https://ganninsides.com/2024/07/28/development-in-global-equity-and-forex-markets-would-derail-the-uptrend-in-indian-markets/

DEVELOPMENT in GLOBAL EQUITY and FOREX MARKETS actually derailed the uptrend in INDIAN MARKETS.

As i noted in above post  the uptrend in indian markets was not sustainable.
I did spelled out multiple reasons to back that thought process.

I very clearly said that dispite a 500 point upmove of 26th,july upsides on NIFTY is limited and I am no longer intrested in taking long trades.
many of my followers didn’t liked that view but unfortunately i couldn’t help them out.

but now one week down the line many would had realised the whole thought process.
Technicaly we were closely looking for the resistance of 25200 on spot.
INDEX went till 25078   and after that price registered a strong REJECTION  and going forward this REJECTION could gradually turn out a meaningful REVERSAL.


would still take some time for that but that process should be underway.

for short term on price front we could see NIFTY dropping towards 24520 and 24210 on spot in coming days,
and on TIME front 5th,August is going to be a very important cycle date.
if markets starts to sustain below the intraday low of 5th,August then that would make the setup extremely bearish and with that kind of setup for NIFTY it would be easy to break the significant support of 24000.

Lets see  or now mondays low would be of paramount importance for us.

Global markets were extremely in a risk off mode this week specialy Japanese markets and U-S-MARKETS.
NIFTY on other hand was relatively stable.

So lets review the global setup below.

U-S-INDICES first

As i discussed in previous weeks post  we were looking for a counter trend bounce in major U-S-INDICES and during the week we actually got that bounce.
and once that counter trend vounce ended we got a very strong turn lower  and things did unfolded exactly in the manner in which we were looking at.

So lets straight away discussed on the technical setup for S&P and NASDAQ.

S&P

Holding 5340 we were looking for a counter trend rally towards the zone of 5570-5610  initially index successfully managed to hold above 5340 and on Thursday made high of 5566 very close towards the lower edge of our projected zone.
The decline from Thursdays high has been extremely furious where we saw index dropping from 5566 to 5302 in just 24,hours.

Hens after such a sharp decline market would require some time to stabilise.
All though my target for this move for now is at 5200 on downside  I dont expect further one way decline towards 5200.
with vix at 2024 highs    we have to be prepared for extreme voletility on both sides.

eventualy 5200 will come but that still wont be the end of the decline.

Once 5200 breaks index would attempt a further extendtion of its decline towards 5020 which happens to be its 45 degree angle from its july high of 5669.

In my last weeks post i clearly mentioned that on 24th,of,JULY something very significant has happened and that has that potential to trigger a large scale reversal.
If during this decline if SPX drops below 5020 which i am sure it will  then that would officialy conferm my view.
Would discuss this in further detail when SPX breaks 5020.

NASDAQ COMPOSITE

On NASDAQ we were looking for a test of 18100 during the counter trend rally.
but index managed the move higher only till 17800.


Post that it too went for a wild ride on downside where it made low of 16582 on friday.

16800 was a key support here.
As long as index manages to hold below 16800 it would decline further towards 16200 which happens to be its 45 degree angle from its july high.
Once 16200 breaks we should get this index towards the January 2024 low.
Not immidiately but gradually.

Here too voletility is likely to stay extremely high so better not to get carried away with major swings.
A 2%+ up or a down day from here should be a regular affair.

On TIME front  5th,August Which is tomorrow is going to be a very important cycle date,
As i discussed this in indian markets section  above  will repeat it once again     that if indices fails to sustain below 5th,August low then most probably markets would either consolidate or attempt a pullback.
So plan your short term trades accordingly.

coming to YEN now.

Last week i discussed the importance of YEN for the global financial markets.
Unfortunately many in INDIA doesn’t even understand the concept of a carry trade.
I tried to explained that in last weeks post.
but majority still felt that such macro things doesn’t matter for INDIAN MARKETS.

Anyways my job as an analyst is to highlight potential risks which could impact our trades and investments.
My job is not to convince everyone to consider and focus on all points which are discussed on this platform.

Now as far as YEN is cunserned level of 143 on USDJPY cross  is absolutely critical.
Holding 143 things can stabilise but in case for any reason 143 breaks then that can trigger margin calls on all risky assets globally.
Take some time out and research on why that could happen.

thats it for now.
Lets see how things goes post 5th,August.

there is lot to discuss today so lets straight away move ahead and start with INDIAN MARKETS first.

For INDIAN MARKETS BUDGET was the significant EVENT and this tuesday that finally passed.
For NIFTY as I had been discussing constantly that   level of 24,000 is an ultimate support and as long as that support is holding things are likely to stay fine for NIFTY and any decline which holds the level of 24,000 would only be considered as a normal pullback.
No scope for a meaningful REVERSAL or correction as long as 24,000 is held.
On TIME front INDIAN MARKETS in next few days would be approaching a critical turn window so dispite NIFTY making a fresh high I wouldn’t be looking for further long trades to chase this INDEX on higher side.

because the recent fresh high which NIFTY made on FRIDAY came on back of few unavoidable inter market divergences which cannot be ignored.
these divergences are strong enough to restrain the INDEX from generating a trending move on higher side.

In INDIAN MARKETS we have BANKS and RELIANCE which have broken their medium term supports and on the other hand we have AUTO I.T. and ITC which are in a very strong shape technicaly.
So rather going after the NIFTY either on long or short side,
an ideal profitable trade would be to sell BANKS and RELIANCE on rallies,
and,
buy AUTO and ITC on dipps.

