is this a trend reversal - outlook for next 6 months - high alert given in nov'10

8/7/2019 Is This a Trend Reversal - Outlook for Next 6 Months - High ALERT Given in Nov'10

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Is this a trend reversal?

Outlook for next 6 months.Report on current mar et tren s y HBJ Cap tawww.hbjcapital.com / www.hbjcapital.in

www.multibaggerpennystocks.com

www.stoplosstrade.com


2/25


3/25

Helpline Numbers Available (24x7)

For health check of your portfolio, please e-mail your portfolioto [email protected] or Speak to our research analyst.


4/25

Outlook for next 6 months

B Sandee Jain


5/25

Next phase of the banking crisis in USAUSA government released new data showing that the FDICs list of problem

banks now includes 903 institutions. Thats ten times the number of bad

banks on the FDICs list just two years ago. The banks on the list have$419.6 billion in assets, or SIXTEEN times the amount of two years

ago.

Consider what happened on September 25, 2008, for example.

Thats the day Washington Mutual filed for bankruptcy with total assets of

$328 billion.But ust 30 da s earlier accordin to the FDICs ress release the a re ate

assets held by the 117 banks on its problem list were only $78 billion.

In other words

Washington Mutual alone had over FOUR times the sum of ALLthe assets of ALL the banks on the FDICs list of problembanks!

Now you can think, how much FDIC is hiding & how much theyare reveling?


6/25

QE2 - Its actually hurting the marketsWith the financial markets facing uncertainty about the balance sheets of banks and governments in Ireland, Spain, and

Portugal, continued weakness in stocks, commodities, and precious metals remains a possibility. From a risk

management standpoint, it is important for us to understand the possible downside risks in the short-to-intermediate-term.

QE2 program (FED decision to buy another $600 billion in Treasury bonds) is just not helping. Itsactually hurting the markets. The goal of the policy is to create higher stock and housing prices bypushing the dollar and interest rates down.

Bernanke is going to come under fire from all sides: domestic, international, political, financial. Everyone wants the FED

to remain the rock of Gibraltar, because the world is holding trillions of dollars' worth of Treasury debt. If the dollarfalls, those who hold T-bills and T-bond will be exposed as suckers lapdogs of the Federal Reserve. No one wants to

be seen as anyone's lapdog, especially when he really is.

During a visit to India on Nov 10th, Obama argued that QE-2 is in the worlds best interests. I will say that the Feds

mandate, my mandate, is to grow our economy. And thats not just good for the United States, thats good for the

world as a whole. And the worst thing that could happen to the world economy, not just ours, is if we end up being

stuck with no growth or very limited growth, Obama argued.

Simply running the printing presses in order to pay-off your debts is no way for a great nation to behave. The US-

government is essentially bankrupt, and can no longer service its debt, by running a balanced budget. Instead, the

only thing standing in the way of an outright default by the US-government on its debts, - is the Feds electronic

printing press. Still, China and Japan were net buyers of $43-billion of US T-Notes in September, - and so, the shell

game goes on awhile longer.


7/25

A stronger dollar and rising interest rates arenot good for stocks. Now we have both!

The S&P 500 chart shows a potential double-top forming. It looks like the next bear market may have started a few days

ago. We disagree with the view that inflation needs to be pushed higher, and worry that another round of asset

purchases, with interest rates still near zero over a year into the recovery, will distort financial markets and greatlycomplicate future Fed efforts to normalize monetary policy.

The Feds purchase program has also met broad opposition from other central banks and we share their concerns that

quantitative easing by the Fed is neither warranted nor helpful in addressing either U.S. or global economic problems.


8/25

Economy changes but history repeats :Nikkei fell down by 34% due to QE from BOJ in 2001

As you can see in the chart, the Nikkei shot up 22 percentfollowing the BOJs quantitative easing announcement in

March 2001. But the party was a short one

After 22% upside from March to Apr 2001 (3 months), from May 1, 2001

through September 17, 2001 (5 months), the Japanese market lost all of

those gains and more tumbling 34.1 percent.

Its really ironic

When the twin bubbles in Japan burst a stock market bubble followed by a

housing bubble the Japanese authorities answered in exactly the same

way their U.S. counterparts are doing now.

They implemented the same fiscal and monetary policies grounded in the

same faulty arguments and failed miserably. Even more ironic is the

fact that the U.S. was Japans sternest critic.

Here we go: Same problems, same short-term fixes yet Bernanke is hoping

for different outcomes. But given all that ails the economy, We think

Helicopter Ben is in for a very unpleasant surprise.


9/25

ECM shows Caution from Jan 2011

As per the economic confidence model (EMC) designed in 1997, a stock market moves approx 3-6months ahead of real economy, hence what will be the tone of economy 3-6 months hence will be

reflected now in stock market.

Now, look at the chart above....you can see highest peak in 2007.15, it means around 2007 Feb/Mar we had

best time for economy and probably Jan'07 was best for stock market. When I say best time, it can be

best time for US or UK or Asian Countries. For Indian markets too year 2007 was best for investment

followed by fall in 2008.


