Basics of Stock Market Behavior - Course 101

I have been hearing about the Indian stock markets and the economy for quite some time. With so many people saying many different things, I thought I will try to give it a shot and see what I come up with. With due apologies to people from my home land: udayan, amartya, here I go.

My guruji told me recently that the Chinese markets have been down 20% in less than a month. Once the bears in China head towards the poles and bulls in the china shop in Spain come to India and US, there will be a surge in the DOW towards the Nasdaq and the NIFTY towards the Sensex.

Considering that
1. Readers Digest US business is heading for Chapter XI (Bankruptcy).
2. Jobless rates have increased and GDP growth has decreased in the US.
3. Q1 results in India have been good.
4. Inflation in India is at all time low.
5. Monsoon has failed in india.
6. With the recent fall in markets indices across the world, Gold has fallen from about $1000 to about $935/oz.

we have a situation where different factors point in different directions.

As my guruji points out, when the bears are exhausted and wont sell, the bulls sell in order to book profits. Now when a bull sells, who is buying? It has to be a bear. What does it mean?

When a bear is exhausted, he ends up buying. And when a bull is exhausted he ends up selling. We reverse our stances when we are at our wits' end. Hence at that point in time the same market behavior continues as usual except that the bulls play the bear's role and vice versa. Pause for a moment and reflect on this point.

The fundamentals seem to point all over the place just like in the Maruti advt. where people point out the location of the nearest Maruti Service Center. Fundamentals currently dont provide any clue. A lot depends on how the US markets do today and the far eastern markets tomorrow. Each one will depend on the other one for a cue. There is apparently a double top with a single bottom also.

Finally, the markets will be determined by the behavioral pattern of the investors. If they choose the buy option instead of the sell, the sentiment will be bearish (remember that now the roles of bulls & bears have been reversed).

The role reversal also creates an identity crisis since the bears wont know whether they are now bears or bulls. Being at one's wits' end is rather subjective, hence we cant exactly track when a bull becomes a bear.

Having said that, let's see what will happen tomorrow. Tomorrow being Thursday and guruji's turn to cook, sentiments will be negative at home and elsewhere. I expect the market to open below today's close. There is a support at 4034.5 and at 16420.2. We expect both Sensex and Nifty to be range bound between the above figures.

I hope I have brought some clarity into the otherwise murky subject of market behavior.

Its a jungle out there.

Cooking Disasters in the Middle East

A Sindhi friend of mine from the Middle East dishes out some mean Pav Bhaji, Rasam, Curd rice, Alu paratha. And there is some suspicion that Swine flu and other gastro diseases have had their origin in the Dubai/Sharjah area.

As it happened, she & I would tell each other whenever we messed up some dish. And we started to keep scores also. The first day I burnt rice (I dont use pressure cookers like other housewives do), I had to throw it out. Even my puppies refused to taste it. But everything else turned out wow. Honest that I am, I mentioned the rice disaster to my friend. And the score was me 1, she zero.

And as time went by, the score changed progressively from 0-1 to 5-1. My friend would occasionally let slip (very guarded though she is) that something was "accidentally" burnt. I would immediately update the score in my diary. Later, the burning incidents became more frequent with the result that the Dubai fire engine service started scheduling their resources and activities based on whether she planned to cook.

The other day, she accused me of not cooking frequently enough and THAT being the reason why my score has remained at 1 while she being a more regular (!! we all know how regular) cook, her score had obviously increased. And hence demanded that SHE be considered the winner of the cooking contest.

Now here was a glitch. It took me quite some time to get my idea across to her. It was my contention that we were not measuring the success rate. We were only measuring who burnt dishes more frequently. Hence how often each one cooked was irrelevant.

Her answer was a silent "hmmmm". I took it as her strong disapproval of my theory. Meanwhile I asked another good friend of mine to adjudicate. She also said that the Sindhi girl was the winner. Strange is the way a woman's mind (I use this word rather loosely here) works.

So I devised a plan to convince my friend in Dubai. I asked her if she understood cricket and cricket scores. She said NO. I interpreted that (correctly, as it turned out later) to mean that she did understand cricket. I said "Let's say in a match, Sachin Tendulkar scored 55 in 100 balls. And let's say Dhoni scored 35 in 33 balls. I asked her who would be the highest scorer in the match. Without hesitation my friend replied "oni". "Oni"? Some sindhi name? Then I understood she was eating then and had her mouth full. She then explained logically that 55 runs in 100 balls = 55% strike rate and detailed the mathematical working. I had a saridon and then asked her after she had finished, whether my question related to higher SCORE or higher STRIKE RATE. She said "score, NO its the Strike rate, NO NO its the score".

In the same way if the question is: who burnt dishes more, it does not matter how often we cooked. We are only tracking who burnt dishes more often.

As usual after a lot of discussion she conceded the point with poor grace. I was too tired then to go out and inform the puppies.

And then I made a resolution and I told her.

"I have decided. I dont want to keep scores anymore. I want to compete only with people who are at my level. Aire gaire logon ke saath nahi". She was happy. No more tension.

An Ode to Mummy's Birthday in Australia

I have a baby friend from Malaysia whose culture, if calculated accurately, would fall somewhere in the Bay of Bengal. She claims that her ancestors were sikhs. She can almost correctly count from one to ten in Punjabi.

The other day she was quite upset that all her efforts towards writing poetry had come to naught. And her mum's birthday was that day. She was desperate. She wanted to cook something for her mum. She cooked chicken which (while on the stove) was alive and kicking just as her mum called and told her that she was on the way back home. I suggested Euthanasia to my little friend. She rejected the idea since apparently that's not quite legal in Australia; quite a backward country - that.

Since I dislike seeing a friend in trouble I thought I would write a poem (or what we Urdu lovers call a Nagma) which she could dedicate to her mother. Here is the unabridged original Malaysian version.

"

Mummy, oh mummy,

You are la the best mummy

Every time I see you, I want you

(someplace la else)

This new la house is so nice

And I am going to be a baby doctor in 5 months. ooh la la la (this isn't the maLAysian la)

Happy b' la day mummy.

"

This baby friend hasn't spoken to me after that. I wonder how she is.

On Stock Markets and Heart Attacks

HoursNowTV. Aug 18th 2009: A hacker inadvertently caused the death of a person 2000 km away. The hacker who is a timid person residing in Chennai hacked into the ----bulls site and tampered with the data which showed NIFTY to be touching 6300, when in fact it was at 4500. A lady (!!) was avidly tracking NIFTY data on the -----bulls site. When she returned, after a tete-a-tete with her sister-in-law, she suffered a sudden cardiac attack on seeing the NIFTY data at the -----bulls site. The owner of the site, when questioned by our reporter, vehemently denied any wrongdoing and said that this was a malicious attempt to discredit their site. Enquiries are underway to determine whether the website attack was actually aimed at the lady in question by the person in Chennai and whether the -----bulls site was merely used as an instrument to achieve an end. If this suspicion is confirmed, it is expected that there will be a bullish tendency on the part of persons wanting to get rid of rakshasis in this circuitous way.