Short RCOM-245 for a target 238-233 sl 250
Short SBI-1713 for a target 1675-1630 stop loss 1735
Short ICICI-704 for a target 682-773 stop loss 717
Short L&T-1412 for a target 1385-1350 stop loss 1440
Short Banknifty-7104 for a target 6880-6820 sl 7165 [Spot]
Support
4348
4294
4237
Resistance
4383
4404
4461
4515
4678
4732
Buy APTECH LTD;MCLEOD RUSSEL
This is list of 10 strong futures:
Nifty is in downtrend
Selling may continue up to 4348 level for time being.
Hurdles at 4383 & 4404 levels. Above these levels, expect short covering up to 4459-4461 zone and thereafter expect a jump up to 4513-4515 zone by non-stop.
Sell if touches 4676-4678 zone. Stop Loss at 4730-4732 zone.
Short-Term Investors:
Bearish Trend. 3 closes below 4623.80 level, it can tumble up to 4092.20 level by non-stop.
BSE SENSEX:
Lower opening expected. Downtrend should continue.
Short-Term Investors:
Short-Term trend is Bearish and target at around 14235 level on down side.
Maintain a Stop Loss at 15973 level for your short positions too.
Buy APTECH LTD (NSE Cash)
Profit Booking expected.
Mild sell-off up to 207 level can be used to buy. If uptrend continues, then it may continue up to 218 level for time being.
Book Profits if touches 227 level on upper side.
Buy MCLEOD RUSSEL (NSE Cash)
Recovery expected.
Book Profits if touches 176 level on upper side.
Keep a Stop Loss at 149 level for your long positions too.
FII DATA
| FII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| FII | 17-Aug-2009 | 1583.39 | 2809.88 | -1226.49 |
| DII trading activity on NSE and BSE in Capital Market Segment(In Rs. Crores) | ||||
| Category | Date | Buy Value | Sell Value | Net Value |
| DII | 17-Aug-2009 | 1744.91 | 1284.59 | 460.32 |
SPOT LEVELS TODAY
 | 4387.90 | ( -4.20 %) | -192.15 |  |
| 1 | 2 | 3 | ||
| Resistance | 4519.60 | 4651.30 | 4723.80 | |
| Support | 4315.40 | 4242.90 | 4111.20 | |
 | 14784.92 | ( -4.07 %) | -626.71 | | |
| 1 | 2 | 3 | |||
| Resistance | 15132.56 | 15480.19 | 15676.16 | ||
| Support | 14588.96 | 14392.99 | 14045.36 | ||
Global Cues & Rupee
The Dow Jones Industrial Average closed at 9,135.34. Down by 186.06 points.
The Broader S&P 500 closed at 979.73. Down by 24.36 points.
The Nasdaq Composite Index closed at 1,930.84. Down by 54.68 points.
Wall Street retreats as worries about the economy cause investors to bail out, after lifting stocks by 50% in five months.
Wall Street slumped Monday, falling for the second straight session, as worries that nervous consumers will pressure a fragile recovery dragged stocks lower after a five-month advance.
Steel, energy and banking stocks led the decline as the week began with a steep sell-off.
A broad sell-off slams stocks as investors worry that a global economic rebound will be weak at best. Oil falls.
Stocks started the week with their worst losses since early July as news of U.S. consumers' flagging confidence last week spread doubt all around the world.
The sell-off in the United States came after nasty selling in China, Japan, India and Europe.
And the stocks hardest hit were among those that have fueled much of the big rally since March: technology, metals, energy and financial institutions.
Today's was the worst daily performance for the Dow and S&P 500 since July 2 and the worst for the Nasdaq since June 22.
The Dow Jones industrial average (INDU) lost 186 points, or 2%, after having lost as much as 204 points earlier. The S&P 500 (SPX) index fell 24 points, or 2.4%.
Both the Dow and S&P 500 closed at 3-week lows.
The Nasdaq composite (COMP) lost 55 points, or 2.8%, ending at a one-month low.
Jason Trennert of Strategas said he believes the pull back is just that, and the bigger market trend remains up.
"We've been telling our clients..that it's more dangerous to be short than long, and I think that's true," he said.
