Monday, September 8, 2008

Markets Jump as Freddie and Fannie Bailed Out

The Nifty today, as was expected, opened about 150 points in the green after the NSG approved the nuclear deal in India’s favour. There was also the news from America that the Government had taken over mortgage lenders Fannie Mae and Freddie Mac, which had issued debt worth $1.4 trillion, and the bailout of which would require about $200 billion. Both were good news from the market’s point of view which is why it opened in the green today. At the time of writing this newsletter the Dow Jones is up almost 200 points, but has come off its highs. The same thing happened with the Indian markets earlier in the day. After a very good opening, the prices did sustain most of the day but started coming off in the final hour of the day. The day remained good enough for the Nifty to close 130 points in the green while the BSE Sensex ended the day with a gain of 461 points.

Nifty Daily Chart - MACD Slightly Bullish

Attached above is the daily chart of the Nifty. It is similar to the chart shown yesterday except that the ADX indicator has been removed and the MACD has now been shifted to the bottom portion of the chart. Looking at the price today in correlation to the resistance line CD, we notice that the price did go above the resistance line intraday but lost enough to close below it. The ADX indicator, though not shown in the chart today, still remains unchanged at 11 and the Nifty continues to be rangebound between 4200 and 4650, as marked by the black rectangle. As regards the MACD, the MACD line still stays close to the signal line, though slightly above it while both the lines are just above the equilibrium line of 0. While the Relative Strength Index (RSI, which again is not shown here) remains neutral the MACD is giving slightly bullish signs.

News from the crude front too remains positive. After rising to above $109 levels intraday it has now slipped back to $105.50. A negative crude should be good for the global equity markets.

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