**[investwise]** Deydun: Markets Have Smelt The Heat Right Round The Corner

 

Deydun: Back-Off From The Heat!   Robert De Niro (heist gang leader) to Al Pacino (obsessive cop) over a cup of coffee in Michael Mann's all-time classic, Heat –   "Don't let yourself get attached to anything you are not willing to walk out of in 30 seconds flat if you feel the heat round the round. Pal, if you are around me and you got to move when I move, how are you going to keep a marriage?"   Pacino- "That's an interesting point. What are you, a monk?"   Deniro- "I have a woman."   Pacino- "What do you tell her?."   Deniro- "I tell her I am a salesman."   Pacino- "So, if you spot me round that corner, you just gonna walk out on this woman? not say goodbye?"   Deniro- "That's the discipline. It is what it is or we both go do something else pal."   It's a conversation you begin to appreciate as a trader, especially when there is so much heat round the corner. If you get the sense that you are on the wrong side of the market, act first, analyse later seems to be the way these days. Deniro would be doing well in this market.   There's a mind boggling sovereign crisis with strong signals of slowdown in global growth coming from China and the price of Copper. The Euro is breaking major support at 1.2000 and the Authorities are running the printing presses and dishing out one bailout package after another – driving short sellers up the wall literally after every sell-off, just when they've got "comfortable" with their shorts.   Macro headlines remain bearish on the one hand, but corporate earnings and balance sheets are in better shape than ever (at least that is what the smart bottom up analysts tell us). In summary, all the news that you need to know is already out there. Can't think of anything new that can make the already very bearish bears, any more bearish. Following price action for clues on either side from here takes precedence over anything else and keep you out of trouble at least.   Above is the European Banking Index going back to the March lows of 2009. Notice how it topped out in Oct 2009, several months before the rest of the market. As always, the sensitivity of banking stocks to anticipate trouble comes through loud and clear. They really are the "smart" stocks. As things currently stand, the Daily RSI is below 40, which is where downtrends gain in strength from, and price is beneath both the 45 EMA and the 200 DMA. Horizontal support has given way and unless the Index can halt itself early this week, there is little support beneath it now.   We come in Mon flat on the VGA position. Should have gone short when we closed the long late last week. But shoulda, coulda, woulda does not work in trading. Looking at it here, after the wide range day on Fri, today/tomorrow should attempt a rally. Our guess is that a fib retracement should generate a rally to between 2528-2575. Let's get short into that zone and take a chance with a stop just above 2600.   Taking a leaf out of Deniro's book, the heat is at the 45 EMA (on VGA now at 2668) and price is well below it. Traders should keep the discipline and either stay out or if of the aggressive variety, take your chances with being short. Safe Harbor Statement: 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.   Nothing in this article is, or should be construed as, investment advice.

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