"It's important to keep an eye on China because it has been a very good leading indicator for inflationary and deflationary pressure over the last couple of years...It's obviously a much more volatile market," said Trennert.
"I don't know if you can really see what's going on now as a trend, but I think it bears watching."
What wasn't clear was whether today's selling was a one-time event or the start of something larger.
Many market analysts believe the market has been overdue for a pullback, if only because of the size of the rally since March 9. The Dow was up as much as 44% from its March 9 low after Thursday's trading; the S&P 500 had been up nearly 50%.
There's growing worry that many investors may have bought into stocks too early, with an economic recovery in the earliest stages -- at best. You can see the worry in the 17% gain in the market's so-called fear index, the CBOE Volatility Index ($VIX.X).
The VIX measures the ratio of call options -- options to buy stocks -- traded on the Chicago Board Options Exchange compared with put options, which are options to sell stocks. A rising VIX means investors are seeking to protect positions.
There has been a growing chorus of market pros who say the market got way ahead of itself, the rally of the past month was founded on nothing and a correction is coming.
"There's no basic foundation for the run-up we've had, been far too rapid," Dan Deighan, founder of Deighan Financial Advisors, told CNBC today. He predicts we're going to see a 25 to 50 percent drop in the market — and it's going to be fast.
This echoed comments on Friday by Pimco's Mohamed El-Erian, who said, "Stock investors are making overly optimistic assumptions" and that "[c]urrent valuations are not warranted by the outlook for 2010."
But Bruce McCain, chief investment strategist at Key Private Bank, said this is a normal correction and investors shouldn't panic.
McCain says, this correction will likely be 10 percent at best — say, bringing the S&P to 900 from 1,000 — and will be over in a few months. Then, stocks will start to go back up.
"A substantial portion of this rally is still yet to come," McCain said. "We're cautioning clients not to sit on the sidelines too long — to push ahead of their comfort level" so they don't miss out on the rally when it picks up again.
"We feel pretty confident telling our clients to make sure they're fully invested," McCain said. "As we get to the end of the year, we'll watch the trends and maybe pull back a bit," he explained.
Signs of a correction started last week, when stocks snapped a four-week rally that had pumped up the Dow by 15 percent.
In the last month alone, the S&P 500 gained 15%. After such a run, a pullback was predictable, but it's unlikely to signal a bigger retreat, said Stephen Goldman, market strategist at Weeden & Co.
"You have a market that's seen most sectors and stocks rise in tandem and and so we should see a pretty orderly pullback," Goldman said. "We're still only down 2% or 3% from the highs."
Goldman said he sees a continued advance through the fall. But he said the difference is that from now on, it's going to be a lot more choppy, with investors having already anticipated a lot of the economic improvement.
The CBOE Volatility (VIX) index, also known as the Vix, Wall Street's so-called fear gauge, spiked 15%, signaling a bigger stock pullback could be brewing.
"People are worried we've run too far, too fast and that we still have a long way to go in terms of the economy," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams. "There are concerns about a double-dip recession."
Underscoring the weakness in consumer spending, home improvement retailer Lowe's (LOW, Fortune 500) on Monday reported a worse-than-expected drop in second-quarter profit. Lowe's also issued a second-half outlook that is short of analysts' estimates. Shares plunged 10.3% and dragged on other retailers & along with Liz Claiborne and Abercrombie & Fitch.
Rival Home Depot was down 3.8% to $26.11.
Stock declines Monday were broad-based, with 28 of 30 Dow stocks sliding, led by IBM (IBM, Fortune 500), Boeing (BA, Fortune 500), Chevron (CVX, Fortune 500), Exxon Mobil (XOM, Fortune 500) and 3M (MMM, Fortune 500).
The hard-hit sector continues to show signs of improvement. On Monday, the Empire State Manufacturing survey, a measure of activity in the New York area, rose to 12.1 in August versus a reading of negative 0.6 in July, according to the Federal Reserve Bank of New York. Any reading that is positive shows expansion in the sector.