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11/25

Study on next market move till 2016.

Source: Princeton Economics. Martin Armstrong discovered the 8.6 year PI Economic Confidence Model

that has predicted many Economic Confidence crisis.

The 8.6 year PI Economic Confidence cycle is expected to bottom in June 2011 and 2020. Notice how well

it predicted the bottom in 2002 and the top in 2007 on a year basis. The graphic shows that the model is

predicting a top in 2010 before heading down into a long-term low in June 2011. This is economic

confidence model and as you all know stock market is 3-6 months ahead of the real economy so one can

expect market to top by March-Apr 2011 or in worst case even in Jan-Mar 2011.


12/25

Expect Sensex @ 35-45K by 2013After correction in 2011 which is most likely to

be a deep correction of 20-25%, we can

see a massive rally where in Sensex can beseen at 35,000-45,000 levels by 2013.

You might have missed buying in 2008rock bottom, but do not miss bottom

fishing during 2011 correction. Keep40-50% cash in hand to takeadvantage of this opportunity.

Get your portfolio checked by us. We will

advice you what to hold and what to sell.

You MUST maintain a cash levels of 40-50% to take advantage of the upcoming

correction in the market which is likely to

start soon or may have started already.


13/25


14/25

Europe's debt crisis is contagiousIreland

Irrespective of how big Ireland is and of what importance it is to EU, let me just give you a clue of what has

happened in Ireland and what the scenario is currently with a simple statistic. They have an index of

whose name I am unable to recollect but is similar to what we call the Bankex or the index of the banks.

And this particular index of Ireland is currently 2% of what its highs were 3 years ago. Just this number

can explain in what condition the banks are in Ireland and the financial system in the country.

e op an s n re an , w c as you ear e sew ere s oa e w a e s an s see ng ou ow n

deposits in double digit percentages for the last several months. The sustainability of these top banks in

Ireland and the financial system in the country is under serious threat in which case you should have

easily identified that there is going to be a bailout package.

While we had expressed that Ireland receiving the bailout package can fix the European issues for now, there

are already talks on Serial bailouts in Europe. However, it should be noted that even during Greece

bailout, talks of contagion were on for a while, before it was swept under the carpets. So, is this time

going to be different?


15/25

China's attempts to tackle inflationThe markets currently have virtually zero confidence that the bailout in Ireland will solve the European crisis. Contagion

is spreading through the euro region as Ireland hammers out an aid package with the EU and the International

Monetary Fund to save its banking system.

China I am not really sure which of these factors Ireland or China spooked the markets or if they really did. Chinas problem is

entirely different from what we saw in the last page. The Chinese authorities have flooded the financial system with

money like anything in the last 2 years. They have also been relatively late in tightening the liquidity in the System.

In such a scenario, the country being aggressive in financial tightening is obvious. This is also something that we should

expect appen ng go ng orwar . e t e nese aut or t es ncrease t e reserve rat o or t e an s n two qu c

successions recently, the next move could be increasing the rates. And these moves will impact the global sentiments

since China is and has been the Savior, trying to pull the world out of the slowdown at least to an extent.

But, unlike the European problems, liquidity tightening in China may not have any real effect on the markets going

forward. You do it once and for the first time markets do fall, you do it again the fall is probably negligible andyou do it again it is expected and becomes the norm.

Issues like fighting between North and South Korea, Europe's debt crisis and China's attempts to tackle inflation are

already impacting stocks markets. With nerves already frayed thanks to the Irish bail-out saga.


16/25

After 2G Scam, now Housing loan scandalWhile many people continue to see the European problems to have impacted our Indian markets, I have always been

suspicious of a local factor. In spite of the so called European woes, it should be noted that none of the major 3

indices from Europe fell down by more than 2.5%, while the Indian markets are down by close to 8% in about 2weeks. So, this gives way to a question Is there anything uncomforting within? I have always had this view that if a

correction were to come thats probably going to be before the markets make a new high.

One of the latest news which might future take the market down is - CBI busted a housing loan scandal racket and

arrested CEO of LIC Housing, General Managers of Bank of India and Central Bank of India (New Delhi) and CGM

of Punjab National Bank. Several other bank officials have also been arrested on bribery charges. LIC Housing Financebeing involved in a multi-crore scam surfaced sending realty and banking stocks spiraling down. The CBI, which was

said to be questioning a slew of people involved in the scam, included officials from LIC Housing, Central Bank of

India and a real estate developer, whose identity was not disclosed.

Such developments are really very bad for the market, sentiments will go for down & we are in for another 3-4%

correction in very short term. The visible downside for the markets are between 18,400 to 18,800 and there is a very

high possibility that the markets will consolidate between 18,800 to 21,000 for a while. In such a scenario, we would

like to advise you to HOLD on to your positions. We are not recommending to sell any of our Multibagger Stocks in a

loss. You can maintain 50% cash position by booking profit from profitable counters. Which stocks to buy when the

market falls will be informed based on the extend of fall & value of stock at that point of time.


