Is Anybody Watching India? & Fox Business 5/18/09

The futures were up this morning when I saw the headline that the Congress Party in India had won the election. Many say this is the collapse of India’s once-powerful communist parties which could mean key reforms in insurance, pension funds, banking and retail. The iPath MSCI India ETN (INP) was already looking good technically before today but the election news caused a 24% rally today closing above $49 (its biggest one day gain ever). With that said, the old high was around $120 in early 2008, so still way off of its all-time highs. Two other ETFs that give you exposure to India are EPI & PIN in case you’re interested. Investors poured into India today because this is another step toward capitalism, something that seems to be disappearing in this country. The futures got another pop when Lowe’s announced reduced earnings and revenue but better than expected. I think that sounded good but that wasn’t the real story. I think the big money (institutional money) was buying U.S. equities based on the news in India. Take a fast growing population with tons of consumers to buy “stuff” and make it easier to sell them that stuff and there’s good reason why equities went up. I think this is great news.

The markets opened stronger and got stronger as the day went on. There were times it looked as though it was going to roll over but never did. There’s no doubt that the India news is great. But, let’s analyze the rally a little closer. Today’s rally was on very low volume and the internals while decent, weren’t spectacular. Chalk one up for the bulls nevertheless. Technically, I see that we’re now firmly in place between the 20-day moving average which is moving up and the 200-day moving average which is moving down. One will give way and very soon.

When you have some extra cash on the sidelines like I do right now, it’s hard to watch days like this. However, I’m not in the day trading business and I’m not interested in scalping gains. My goal is to make a reasonable return and protect principal. That means not getting caught up in the day to day gyrations. Don’t get me wrong, day trading can be fun but that’s not where I’ve made most of my money in my investing life. With all the vibration lately, the equity markets are at essentially the same place they were in early May. So, take a breath. Develop the game plan and stick with it. I’m keeping an eye on the leaders of the rally since March 9th to see if they hold up better on down days and continue leading on up days.

Today didn’t change my shorter term view that we may see lower equity prices but the India news makes me more bullish. It’s not a game changer but it certainly helps.

Fox Business Network

This post published at www.karleggerss.com

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