Steel companies also took it on the chin Monday after an analysts warned investors expecting an increase in orders they could be disappointed. Steel production has rebounded from last year's lows, but a Credit Suisse analyst said a surge in orders has not materialized. U.S. Steel ( X - news - people ) fell 8.3% for the day while Nucor ( NUE - news - people ) was off 4.7%.
Falling oil prices took energy shares down as well. Crude was off as much as 3% during the day as traders soured on the prospects for a quick rebound from the global downturn. Exxon Mobil ( XOM - news - people ) lost 2.4% as a result while ConocoPhillips ( COP - news - people ) fell 3.2%.
Financial shares felt the pain, too. A report from credit reporting agency TransUnion showed that delinquent mortgages hit 5.8% for the second quarter of 2009. That's the tenth straight quarterly increase and a jump of 65% from the same time last year. Bank investors reacted unfavorably, with the Financial Select Sector SPDR ( XLF - news - people ), an exchange-traded fund that tracks major banks, brokers and insurers, down 4.2%.
Stocks in Asia tumbled, especially in China, on worries that their economies may not grow as quickly as expected.
There's a double worry in China: Too much investment is flowing into industry, and its export-oriented economy is too vulnerable to U.S. weakness.
That hit heavy-equipment makers like Caterpillar (CAT), down 4.5% to $43.95, and Joy Global (JOYG), down 6.4% to $37.87.
It also clobbered metals shares like Freeport-McMoRan Copper & Gold (FCX), down 6.7% to $59.36; Alcoa (AA), down 6.5% to $12.41; and U.S. Steel (X), down 8.3% to $42.32.
Remember, this has been the market's strongest sector all year, led by Apple (AAPL) and a few others. But the gains for technology have been built on expectations of strong consumer demand for smart phones, net book computers and other electronic devices.
Apple was off 4.3% to $159.59, subtracting nearly 10 points from the Nasdaq-100.
Google (GOOG), which went public five years ago on Wednesday, was off 3.3% to $444.89.
Banks were hit by two problems. First was Capital One Financial (COF), the credit card company, which fell 2.9% to $34.06 after the company said its annualized charge-off rate for its credit-card customers rose to 9.83% in July from 9.73% in June.
The other was market dismay came from BB&T Corp. (BBT), which is taking over assets of the failed Colonial Bancorp. BBT said today it was going to sell $750 million in new shares to bolster its capital. BB&T fell 6.4% to $26.43.
An issue for analyst Richard Bove is that Colonial was functioning only by selling high-yield certificates of deposit. That money might flee once the CDs come due, meaning BB&T will have paid more than was necessary.
Financials sold off as several companies, including Bank of America BANK OF AMERICA CORP NEWBAC 16.56 -0.83 -4.77% NYSE Quote | Chart | News | Profile [BAC 16.56 -0.83 (-4.77%) ] and Capital One CAPITAL ONE FINL CORPCOF 34.06 -1.02 -2.91% NYSE Quote | Chart | News | Profile [COF 34.06 -1.02 (-2.91%)], said credit-card defaults rose in July.
The market was also buzzing about the Fed's decision to extend the TALF another six months, which means through June 2010, as the credit market remains "impaired."
Over on the Nasdaq, the hardest hit of the indexes, UAL, Electronic Arts and Wynn Resorts were among the biggest decliners, all down more than 8 percent.
Shares of BJ's Wholesale Club BJS WHOLESALE CLUB INCBJ 30.52 -0.53 -1.71% NYSE Quote | Chart | News | Profile [BJ 30.52 -0.53 (-1.71%) ] fell after J.P. Morgan Securities downgraded the stock to "neutral" from "overweight."
A rising dollar drops commodities
Because of the crummy markets around the world today, the greenback became popular because many investors wanted to buy Treasury securities.
So, interest rates were lower and the dollar was higher against the pound and euro, although lower against the yen.
Gold fell 1.4% to $935.80 an ounce in New York. Copper was off 2.6% to $2.78 a pound, and silver fell 5.1% to $13.98 a pound.
Oil has dropped as well, closing at $66.75, down 76 cents from Friday. Crude has dropped 3.9% this month.
