Sensex not to fall beyond 9K levels: Ray Barros

Q: The pullback this time around was triggered by some of the developed markets. Do you see a lot more juice to this pullback rally from the charts of the Dow and the S&P?

A: No, I think we are going to be in for a chop, in the Dow Jones and in the S&P. We have gone to what we call as a directional market. We have been moving very steadily and now we are going to try and find a top. We found a base down here on the S&P and that is 1200 or so and the Dow Jones that bottomed there was at 10,220 and we are now looking for a top.

The top on the S&P is going to come at 1270 to 1280 mark bearish basis cash. We are going to come down and retest the 1200 mark, which is going to go sideways till the end of July and early August. The bottom for the Dow was 10,020. The minimum top would be 11,650 to a maximum of 11,820 and then it will come down and retest the 10,020 level.

Q: What are the charts of most of the other global markets - the ones that you track? Could we have a globally orchestrated synchronized short covering bounce after which the downsides will resume, is that the pattern that you are seeing from most charts?

A: The pattern across every single chart in the South East Asian markets and also across Europe, the Dax, the FTSE are bad an all are showing a short-term bounce and then the resumption of the bear market. The money supply states that the M3 level in 2006, when the US government stopped producing the M3 data, was standing at around 8%. Then, about a year later it stood at 10%, so it went up 2%. Between 2007 to date it has hit a maximum of a 17% of an increase in the M3 with a slight pullback of 16%. That’s a huge increase. According to the last CPI reports, it is going to go up to the largest increase in the last 26 years and it’s going to get a lot worse and then the Fed is going to be in real difficulty. It’s going to have the inflation problem that India is dealing with. They have to raise rates at a time when the economy is not doing so well and that I believe will be the signal for the markets to really tumble.

Q: Which of the top Indian stocks that you track are looking particularly weak and in very bearish grooves?

A: The two stocks that are the least bearish are; Infosys, which is in a sideways market at the moment. The top of this stock was at around Rs 2375 and the low at Rs 1354. It hit a peak of Rs 2000 and it’s bouncing up today. That’s going to get back up to the Rs 2375 mark. The other stock is ONGC. The high for this stock would stand at about Rs 1335 to Rs 1480 and the low would be Rs 758 to Rs 820. This stock too seems to be a sideways market. That’s the best that you can do. All other stocks are in sustained bear runs. One might see a bit of a pull back in ICICI Bank. The stock may have a pullback to around the Rs 650 mark and then it would just resume the downtrend.

Q: The question a lot of people are grappling with right now is when this entire bear phase would play out and how long is it going to take. The expectation was that the second half would be stronger for the equity markets and that hasn’t quite shaped up on a time wise basis are you being able to make any assumption at all on how long this bear phase will last?

A: Yes, but not on the Indian markets because I don’t track them in detail as much as I do for the US. Once this bear phase started I thought we were going to retrace all of the 2001-02 lows. We are looking at around 750-800 on the S&P and at about 7,005 on the Dow. In 2010-11, perhaps we will see a bottom. Pumping of money supply into the American economy had brought about the crisis. There was a great amount of excesses and that’s going to take a long time to unwind. There still is a lot of danger signals being hidden that we aren’t seeing at the moment. We will probably see more institutions coming to serious problems. I don’t know what the Fed is going to do but I do know that the markets will continue to tumble at least till 2010, At least the US markets.