State of the Market|Reading the Psychology of the market

No Correction ends without inflicting intense pain to maximum number of market participants. Global setup looks scary and Indian market should be ready to take a hit from global shores.

Market Observations

1. The important question traders need to ask: Where the pain will get arrested: i. 200 dma on Nifty i.e. 4637 or ii. 50 week ma on Nifty i.e 4401.
2. The big question: What can support this market?



3. There is no support that holds when market is in panic mode. The best strategy: Let the market find its own base.
4. Global Sell off: Blame it on USD index. Yesterday, I did mention about the big concern - USD index chart and its rally from 200 dma. Overnight there was more follow through buying


Source: Stockcharts [www.stockcharts.com]


5. The new subprime problem: Public Debt/Sovereign Debt.
6. The Dow is right at 10,000 for the first time since last November amid worries about the US job market and Europe’s ability to get a grip on its debt


Source: Stockcharts [www.stockcharts.com]

7. As you can see in the chart above, Dow Jones seems to be on its way to 200 dma i.e. 9470. This looks like a correction of another 5.3%.
8. Dow Jones Chart is a great example of why one should not buy the bounce when market breaks 50 dma.
9. Friday’s low of 4766 on Nifty - Will it act as support or resistance today? It will depend on the opening.
10. Month to date - Nifty is down 0.73% - not bad - but this has come with lots of choppiness.


Source: ChartAlert

11. FIIs net sold 155 crores worth of stocks in cash market whereas DIIs net bought 242 crores worth of stocks in cash market. FIIs also sold 196 crores of Nifty futures and another 342 crores worth of stock futures.
12. The bad news - Reliance which was holding on to 200 dma has finally broken down.


Source: ChartAlert [www.chartalert.com]

13. The good news: ONGC is still holding above 200 dma of 1120
14. Fundamentally speaking - the sector that should be on avoid list - Metals. Global Headwinds are too strong for the sector.


Source: ChartAlert [www.chartalert.com]


15. Tata Motors: The stock has broken below 50 dma. Where will it find support now?


Source: ChartAlert [www.chartalert.com]

16. Will any sector be able to withstand selling pressure. Keep an eye on frontline Tech names like Infosys, TCS and Wipro. All of them are near support levels.
17. GAIL: Buying Opportunity if there is correction in the stock.


Source: ChartAlert [www.chartalert.com]

18. Kirit Parikh Recommendation = Divorced from political reality. Having said that -Let us hope for the best.
19. One sector that may become investment worthy in this decline - Sugar and Tea stocks
20. In Down trend - Sell Low Buy Lower strategy works. DLF, and Unitech seems to be in strong down trend.
21. CLSA has come out with underperform rating on the DLF post earnings with price target of 357. Just a month back, most of the brokerages came out with strong buy report on real estate stocks.


Source: ChartAlert [www.chartalert.com]

22. Price on the screen determines the bullishness or bearishness. And that’s why one should never accept fundamental reports at face value.
23. Believe nothing just because a so-called wise person said it. Believe nothing just because someone else believes it.
24. We do not receive wisdom, we have to discover it for ourselves by a voyage that no one can take for us, a voyage that no one can spare us…Marcel Proust
25. Call on the market.

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