Only two of the 30 Dow stocks were higher this afternoon. The Dow winners: Pfizer (PFE), up 0.7% to $15.88, and Coca-Cola (KO), up 0.5% to $48.70.
Meanwhile, just three Nasdaq-100 stocks were higher, along with only 37 S&P 500 stocks. The top S&P 500 stocks were health insurers Aetna (AET), Coventry Health (CVH) and health research company IMS Health (RX).
The reason: reports that Obama administration may be backing away from its commitment to a public health care option.
Oil, Gold & Currencies:
U.S. light crude oil for September delivery fell 76 cents to settle at $66.75 a barrel on the New York Mercantile Exchange.
COMEX gold for December delivery fell $12.90 to settle at $935.80 an ounce.
In currency trading, the dollar gained versus the euro and fell against the Japanese yen.
The euro rose against the dollar and the yen before a report economists said will show German investor confidence advanced this month, easing concern the global economic recovery will stall.
The 16-nation currency advanced the most in more than a week versus the yen before a report forecast to show confidence rose to a three-year high in Europe's largest economy. The yen fell against all of its 16 majorcounterparts on speculation Japanese investors and importers took advantage of its strength to sell the currency.
"Because Germany is a manufacturing hub, it's a good barometer for what's happening in the global economy," said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Sydney. "The euro will receive some benefit from it."
The euro rose to $1.4105 at 10:35 a.m. in Tokyo from $1.4082 in New York yesterday, when it touched $1.4046, the lowest level since July 30. It advanced 0.5 percent, the most since Aug. 7, to 133.73 yen from 133.08 yen. The euro bought 86.14 British pence from 86.15 pence.
The yen declined to 94.81 per dollar from 94.50 in New York yesterday, when it reached 94.21, the strongest level since July 29. The currency dropped 0.8 percent to 78.14 versus Australia's dollar and fell 0.6 percent to 63.50 per New Zealand's dollar.
Germany's Economy
Europe's single currency rebounded from a two-day decline versus the dollar as doubts about the economic recovery damped demand for higher-yielding assets and triggered a selloff in equities.
The ZEW Center for European Economic Research will say its index of investor and analyst expectations rose to 45 from 39.5 in July, according to the median of 35 forecasts in a Bloomberg News survey. That would be the highest reading since May 2006. ZEW releases the report, which aims to predict developments six months ahead, at 11 a.m. in Mannheim today.
Germany's economy grew 0.3 percent in the second quarter from the first, bringing a halt to the worst recession since World War II sooner than forecasters had expected, a report showed last week.
The European Central Bank this month kept its benchmark interest rate unchanged at 1 percent. ECB President Jean-Claude Trichet said after the Aug. 6 meeting that there are "clearly less negative" economic signs.
The yen declined from near a two-week high versus the dollar on speculation Japanese importers sold the currency and as technical charts signaled its 1.5 percent gain in the past five days was excessive.
Yen Correction
"The yen's recent rise was rapid, so there's probably a correction occurring," said Nobuaki Kubo, vice president of foreign exchange in Tokyo at BBH Investment Services Inc., a unit of New York-based Brown Brothers Harriman & Co. "It's also likely that importers would sell yen at these levels."
The dollar's 14-day stochastic oscillator against the yen was 18.5 today, near the 20 level that indicates it may have fallen too fast and is poised to gain. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a currency.
Japan's currency also weakened amid speculation investors sold the yen to purchase higher-yielding assets elsewhere.
"There's talk that Japanese insurers and securities firms are selling the yen," said Takashi Kudo, director of foreign- exchange sales at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. "They may be seeking higher returns abroad."
Commodity Currencies
The benchmark interest rate is 0.1 percent in Japan, compared with 3 percent in Australia and 2.5 percent in New Zealand, making the South Pacific nations' assets attractive to investors.
Gains in the dollar may be limited before the Commerce Department reports housing data today in Washington. U.S. housing starts rose to an annual rate of 598,000, the highest level since November, from a 582,000 pace in June,
according to a Bloomberg News survey of economists.
"A strong number is going to be good for commodities and commodity currencies like the kiwi," Westpac's Cavenagh said, referring to the New Zealand dollar by its nickname. "The impact will be positive from a risk point of view," reducing demand for the dollar as a refuge, he said.
