


 



Bearish kumo breakout on 29-Jul-2011 and Tenkan Sen and Kijun sen crossed bearish on 02-Aug-2011. Chikou Span is also below kumo. So, everything is bearish and there is not even a bullish signal yet.


But if you look at chart carefully, you'll observe, that even though, price is coming & trading down, Kijun-Sen line is flat. Not only that, Senkou-span A line is also flat. If you've gone through my tutorials on Ichimoku and my previous posts, you'll remember that whenever Kijun-Sen or Senkou-Span A or B is flat, it will ALWAYS attract price.


So, in coming days, if price trades in range-bound or upward, it will go upto levels of 11,600. But if DowJones takes further dip from here, the kijun-sen line will also come down. So, for a trader, do not take any fresh shorts from here. Make strict stop-loss on your existing shorts.


Do not take any long position. I'll suggest same when price and Chikou Span (CS) crosses cloud in bullish mode.

Monday, August 8, 2011

What does USA rating downgrades means to you?

Last 2 days, every news channel showing only one major news under "Breaking News" - S&P cuts rating for USA. All right, but what does it mean to a common man anywhere in the world. Is it interfering my investments or my lifestyle? Let's try to find out in simple manner.


The debt ceiling is a cap on the amount of debt the federal government can legally borrow set by Congress. Imagine if you stopped paying your credit cards bills or your car payments; you would ruin your credit rating and your car would be repossessed. The same thing happens with countries that default on their debt. Put simply, if Congress does not raise the debt ceiling then China, Japan, OPEC, and others will stop giving us low-interest loans. Foreigners will pull money out of the U.S. and the dollar will drop. In the end, this means that our cost of living will rise substantially.


Remember, S&P ratings is not a "guarantee" but a "suggestion" to fellow investors and / or banks and countries.


The short term effect of the re-rating will surely put down stock markets across the world - especially where technical charts are already weak like DowJones, Sensex and other European indices. See my existing post where I've explained weakness of technical chart of DowJones. This will also act as warning to President Obama to cut major expenses of country like wars, giving aid to Pakistan, which ultimately passes to terrorist and then starting another war. This puts in infinite chain reaction of expenses. Osama Bin laden living in "high security" area of Pakistan is a proof of this statement. Now, USA president has to act practically for the welfare of USA citizens and stop acting as diplomatically.


Now, what to do? Just forget this rating chapter and leave for people like to comment. I think the coming days will give you opportunity for better investments in stock market. Remember, the golden rule - Buy when everyone is selling and Sell when everyone is buying. Sit on cash and watch the technical charts carefully and start investing as soon it takes U turn. There are many good & tested technical indicators available on this website for you.


And finally, see what President Obama has to say on all this


[youtube]O08VHT6TsRM[/youtube]

Saturday, August 6, 2011

Double dip recession in US?

It has been three decades since the United States suffered a recession that followed on the heels of the previous one. But it could be happening again. The unrelenting negative economic news of the past two weeks has painted a picture of a US economy that fell further and recovered less than we had thought.



When what may eventually be known as Great Recession I hit the country, there was general political agreement that it was incumbent on the government to fight back by stimulating the economy. It did, and the recession ended.

But Great Recession II, if that is what we are entering, has provoked a completely different response. Now the politicians are squabbling over how much to cut spending. After months of wrangling, they passed a bill aimed at forcing more reductions in spending over the next decade.

If this is the beginning of a double dip, it will have two significant things in common with the dual recessions of 1980 and 1981-82.

In each case the first recession was caused in large part by a sudden withdrawal of credit from the economy. The recovery came when credit conditions recovered.

And in each case the second recession began at a time when the usual government policies to fight economic weakness were deemed unavailable. Then, the need to fight inflation ruled out an easier monetary policy. Now, the perceived need to reduce government spending rules out a more accommodating fiscal policy.

The US economy fell into what was at first a fairly mild recession at the end of 2007. But the downturn turned into a worldwide plunge after the failure of Lehman Brothers in September 2008 led to the vanishing of credit for nearly all borrowers not deemed super-safe. Banks in the United States and other countries needed bailouts to survive.

The unavailability of credit caused a decline in world trade volumes of a magnitude not seen since the Great Depression, and nearly every economy went into recession.

But it turned out that businesses overreacted. While sales to customers fell, they did not decline as much as production did.

That set the stage for an economic rebound that began in mid-2009, with the National Bureau of Economic Research, the arbiter of such things, determining that the recession ended in June of that year. Manufacturers around the world reported rapidly rising orders.

Until recently, most observers believed the US economy was in a slow recovery, albeit one with very disappointing job growth. The official figures on gross domestic product showed the US economy grew to a record size in the final three months of 2010, having erased the loss of 4.1 per cent in GDP from top to bottom.

Then last week the government announced its annual revision to the numbers for the past several years. New government surveys indicated Americans had spent less than previously estimated in 2009 and 2010 on a wide range of things, including food, clothing and computers. Tax returns showed Americans even cut back on gambling. The recession now appears to have been deeper - a top-to-bottom fall of 5.1 per cent - and the recovery even less impressive. The economy is still smaller than it was in 2007.


Source: Economic Times