The trading over the last 2 weeks is a classic example of technical analysis in action. Old and cliche as it is, history does seem to repeat yet again. As with the blue chips, the index rallied on dwindling volume over early march, reversing on a trendline bounce off. The dip on 15th march is significant as it was on high volume, gapping down through the channel support and historical support. This is followed by two days of sideways that tested 2971 but failed to close above. Friday's movement is an engulfing price pattern and 2971 was tested yet again (nearly), but ended the day with a lower close.
What is the feel of the market? The clues that the market is giving shows downside biased ness still. As much as i am tempted, there is no need to jump the gun yet. I feel that it is better to wait for some signs of basing and reversal before going long. Short wise, the signals do indeed coincide with a short call. The selling has been for sometime now though, so there are already a good amount of shorts in the market. I feel that caution should be exercised should one intend to go short. Position trading should be held back on the short side. Instead, it may be better to do intraday shorting, until the market dries up in downside momentum. Lets see how it goes from here.
My heart goes out to the people of Japan, who are hit with the nuclear fallout right after the tsunami. I am very impressed with the strength of the people, looking at how the twitter messages of extraordinary deeds have happened.
Currently, the damage made to Japan is at best a guesswork; it has been reported that the various automobile and steel factories have been shut down due to damages. Other sectors include electronics, SLR camera manufacture and semiconductor devices. According to asahi.com, "Tohoku region--Iwate, Miyagi, Fukushima, Aomori, Akita and Yamagata--accounts for 6.4 percent of Japan's gross domestic product." This is the area that is affected by the tsunami.
This is a critical hit and an initial damage- i believe there could be more fall out as the domino effect comes into play. In addition, the radiation fall out has added on to the uncertainty in the country and it could take a while before an assessment on the total damages can be made.
Meanwhile, i will stay out of the market and look for opportunities to go long. I have covered my shorts on SIMSCI. It is very tempting to buy into Nikkei, as it has been supported at 8000. However, the increased volatility and range, as well as the possibility of further complications stack the risk beyond my appetite.