The Dollar Index, which the ICE uses to track the dollar against currencies of six major U.S. trading partners such as the euro and the yen, traded at 79.232 from 79.318 yesterday.
Bonds:
Treasury prices rallied, lowering the yield on the benchmark 10-year note to 3.47% from 3.56% Friday. Treasury prices and yields move in opposite directions.
Treasury debt was about the only winner on Monday as investors scooped up long-dated bonds for their safety. The yield on the benchmark 10-year note fell to 3.48%, while the return on the 30-year long bond dipped to 4.33%.
What to expect:
TUESDAY: Housing starts; PPI; Earnings from Home Depot, Saks, Target, TJX, HP and Analog Devices.
WEDNESDAY: Weekly mortgage applications; weekly crude inventories; Earnings from Deere, Limited.
THURSDAY: Weekly jobless claims; leading indicators; Philly Fed survey; Earnings from Gamestop, Hormel, and Sears.
FRIDAY: Existing-home sales; Earnings from JM Smucker.
For Tuesday, traders expect Wall Street to take its directional cue from overseas markets. There are producer prices inflation data and housing starts at 8:30 a.m. Several retailers report earnings, representing a diverse cross section of the retail landscape. Ahead of the bell, there's home improvement giant Home Depot [HD 26.11 -1.03 (-3.8%) ]; department store chain Saks [SKS 5.35 -0.49 (-8.39%) ], discounter Target [TGT 41.38 -0.65 (-1.55%)]and TJX [TJX 35.38 0.29 (+0.83%) ], the owner of off-price chains Marshall's and TJ Maxx. Computer maker Hewlett Packard [HPQ 43.11 -0.98 (-2.22%)] reports after the bell.
The week brings a slew of economic news. On Tuesday, the government reports on July housing starts and building permits, and July producer prices, a measure of wholesale inflation.
Later in the week, reports are due on leading economic indicators, jobless claims, state-by-state unemployment and existing home sales.
A Commerce Department report on housing starts, due Tuesday morning, will offer a signal on where the economy stands.
In addition, several important earnings reports will also shed light on the economy.
These include Dow components Hone Depot (HD) and Hewlett-Packard (HPQ). In addition, department store operator Saks (SKS), discount retailer Target (TGT) and furniture maker La-Z-Boy (LZB) report.
Asia:
Japan's Nikkei stock average clawed higher on Tuesday as short-covering emerged a day after its biggest percentage loss since March, though gains were checked by jitters ahead of the start of Chinese stock market trade.
Softbank Corp. (9984) shares lost ground Tuesday morning, briefly falling 58 yen from Monday to 1,982 yen. The stock fell below the psychologically important level of 2,000 yen for the first time since August 10.
Telecommunications Co. (4817) shares moderately rebounded Tuesday, after the cable television network operator said Monday evening that the number of cable TV subscribers rose 15% on the year to 2.58 million households at the end of July.
Asahi Co. (3333) shares soared Tuesday morning, briefly climbing 9% to 3,380 yen to surpass the previous year-to-date high set on July 27. The stock was one of the biggest gainers on the first section of the Tokyo Stock Exchange.
Asian stock markets avoided another tumble in morning trading Tuesday, with Japan helped out by investors covering short positions and China avoiding further sharp losses with the help of a securities initial public offering.
The Shanghai Composite index [CN;SHI 2870.63 -176.342 (-5.79%) ] bounced between red and green after tumbling 5.8 percent on Monday, its biggest daily percentage drop in nine months.
Shares in China Everbright Securities, which raised 11 billion yuan ($1.61 billion) in its Shanghai IPO, opened 42 percent up in their Shanghai debut on Tuesday,
at the high end of expectations but weaker than last month's sizzling debuts, due to the broadly weak market.
Hong Kong's Hang Seng index [HK;HSI 20137.65 --- UNCH (0) ] tracked Chinese trading, remaining little changed in morning trading.
Korea's Kospi [KR;KSPI Unavailable () ] remained higher with gains by key blue chips such as Samsung Electronics and Posco lending support.