17/25

Fundamental Views by

www.multibaggerpennystocks.comFrom Ekansh Mittal


18/25

No irrational exuberance seen in the marketIn the last two weeks the broader indices have witnessed a correction of 7-8% bringing down SENSEX from

it's highs of 21,000 to 19,460 odd levels and this has already made many capital market participants

jittery. The 2008 crash is still quite fresh in their mind and keeps surfacing every now and then. This timethe nervousness is more especially on account of the fact that SENSEX attained a level of 21,000 for a

very brief period and since then it's been falling. However, we would like to make things a bit clear by

commenting on the valuations for now (2010) and then (2008) and would also like to make investors

aware that instances like 2008 crash or dotcom bubble burst as in 2000 take place on account of

irrational exuberance which is not the case at present.

The Sensex P/E stands at 22 times as of date for historical 12 month's earnings for FY 10, while for forward

FY 11 earnings SENSEX P/E stands at around 19.This means we are around 18% higher than the long

term average P/E of 16 times (data from brokerage reports), while if we look at the historical P/E

values during the last few bull runs, especially 2008 then during the Dot-Com bubble we were at an

astronomical 33 times earnings and during the Great American Subprime Bubble (2008 crash) we wereat 28 times multiple. So, all this points to the fact that we are still better placed in terms of valuations

and thus one should derive some ease and comfort from the same.


19/25

Another 3-4% correction on the cardsNow talking about the recent correction, it was more on account of Profit booking from the institutions who

were already sitting on good gains on their long position. The FII's were the net buyers during the last

two months starting September 2010 which resulted in 15% appreciation in the market, however overthe last two weeks the flows have turned negative ignited by the resurfacing of Ireland debt woes and

China's monetary tightening.

We believe that there is another 3-4% correction on the cards (19,000 for SENSEX and 9,700 for Small Cap

Index) especially since the Central Bank of China on late Friday announced that it is contemplatingincreasin the ke olic rates b another 50 basis oints (1 basis oint = 0.01%) in order to tame

inflation.

We don't see the above move as negative and also consider the recent correction healthy for the market's in

the longer run, however at this moment we are not suggesting a buy and would like to wait for the

market to stabilize over the next 1-2 week. It is better to maintain cash position in order to takeadvantage from market fall if any.


20/25

Technical Views by

www.stoplosstrade.comFrom JK/Akash


21/25

Excess supply zone for Nifty is 6100-6055The Indian market is currently reeling under pressure under the multiple factors which are evident on the global as

well as domestic economic horizon. The emerging markets including India experienced a rush of capital before

the announcement of quantitative easing. The markets back home succumbed under the pressure of the recentdevelopments on the global economic horizon. The role of the institutional market participants is ironical in

order to understand the current turbulent selling momentum in the benchmarks. The market makers were net

buyers in equities from nearly 40 trading sessions who have now turned their course of action. The current

downward slip on the charts could be attributed to the profit booking by the institutional clients on their long

positions.

so e po ca uncer a n y w c as emerge over e n an asporas w ave momen ary mpac over e

benchmark which currently seems to be a bit overdone. In the immediate term, the 6100-6055 levels would

prove to be a point of excess supply for the markets both technically as well as psychologically. The resurfacing

of the European debt crisis with Ireland as the latest entrant over this economically plagued continent is

questioning the sustainability of the on-going global recovery

Markets are yet to factor in the recent indication by the Peoples Bank of China which has increased the key policy

rates by 50 basis points to strengthen liquidity management and moderately regular supply of credit, on

account of the inflationary pressure hovering over the domestic economy. This move is expected to dampen the

outlook for equity markets in the region in the immediate time frame.


22/25

Technical Charts [6 months]


23/25

Strong Support @5785/5635The technical picture on the charts seems to be near an inflection point in the present market conditions. The

Short term moving average (15-EMA, 6099) is presently trading near its Medium term counterpart (30-EMA,

6080), which in case of a possible crossover would be an important technical development on the chartspointing towards the downward side in the intermediate time fame.

Also, the ADX trend indicator (>30) suggests that the present correction on the charts is a trending move, which

is going to continue for the time being. The Demand Index (DI) is trading in the negative domain indicating

presence of selling momentum on the bourses. Keeping in view the periodic nature of these indicators, the

first line of defense for the indices would be near the 5785 levels. However in case of a prolonged correction,e mar e s wou e ge ng suppor near e psyc o og ca y mpor an , n case e g o a econom c

recovery looses its sheen.

In very short term, markets could bounce back on account of short covering which should not be mistaken with

strength in the benchmarks and should be utilized to clamp down the exposure in equities for immediate term

time frame.

On a medium to longer term time frame, equities are still the best bet to generate handsome returns on the

invested capital, if supported by a "Top Down" and followed by selective buying.


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is this a trend reversal - outlook for next 6 months - high alert given in nov'10

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