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.

Please do
subscribe to my posts, so that all posts are delivered free to your inbox and you don't miss any useful analysis of the markets in the future.

Happy Investing!!!


  1. Its a very well written post & now its my daily routine going to sleep after I read your post .......

    I am sure you are justified in asking these question & all those who can understand these things in india will be asking the same question because they ( manmohan & congress) are representing us in world they are not our bosses so they cannot hide such a important information from us and cant take sensitive decision without consensus in parliament ......

    I understand return line failure but cudnt undersatn one thing because of a news we are falling wud it be consider as a normal weekness as low strength .....

    Last but not the least I have a heading sudershan is best It doesnt mean I dont respect you or any other person a lot. But still I think he is a person who doesnt worry about anything but investors wealth can tell spade a spade on cnbc & have very good experience & a genius and i think you are quite younger . I got ur blog Id from Sudershan Sukhani blog only ..........

    thanks for providing all good information and taking pain in night at 12o clock......


  2. Thanks, Deepak, for your comment. News only has a short-term effect on the markets. For me, news does not matter. What matters is what is visible on the charts. If there is a return line failure (the reason does not matter), it means there is weakness and that will be cancelled only when the support line (4200) is respected.

    As regards Mr. Sudarshan Sukhani, yes, he is a genius. In fact what I am today is all because of him. He is my guru. He only instigated me to learn technical analysis. Had he not encouraged me to learn technical analysis that day a decade earlier, I wouldn't have been here today.

  3. Hi Vikas

    I don't understand what is the big deal of the new information being brought out. Firstly how does US policy of stopping supply will hinder India security. They are not saying india cannot do the test. What they are saying is if they do the test they will stop the supply. Again their i think they are bringing that clause just so that they can prove something to the NSG that India is not looking nuclear for weapons but for energy.
    I dont think even if india perform any test US will stop supply. As they are the one with a bigger loss. Look to the pokhran test when US made the ban, they were the ones who got affected more then India and eventually lifted the ban.
    I am not saying that this clause is no issues at all. But its not so much of a big deal as it is presented by media and opposition party. The UPA government i think has few of the best educated politicians and i am sure they would not take any such step which will hinder country security or growth.
    The current PM and finance minister are one of the best we have since independence.

  4. Yusuf, I appreciate your leaving the comment but there are some points on which I don't agree with you. And one of them is the fact, rather fiction, that the UPA has few of the best educated politicians. Politicians, according to me, all fall in the same category. They only think of making money while in power, desh jaaye bhaad mein.

    I may agree with you that we have the best PM and FM since independence but the point is what have they done in the last 5 years? They have both been governed wholly and solely by the Left parties and the lady who has the steering wheel in her hand. You know who I am talking about.

    As far as the country's security is concerned, what will we do if Pakistan tests some new nuclear missiles? Will we not do the same so that we can keep ourselves safe? And the moment we do that, the nuclear supplies would be stopped. And not only that, all countries would then be against India because they would think we are misusing the nuclear supplies, and the truth in that situation won't matter. We will then have more enemies than friends internationally. And I am pretty sure that if the deal goes through in the current format, Pakistan will test a few missiles in the next few months only to make India retaliate and to see the nuclear deal fall apart.

    I think India should definitely keep the right to test nuclear weapons, if the need so arises, without affecting the deal. Well, that is my opinion. You, of course, have the right to disagree.