Singapore's Straits Times index [GB;STI 2560.92 14.94 (+0.59%) ] held on to small early gains.
Shares in Singapore-listed Straits Asia Resources jumped up by as much as 11.1 percent to S$2.31 after a spate of bullish recommendations from stockbrokers.
And Australia's S&P/ASX 200 [AU;XJO Unavailable () ] fell as miners such as BHP Billiton and Fortescue Metals were dented by weak metal prices on uncertainty about a global economic recovery.
Hong Kong stocks fell on Tuesday morning, with the benchmark Hang Seng Index opening 12 points lower at 20,125.
The Hang Seng China Enterprise Index, which tracks the overall performance of 43 mainland Chinese state-owned enterprises on the Hong Kong Stock Exchange, opened 110 points lower at 11,284.
Great Wall Motor Co Ltd<2333> increased 0.45% from the previous closing to HK$6.64. BYD Co Ltd<1211> fell 1.87% and opened at HK$42.
HSI 20040.99 -96.66 -0.48% .(08.40 AM IST).
Hong Kong stocks were Tuesday struggling to recover from the previous session's heavy losses, as Chinese shares remained volatile a day after the Shanghai Composite index suffered its biggest percentage loss of 2009. The Hang Seng Index was down 0.3% at 20,086.36 recently after flirting with gains, while the Hang Seng China Enterprises Index lost 0.6% to 11,331.02. China's Shanghai Composite was recently up 0.2% at 2,877.20 after moving in a range between 2,827.11 and 2,881.22. The index had plunged 5.8% in the previous session. Shenzhen's main share index dropped 0.8% to 948.14. Steelmakers and other metal stocks were higher after Monday's steep decline. Shares of Air China /quotes/comstock/22h!e:753 (HK:753 4.28, -0.28, -6.13%) slumped 7.9% in Shanghai and 2.6% in Hong Kong after agreeing to increase its stake in Cathay Pacific Airways. Cathay /quotes/comstock/22h!e:293 (HK:293 11.54, -0.08, -0.69%) rose 0.7% in Hong Kong.
Chinese stocks open 0.88% lower on Tue
Chinese stocks opened lower on Tuesday morning, tracking losses from the previous closing.
The benchmark Shanghai Composite Index, which covers both A shares and B shares on the Shanghai Stock Exchange, opened at 2,845.34 points, down 0.88% or 25.3 points from the previous closing.
The Shenzhen Component Index on the smaller Shenzhen Stock Exchange opened 1.21% or 141.1 points lower at 11,527.7 points.
Everbright Securities Co Ltd<601788>, China's 11th-largest brokerage by assets, debuts on the Shanghai Stock Exchange today, with an opening price of RMB 31, 42.31% higher than its IPO price.
Has the Chinese stock market peaked?
It looks like this year's go-go market has lost its mojo. It's a big reason stocks have sold off today.
As August began, China could do no wrong. The economy was red-hot, with the government pouring billions into myriad infrastructure projects.
The Chinese stock market was hotter. In fact, the Shanghai Composite Index, China's benchmark, was up nearly 91% on Aug. 4.
No more.
The Shanghai index fell 5.8% today, its seventh loss in the last nine sessions. It has fallen 17% since Aug. 4. That's a correction. A few more down days, and the index will be down 20%, the popular definition of a bear market.
What happened? Today's sell-off was prompted by worries that economic growth in China won't meet investors' expectations.
"We may have priced in a bit to much too soon," Tim Schroeders, a money manager in Melbourne, Australia, told Bloomberg News.
BusinessWeek suggested that investors are nervous over a possible tightening of bank lending policies, which could crimp liquidity.
In fact, lots of analysts and writers have been worrying China's economic resurgence this year was getting more than a little crazy.
It was built on heavy investment in infrastructure and industry. Commodity prices, particularly oil and copper, have shot higher as China bought -- and speculators speculated China was buying -- all the raw materials it could get its hands on.
As Jim Jubak noted last week, a number of economists were worried that much of the stuff China was buying was going into stockpiles.
"If these commodities are going into products, they ask, shouldn't we be seeing a bigger increase in Chinese exports? Instead, Chinese exports are still declining, dropping 20% in the first half of 2009."
Oppenheimer & Co.'s Carter Worth wrote clients today that if they have holdings in China, they should sell. "The idea is to 'act' now . . . to trim, to sell, to realize gains in some form or fashion before, as they say, someone does it for you."
Four Signs the Stock Market Has Finally Begun a Correction
After waiting months for a pullback from the stunning five-month stock rally, Wall Street may have met its match Monday.
Stocks went into a tailspin that ostensibly came after disappointing GDP numbers out of Japan.
But the real roots of the downturn seem to run deeper. Continued weakness from the consumer, along with other signs, have market pros convinced that stocks have begun a correction—typically defined as a drop of at least 10 percent.
The only questions seemed to be how deep and how long.
"The market seems to be second-guessing its recovery thesis—rightfully so," said Chip Hanlon, president of Delta Global Advisors in Huntington Beach, Calif. "If the market wants to focus on the consumer, it's going to have a hard time going higher."
Yet he thinks that even a sharp correction might still leave the markets in decent shape as the government continues to spend aggressively to spur economic growth.
"Could we see a 700- to 1,000-point selloff? We could have one and the bulls could still be saying it's a bull market," he said. "It would be a very normal correction in my book."
While Hanlon attributed the looming correction primarily to consumer issues, there were a host of other reasons cited by other analysts.
1) Earnings Hangover
While a wildly successful earnings season—at least in terms of comparison to Wall Street estimates—helped propel the 50 percent stocks rally off the March lows, the winding down of earnings could have the opposite effect.
"Earnings were good because they were cutting costs. They weren't good because there wasn't any growth," Lutz said. "Now that we're through earnings, people are saying, 'Where's the growth?'"
As a result of the cost cuts, David Kotok, chairman of Cumberland Advisors, expects manufacturing data points to continue to rise, resulting in "strong single-digit" growth numbers for gross domestic product over the next several quarters.
The trouble, he and others say, could be over the horizon.
"I'm in the double-dip camp," Kotok told CNBC. "But the second half of the 'W' is way out in front of us."
2) China Downturn
Others cite trouble in China, which had been looked to by many as the nation to lead the world out of recession.
The hopes were that China's consumers would begin to demand products from other countries, a trend that in turn would spur growth for multinational companies.
But the Chinese markets have been pounded over the past couple of weeks, with stocks there dropping about 18 percent.
"Since China was leadership during both the bear market decline and the recovery, this could very well be the 'canary in the coal mine,' " Bank of America-Merrill Lynch technical analyst Maryann Bartels said in a research note. "This has the potential to signal a deeper correction for China and is a bearish indicator for the global equity market rally."
BofA-Merrill Lynch has been predicting a correction in the 15 percent range that the firm says could reach as high as 30 percent.
3) Inside Dope
Closer to home, those looking for a correction also are watching selling by traders inside companies.
Insiders have been selling at a rate 28 times more than they have purchased in the last month, said Dave Lutz, managing director of trading at Stifel Nicolaus in Baltimore.
"You have insiders selling to the crowd," Lutz said. "You never want to be investing with the crowd."
With that bearish signal in place, Lutz said he's anticipating a fairly quick and steep drop—a likely 10 percent pullback that would entail a move to 950 on the Standard & Poor's 500 within the next couple of days.
As such, he's advising investors to sell into the coming storm.
Not everyone agrees.
Bruce McCain, head of strategy at Key Private Bank, predicts a correction of about 10 percent but doesn't think investors should rein in positions.
"We feel pretty comfortable telling our clients to make sure they're fully invested," he said.
4) Beware Lack of Buyers
Yet at the root of the market's problems remains consumer weakness, and it's hard to imagine a full-fledged recovery without a change.
Buyers, as in consumers, are likely to remain scarce. With unemployment continuing to climb and uncertainty hanging on the horizon, savings rates are expected to escalate, forcing companies to continue cutting costs to boost their bottom lines.
"As long as the consumer, particularly in the United States, is going to have a rising savings rate, have to recovery from a financial crisis, has had a loss of wealth and a decline in housing values, all the things
we know, the consumption portion of the US economy will diminish," Kotok said.
