Wednesday, September 3, 2008

Nuke Deal on Tenterhooks

The Nifty on Monday suddenly started rising at around noon time when the crude oil, which had been respecting the $110 support level for quite some time, came to $107 levels. The break of this important support level for crude meant that more downside could be seen in crude. And what is negative for crude turns out to be good for the equity markets. This sent the Indian equity markets skyrocketing and the Nifty, for the last hour and a half, remained above 4500 to finally close at 4504, a gain of 155 points.

News from the crude front still remains good as it continues to trade in the vicinity of $108 today. But the news from the world over has turned negative. Today was a holiday in the Indian markets on account of Ganesh Chaturthi and while the Indian traders were enjoying a quiet holiday here, the traders in Asia and Europe were busy selling. All Asian markets, with the exception of Nikkei, closed between a percent and two percent down. The European markets met with the same fate today when they opened. The US markets, surprisingly, were only half a percent down today.

Suddenly, once again, the nuke deal seems to be of the prime importance for the time being. According to a
letter written on January 16 earlier this year by Late Mr. Tom Lantos, the then Chairman of the House Foreign Affairs Committee, which was made public by the current Chairman Howard Berman, the US has the right to stop nuclear fuel supply to India altogether should it conduct another nuclear test. And all the time the Manmohan Singh government has been claiming that the deal in any way would not prevent India from conducting any more nuclear tests. As per the US Ambassador David C Mulford, there is nothing new in the letter made public today and that New Delhi was kept in the loop all the time. And the UPA government sources say that they are aware of the current US policy. Now, what does that mean? That in spite of knowing about these restrictions, the government was going ahead with the deal, thus jeopardizing the country’s national security, and all the while keeping the opposition and the Indian public in the dark? And worst of all, the US State Department had asked the US Congress to keep the letter a secret because the information was so ‘sensitive’ that it could have toppled the Manmohan Singh government.

I am sure the Indian public has some questions to ask the UPA government. Was the deal so important that they could goahead with it in spite of knowing that their hands would be tied when it came to the security of the country? If it was, then why was the government making repeated assurances that their hands would not be tied? And if it knew about these restrictions, why was the public and the opposition kept in dark about this? Does it not feel ashamed now that the findings have become public? Please, readers, I need some comments from you. Am I wrong in asking these questions? Would you not ask the same questions? Or would you agree with what the government has done? Are there any American readers here? What do you, the people of America, feel about the India US Nuke Deal?

With this news coming out today, I feel there is no way, if the government has any shame left, that the deal can be operationalised in the current form. And if it can not be operationalised and if all the Asian and European markets are down, there is no way the Indian markets can ignore all of this. So, the Indian markets are bound to come down tomorrow, unless something drastic happens overnight.

Nifty Daily Chart - RSI at 60. Resistance here?

Seen above is the daily chart of the Nifty and as can be seen, the Nifty is now heading towards the upper end of the range at 4650. As of now, the chances are quite bright that the markets would open with a negative gap tomorrow. Would that mean a return line failure, which means that the prices would fail to reach the upper end of the range? That would mean that the RSI would find resistance near 60, which means there is no strength in the markets. And that means no weakness either, because in trading ranges the RSI is expected to move between 40 and 60, or maybe 35 and 65. This implies that we are now again looking at a support near 4200. And a retest of that support after a return line failure could mean that the test may fail support may break.

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