Sunday, November 27, 2011

>USD-INR: More pain ahead. Downgrade target to 57

Below given is the Daily chart of the USD-INR. A clear strong uptrend is visible. After a strong up move from 44 to 50 we can see a sideways consolidation after which the trend was resumed. The Breakaway Gap (shown in the chart) formed on the 22 September 2011 now becomes the pivotal point for the move and hence the lower end of the consolidation i.e. 48.6 becomes the most critical support for the USD-INR.

As per our report released on the 3 October 2011 (attached along with this email) we had given a target of 53. The USD-INR hit a high of 52.73 on 22 November after gapping up and formed a bearish hanging man pattern. The move on 23 November is that of a shooting star and filled the gap formed day before showing signs of exhaustion in the short term. Although in the short-term the USD-INR looks over bought the uptrend remains intact.

We believe any correction/ consolidation is only a pause in the uptrend and the rupee will continue to depreciate with an eventual target of 57 by March 2012. Levels of 50.67 and 49.33 will act as strong supports in any correction/ appreciation.

To read the full report: USD-INR

>GREED & FEAR (Stock Market)

Trickling down

World stock markets clearly continue to want to go up since they continue to ignore the
deteriorating action in the Eurozone credit markets. Thus, the S&P500 and the MSCI AC Asia
Pacific ex-Japan Index have only fallen by 4% and 6% from their recent high reached in late
October, and are still 13% and 15% above their recent low reached in early October. While the
all important spread between the 10-year French government bond yield and the 10-year
German bund yield has again widened to a new euro-era high of 190bp on Wednesday, up from
150bp last Friday (see Figure 1).

The stubborn desire to buy stocks is driven in GREED & fear’s view primarily by the time of the
year. Those who have done well in 2011 betting against risk naturally want to lock in their
gains. While those who have not are desperate to chase a year-end rally. Still GREED & fear
remains firmly of the view that it will pay to bet against risk if the S&P500 makes it temporarily
above the 200-day moving average (see Figure 2). Any such rally is likely to be driven by the
new technocratic government in Italy coming up with seemingly meaningful austerity

To read the full report: GREED & FEAR