State of the Market|Reading the Psychology of the market

Up, Up Up….oh No - Down, Down, Down- that’s the phase we are in. Price on the screen is going to drive the traders behaviour. FIIs and DIIs are locked in intense battle and chartists are caught in cross fire - trying to make sense out of situation that does not make much sense.

Technically, this market is sell on rally because Nifty is trading below 50 dma of 5107 and 100 dma of 5015. Nifty is also trading below 20 week ma which has held on for a long period of time. So, now these levels may act as resistance on rally. That’s what the theory says…..and hence current rally can be only called as oversold bounce…till market moves above these moving averages and prove otherwise.

Market Observations

1. The job of a correction is to test the conviction of market participants by inflicting maximum pain to maximum people
2. The big question: Has market done that in last couple of weeks? The answer is No.
3. Do not take your eyes off 200 dma on Nifty that currently stands at 4615
4. I am not optimistic on market because of the nature of sell off but market does not care what I think. It will do what it has to do and that includes doing opposite of what I think
5. Yesterday, I shared my market observations on NDTV Profit in 2:30 Factor Show. I will try to upload the video soon. It was a great experience doing a live show.
6. Overnight, the Dow Jones Industrial Average rose 118.20, or 1.2% to close at 10,185.53, its biggest point and percentage gain since Jan. 4. The S&P 500 gained 1.4 percent and the tech-heavy Nasdaq added 1.1 percent.
7. Where are all those sellers? Where did they go? They wanted out at much lower prices than they’re getting now. Why don’t they come back and sell now? Days like today mystify me…Jim Cramer
8. Financials got the buying support on report that Volker rule (cracking down on banks) may have limited takers in Congress.
9. Economic recovery at work: ISM Manufacturing index came at 58.4 - a number above 50 represents expansion.
10. The real problem: US Budget deficit. It is estimated to be 1.56 trillion USD this year. It is difficult to control deficit when economy recovery is fragile and unemployment rate is at 10%.
11. Nifty gained 17 points to close at 4900. But from lows, it was a spectacular recovery as Nifty added 70 points
12. FIIs net sold another Rs. 495 crores worth of stocks in cash market. DIIs continue to fight - they bought stocks worth 199 crores in cash market yesterday.
13. Feb = Budget Month. One of the macro figure to keep an eye on = fiscal Deficit
14. 7% GDP Growth + Disinvestment = lower Fiscal Deficit. The deficit is expected to be 6.3% of GDP this fiscal. (This is good news)
15. Government is bullish; and there are estimates that Government may project only 5.5% fiscal deficit in FY11.
16. De regulation of fuel prices = hope or reality.
17. The market moves up on hope and then reacts on reality. BPCL was up 7% yesterday. The hope seems to have got priced in.
18. Is Aban offshore buy post earnings? The company came out with extremely disappointing earnings but institutions seem to be still bullish on earnings in next 4 quarters.



19. Three large cap stock that is consistently outperforming - Axis Bank + BHEL + Reliance
20. One stock that is on dump list post earnings: Hindustan Unilever. On other hand, P&G is on buy list.
21. Auto Sector = There is strong business momentum on the upside and monthly sales figure continue to surprise on the upside.
22. Will FY11 be Year of Commercial Vehicle growth? If yes, then Ashok Leyland becomes the best bet. BNP Paribas has come out with price target of 61 on the stock because of volume growth and margin expansion assumption.
23. Strong technical bounce from 50 dma - i. Aurobindo Pharma; and ii. Lupin
24. Momentum stocks continue to trade with good volumes and are in top 50 traded list - RCF, STC India, Bharti Shipyard, NFL, ThinkSoft and Jai Corporation
25. Educomp continues to be on FII radar. Yesterday, Janus Enterprise fund bought 600 000 stocks at price of 700.
26. Technical Analysis of top 200 traded stocks. Here’s the Technical Screen
27. The technical screen is exclusive for contributing members. Become contributing member
28. In stock market, one should not rely on opinion alone. The plan of action should always be in writing to make sure one is not getting carried away by market moves.
29. Only through curiosity can we discover opportunities, and only through gambling can we take advantage of them…Brian Tracy
30. Most of us are irrational when it comes to investing/trading. If you think, you are not - then Tussi Great Ho

Please share your comments on what you think of market observations, market and trading in general

Disclaimer - The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers