Update 15th March 2012

13200 came in first on DJIA; Dow Theory non-confirmation in place via negative divergence through Transports [both sea and rail freight rates are major contributors] Nevertheless, a topping process is in place now; by end-May 2012, we are very likely to see 12k on DJIA [going below is doubtful with so much liquidity by central bankers] Only a weekly close below 11800 can signal further weakness;

Shorts/Puts seem to be on the reward side with minimal risks [take 3 month forward contracts to be safe]; safe traders can now start building short positions and no hedge per say is required except for adequate margin in trading account to hold the short positions. Do not exercise leverage at this point of time; unilateral bears have already lost twice within 5 weeks, trying to catch a top and taking short positions with maximum leverage [once with SL @ SnP 1360 and then with SL @ SnP 1400!]

On the other hand there are bull calls for 14k, 15k etc which seems highly improbable in the next 6 to 8 weeks; will repeat the same thing that I keep repeating on Nifty on a daily basis; trade little - trade healthy; its time to book profits on calls/longs [long calls with far lower strike prices recommended on 31st Jan]

Update - 31st January 2012

No change to the outlook except for the fact that the upisde went far beyond expected levels of 12600 on DJIA and well above 1300 on SnP 500. Whilst some bears are jumping to short this market, IMHO it is better to wait for a few more days for complete confirmation of the downtrend [that is eventually expected]

Shorts via March futures created now on DJIA must be hedged with March 12700 Call in the ratio 1:1 or 12800 Call with ratio 1:2 IMHO

For SnP 500, shorts via March futures must be hedged with the March 1310 Call in the ratio 1:1 or 1320 Call in the ratio 1:2. IMHO

If the downturn does occur as expected, then bears could be looking for targets anywhere between 11800 and 12200 in 3 to 5 weeks time, making losses on the calls worth ignoring; if bulls do spring in a surprise, the calls will insure the losses on the futures section.

Next Update: After a weekly close below 12200.......OR 13200 on Dow spot whichever is earlier!!!

Update - 17th January 2012

Seems like the final topping out process is in place. The divergence is evident between Dow and SnP 500 right now. Previous 2 sessions took on 12450 on Dow and 1300 posed a challenge on SnP500.

Today Dow almost took out 12550 [may try for 12600] but SnP is still struggling to take out 1300 [a reflection of poor market breadth IMHO]. Any further uspide will be a boon for bulls whilst bears need to be patient.

No change to outlook; first sign of weakness with a weekly close below 12200; complete weakness to be confirmed only after 2 consecutive closes below 11500 and then bulls can say good bye to 12k levels for a long time to come.

[Please note that the market capitalization is significantly lower even though the indices are just about 5% to 8% lower than the May 2011 highs!]

Update - 3rd January 2012

Happy New Year 2012 to all Dow enthusiasts. Santa Rally did not come through but New Year's trade brought in the much awaited cheer and targets have been achieved as indicated in the previous update. Some more steam possible for another 150 odd points but wouldn't bet too much on it.

By and large, the top seems to be in place and prices should be able to start declining slowly but surely. For those who are long, some profit booking advised with trailing stop loss on marginal holdings.

A weekly close below 12200 will be the first sign that this was a relief rally as expected. As indicated in Dec 2011, full weakness to be confirmed only after 2 consecutive closes below 11500 and then it is adios to higher levels for a long time.

[Dow never leaves any gaps open for a long time on either side of price action unlike emerging markets!]