I.T. should be an avoid because thats at a very important resistance.

still for NIFTY on upside 25200 is going to be a very strong resistance.

for the entire month of july so far NIFTY has been in 3.5% band so if you are a trend follower then you have not made money on NIFTY in july dispite index making a fresh high ebery week.

Unfortunately we are currently in a state of MARKET where an UPTREND is classified into 2 categories.
In which the primary category belongs to a kind of PRICE action which we saw during the month of JUNE.
Where the price action is very strong which is actually a kind of price action to trade as a trader.

And the other category would be best classified as a choppy uptrend.
where the INDEX does continue to make higher highss.
but the price action in this phase mostly stays sideways.


And during this phase there is nothing to do much as a trader.

accept the month of june entire 2024 does falls under this second category of UPTREND.

Just for reference if you take the month of june out then there are less then 15 trading days where NIFTY have rissen more then 1.5% on EOD basis.

so the point is there is nothing to get exited post fridays price action.

I dont know how many of you remember that  on 1st,of,MARCH,2024 we did got a similar kind of an up day and post that market really didn’t do much for the rest of the month.
1st,MARCH was meanwhile the first day of a new series and 26th,july too was also a first day of the new series.
so connect the DOTS.

now lets move on from INDIAN MARKETS and discuss the setup for U-S-MARKETS

The stock market got a boost at the end of a wild week after key economic data bolstered perpetual speculation about when the Federal Reserve will cut rates. Every major group in the S&P 500 rose Friday on bets that a Fed easing cycle will begin in September, just in time to keep fueling Corporate America and the bull market. That market meanwhile seems to be broadening beyond that narrow group of companies we’ve become familiar with. While big tech has enjoyed massive gains this year, the so-called concentration risk has come to the forefront for many, especially given the disappointing start of the megacap earnings season. Investors who for months saw fewer alternatives to a tight group of market winners are suddenly branching out.


but dont make a mistake to consider the week as a normal week.
Something very significant happenned on WEDNESDAY  which would have painful consequences for overall market going forward.

so lets go through what just happened on WEDNESDAY.

Wednesday might have been frightening if you are the type of investor who follows day-to-day action. The S&P 500 SPX pulled back 2.3% for the day, while the tech-focused Nasdaq-100 index NDX fell 3.7%.
this 2%+ kind of down day on SPX happenned after 507 calendar days and after 356 trading days.
So its something which was the biggest take away from the week gone by.
Not only that CBOE VIX too was up by 22% in a single day on WEDNESDAY and such rise on VIX actually happenned after 13th,june,2022,
So take some time off and think what these things are pointing at?


Obviously things are not going to rollover overnight but look to consider such signals as a warning for a large scale trend reversal.

Coming to levels now

S&P

On 19th,july I shared level of 5510 as a breakdown level for S&P,500 and a downside target objectives below 5510 were kept at 5425 and 5340 on cash.
However on expected lines INDEX broke 5510 and achieved our target of 5425.
but 5340 is still yet to be achieved and my sense is 5340 would hold for few days and for now INDEX could attempt a counter trend bounce which could carry index towards the zone of 5570-5610,on upside and post this counter trend bounce I would expect S&P to register a furious decline which could drag the index towards 5200 rapidly.
In all probabilities I am not looking for a new high on S&P.

NASDAQ COMPOSITE

As mentioned earlier 18,000 was a significant support for NASDAQ and a break of that have almost triggered a mini colaps.


frankly we were looking for a test of 17400 for this leg but index went on to test almost 17,000 which from the top have almost given up 9%.
Now thats a noteworthy decline in just 15 odd days.


On downside another major support is placed at 16800.
Holding 16800 this INDEX too could register a counter trend bounce which could take it towards 18100 and post this counter trend bounce on NASDAQ too we would be looking for a rapid and furious decline which should drag it towards 16000 and lower.

and here too we are not looking for a higher highs above its high registered so far.

so far accept S&P and NASDAQ we do not have a TOP conformation for DJI and RUSSEL 2000.

specialy the DJI dispite the recent pullback there are no conformations for a TOP yet.
RUSSEL is strong but its performence is unlikely to impact other major INDICES.
If the tech sector is turning down then other indices too would join it on downside either sooner or later.

along with tech sector a risk off signal is coming from FOREX MARKETS as well.

In foreign exchange, the balance appears to be turning decisively against carry traders — investors who borrow in low interest-rate currencies like the Japanese yen and park in currencies with higher rates, such as the Mexican peso. It’s a trade that works beautifully unless the currency in which you’re borrowing starts to gain.
the recent strength of Japanese yen against the $ is one of the major reason behind the recent risk off environment which have added pressure in equity markets of U-s and EUROPE.

Yen is more important because the epicenter of the global carry trade has been coming from JAPAN.
Post GFC hedge funds have used JPY to operate the entire ecosystem of this carry trade.
So far it was working fine because intrest rates in JAPAN were below 0 and as of now they are still at 0.

but now BOJ have indicated that they are ready to raise rates.

market is expecting this rate hike in SEPTEMBER but there is a thin possiblity that rate hike can happen as early as next Wednesday where BOJ monitory policy outcome is due.
even,though a july hike is less expected but a SEPTEMBER hike is a done deal.
and here is where things get more intresting.
because in SEPTEMBER itself FOMC would be going for a rate cut.
So there is going to be a policy missmatch in 2 major economies of this planet.

so this policy missmatch is going to make things more uncertain for the YEN and along with it   this uncertainty would spill over to other risk assets as well.

Hens its high time that we should stay cautious at highs.
So for now lets end this here.