"And that means savings higher, (consuming) less, and we will have a very tepid recovery."
The spring-summer rally was built on government spending, not growth, making a recovery precarious, Hanlon added.
He said that the coming days are likely to see a temporary strengthening in the dollar as a safe haven while the global markets correct, and is advising investors looking to raise cash to sell stock in foreign companies.
"It's a terribly unhealthy foundation upon which this latest rally was built, and it does nothing to solve our longer-term challenges of government overspending," he said. "Washington's trying to encourage us to do more of exactly what got us into this mess in the first place. That can't be a good longer-term solution."
Beijing Capital Int'l Airport's net profit jumps 85.6% in H1
Beijing Capital International Airport Co Ltd<0694>, the largest and busiest airport in China, realized a net profit of RMB 105 million for the first half of this year, representing a year-on-year increase of 85.6% from RMB 56.32 million a year earlier, sources reported.
According to the company's interim report, its revenue from airline business amounted to RMB 1.51 billion, with after-tax income from airline services reaching RMB 1.46 billion, up 16.46% year on year.
The firm is seeking appropriate time for the A-share listing as the market is recovering, said Zhang Zhizhong, executive chairman of the board, without specifying further details.
The firm's passenger traffic increased 22.51% year on year to 5.89 million in July and aircraft movement rose 8.95% to 42,391, China Knowledge reported earlier.
Shares of Beijing Capital Int'l Airport fell 5.24% to close at HK$4.88 on Monday.
China Stocks May Drop Further 10% on Loans, Xie Says
China's benchmark stock index, the world's worst performer this month, may fall another 10 percent as bank lending slows, said Andy Xie, a former Morgan Stanley chief Asian economist.
Oscar Investments-One For The Long Haul
A little known firm, Oscar Investments, has made a windfall of Rs.13.04 billion ($325 million) after Japan's Daiichi Sankyo picked up the promoter's stake in Ranbaxy Laboratories, India's largest drug company. This is by virtue of the 4.74 per cent shareholding that Oscar Investments had held in Ranbaxy Laboratories, which forms a part of the 34.8 per cent stake Malvinder Singh and family held in Ranbaxy.
According to the share purchase and share subscription pact, Daiichi Sankyo will pick up the 34.8 per cent stake from the promoters of Ranbaxy, apart from making an open offer for an additional 20 per cent. Oscar Investments held a total of 17,698,468 shares in Ranbaxy Laboratories and at Rs.737 a share that Daiichi Sankyo has agreed to pay for the acquisition, the money expected to accrue to Oscar is Rs.13.04 billion.
As per the pact between the two companies, the payment will be made by March 31, 2009.The bulk of the promoter group's shares in the Indian drug maker - amounting to 26.57 per cent - is held by Ranbaxy Holding Company. But that is an unlisted entity. Oscar Investments, incorporated in 1978, is a non-banking finance company that is registered with the Reserve Bank of India and listed on the Bombay Stock Exchange and the Delhi Stock Exchange.
A look at the financials of Oscar Investments reveals that the company is yet to publish its audited annual report for 2007-08. But, the earning per share, that sets the mood for the listed price, was Rs.63.77 and Rs.80.68 in the previous two years. On the other hand, given that Oscar has a floating stock of 17.28 million issued shares, the windfall on account of the acquisition deal with Daiichi Sankyo will be a whopping Rs.755 per share.
So if the same financials are maintained, the additional money coming in from the Japanese drug maker will translate in to an enhanced earnings per share of Rs.827.23.
Oscar Investments has not declared any dividends for the past few years. But for 2008-09, they might do so in a bid to share some of the windfall gains from the sell-off.
(Some forward looking statements on projections, estimates, expectations & outlook are included to enable a better comprehension of the Company prospects. Actual results may, however, differ materially from those stated on account of factors such as changes in government regulations, tax regimes, economic developments within India and the countries within which the Company conducts its business, exchange rate and interest rate movements, impact of competing products and their pricing, product demand and supply constraints.)
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Arvind Parekh
+ 91 98432 32381
