Thursday, March 6, 2008

Can Sensex Compared to Hangseng

Sensex topped out at 21207 on Jan 10 2008 (uptil now top) and then bottomed out at 15332 (the recent low from the crash), now to make some money I am just trying to solve the mystery of what lies ahead for that purpose I am using history of other Major World Indices and drawing comparisons with the Sensex
So lets start the Journey
In this post lets have a look at Hangseng
(sorry I am not posting any images as of now due to some problems)
Hangseng reached a major top of 3949 in Sep 1987 then crashed to a low of 1894 in Dec 1987 app one can say 50% correction, after 6 years in Jan 1994 it made a new top at 12599 in Jan 1994 the new top was app 3 times the previous top of 1987, now it again broke down to a level of 6890 in Jan 1995 app 45% correction. Then in Aug 1997 it again went upto 16802 and corrected upto 6708 in Aug 1998, this time round the correction (I prefer to say correction you may call bear market) was a whopping 60% app.
Now Lets Compare the Hangseng Journey to the Sensex
Sensex Formed it first Major top at 6150 in Feb 2000, then crashed to a low of 2594 in Sep 2001, a correction of app 60%. Now my feeling is that at 21206 in Jan 2008 we have formed a major top after 8 years and app 3.5 times the previous major top.
I have concluded this by comparing hangseng history this way
Hangseng Sep 1987 say 4K
Hangseng Dec 1987 say 2K
(correction was big but low was targeted in a small time frame)

Sensex Feb 2000 say 6K
Sensex Sep 2000 say 2.5K
(correction was bigger and low was targeted in bigger timeframe)
Hangseng July 1991 say 4K
(previous top was captured 4 years down the line)
Sensex Jan 2004 say 6K
(previous top was captured 4 years down the line)
Now from here some divergence takes place in my views
While Hangseng reached trippled from previous top of 4K (1987) to achieve 12K in 1994, 7 years down the line and sensex too achieved the same feet ( a little bit more 3.5 times) in 8 years, I feel the situation is comparable to Hangseng 1997 wherein the hanseng was at 16K i.e app 4 times 1987 top in 9 years
the reason being
1) One Emerging Market Mexico IPC has achieved same feet by quadrupling from 2000 highs and then is breaking down
2) In 1994 Hangseng breakdown was comparatively slow, it took its time and also the rise was faster compared to breakdown, while in 1997 the fall was quite fast and big example being August 7 1997 Hangseng was 16820 on Oct 28 1997 Intraday low was 8775 app 50% fall in just 2.5 months with the most terrible fall being from an high of 13473 on Oct 20 1997 to a low of 8775 on Oct 28 1997 i.e a fall of app 33% in just 8 days.
So now if we suppose that we are going to mirror Hangseng of 1997 then 5500 or max 5700 should not be pierced in midterm while in extreme short term 5200 -5250 should not be pierced on the Long side while on the short side one cant time the fall, Best case option than would be to sell 5200 or 5300 call option for this month has and when Nifty approaches 5100+, stoploss could be placed if nifty trades above 5400.

No comments: