Wednesday’s Pre Elections Pull Back Is Encouraging!!!
Market pulled back modestly on Wednesday after three straight days of sharp declines. Investors were very cautious in establishing long(Buy)positions and decided quite correctly to wait for a convincing BUY signal to appear. Today we may see an elections day thin market which can be quite volatile with most of the participants keeping away till a firm trend is established though there would probably be sharp upward movements in speculative popular stocks.
As the Japanese crisis blows over global markets will gradually return to normalcy in the coming days. We reiterate our prediction that the massive reconstruction/rehabilitation process that will soon get underway in the earthquake/tsunami affected North East Japan would pull the global economy out of the persisting recessionary climate. Japanese economy is so robust and resilient that no earthquake or tsunami can affect it to any significant extent.
RSI’s of ASI & MPI daily charts are still at an absurdly low 38 & 21 and ASI and the MPI were still close to the Lower Bollinger Band underlining the terribly oversold condition of the market. RSI of the MPI is still below the Oversold Level (below 30 levels) and that of the ASI is nudging on the border of this region. As noted previously the RSI of the MPI is in a region that was last seen in March, 2009 when the North East war was at a critical juncture. For those who missed the opportunity on that occasion are provided with a rare second chance to latch in to the blue chip bargains still available across the board. However you are strongly advised to use cash instead of margin facilities when buying shares in a falling market where a convincing BUY signal is yet to appear.
Considering the current level of the underlying securities their warrants are being traded in the market at grossly underpriced levels. The extent of undervaluation of most of these warrants is evident from the extract of relevant information from our warrant price calculators given below. (pl. see our warrant price calculators at our website’s research section.)