State of The Market

Sorry RK posted at the wrong spot

Trading Notes June 13 2008

In volatile markets, investors are often hit with conflicting messages from the gloom-and-doom crowd who says "the end is near", and the buy-and-hold crowd who counsels "this, too, shall pass".......Gary D. Halbert

Are Bears underestimating Bulls?


One should never underestimate the opposition. I guess bears must have learnt this lesson by now.

To be honest with you, I was surprised at yesterday's market behaviour - but not frustrated and confused. One of the lessons I have learnt in the market - Get excited when market surprises you because that is the time when market rewards you the most (Yes, I made some money on long side of Nifty). One should never crib on market surprises. Remember, we are not in market to prove something....we are in market to learn something and profit from it. As long as we have that perspective, market will always be fun and rewarding; and not stressful.

How would you read yesterday's market -

Nifty ended the day with marginal gain of 16 points OR

Nifty made a spectacular rally of 140 points from lows of 4400.

I guess you will get different answer depending on whom you ask. The fact of the matter is - We are in sideways volatile market. In such market environment, traders need to be extremely agile to keep up with rapid changes in market.

What I understand? - When a market refuses to fall on bad news - it is a very bullish sign. Does that mean one should start aggressively buying? I don't know. FII figures are outright depressing. But what puzzles me is that market is able to absorb this kind of selling without much discomfort. Technically, we are now in Neutral Zone. As long as market remains between 4400 and 4725 - the market may exhibit volatile sideways trading action. But as we spend more and more days above 4400, the stability and comfort in market can return in big way. This kind of trading action can also make market more resilient to surprises and shocks on the way.

I am not writing off bears also as long as we are in volatile sideways market. Remember, Market does the most obvious things in the least obvious way. You never know. The time is to stay flexible.

Technical Factors - Nifty
Yesterday, as expected, bad Global cues and repo rate hike meant a strong gap down opening. Nifty opened weak below 4400 and then traded sideways between 4400 and 4440. And around noon time, just when it appeared that Nifty might breakdown - it did the reverse and made a strong upmove above 4440 all the way to next resistance level of 4540. Though, in last few minutes, Nifty cooled down and there was aggressive shorting in Nifty (profit booking by intra-day longs) which widened the discount. On a closing basis, Nifty ended the day with + 15.75 points or 0.35% to close at 4539.35. Nifty June 2008 futures closed at 4500.55, at a discount of 38.8 points as compared to spot closing.

Where do we go from here? Market is now in neutral zone. It means bears have lost the battle but it does not mean that bulls have won the battle. In last three days of trading, Nifty has traded in a band of 4400 and 4540. To give some hope to bulls, Nifty needs to breakout of this band, and sustain there. A move above 4540 can take Nifty to 4620; and breakout above 4620 can propel Nifty to 4725.

Levels to watch out are -

Resistance 2 4620
Resistance 1 4540

Support 1 4440
Support 2 4370-4390

This is from a Newsletter from Deepak Singh

I loved this quote....its THE NEXT classic after sholay's...."aadhe idhar jao aadhe udhar jao...baki mere peeche aao"