State of the Market|Reading the Psychology of the market

We are in a market environment where sellers run out of steam after few bad days and equally on other side - buyers run out of steam after few good days. Welcome to range bound stock specific market. This is what market has been for last many months and its high time we accept this reality and not read too much on day-2-day move.

Market Observations

1. The market has been on a drunken walk that takes it in one direction for a series of weeks and then suddenly reverses with the utmost conviction…
2. Anyone who has high conviction in this market is drunk….deduced logic
3. The Dow Jones in overnight move has crossed into +ve territory for 2010. Bulls Cheerful again
4. S&P 500: Is this a real breakout that will last, or is this just a short-squeeze situation that won’t? Bulls will say - kya fark padta hai..


Source: Stockcharts [www.stockcharts.com]

5. There is no fear in fear index. It is trading at levels of 19 - reflection of complacency or new bullish times?
6. Who should get the credit for turnaround in Indian stocks? - Global markets or Budget. I guess at this point - its safe to say both.
7. Nifty is now trading above 50 dma of 5013 and next resistance to watch - 5180 - the level near which market closed in 2009.


Source: ChartAlert

8. DIIs booking profits: Yesterday in cash market, DIIs net sold 977 crores worth of stocks whereas FIIs net bought Rs. 1335 crores worth of stocks.
9. FIIs activity in Futures market: Yesterday, FIIs net bought 1220 crores worth of Nifty futures [hedging?]; and bought 540 crores worth of stock futures. I doubt any shorts are left in the system
10. Can we draw any conclusion based on Institutional activity? - DIIs will support the market on downside and FIIs will keep getting excited from time to time
11. The dollar index, which measures the greenback against a trade-weighted basket of six major currencies, closed down overnight at 80.49 - not able to cross 81.
12. Amidst noise - one untalked subject: INR remained pretty steady despite tremendous USD index strength this year.



13. Nifty is down 3.5% but DEFTY - Dollar denominated Nifty is down only 2.3%. Is INR decoupling from rest of the world?
14. If Yes, then DEFTY may be the better investment bet for 2010. Problem - Where is the investment vehicle? no ETF for DEFTY….and in futures, there is hardly any liquidity
15. Three sectors that are driving this market up - Autos, Financials and Metals.
16. Yesterday, Bajaj Auto and Hero Honda made fresh 52 week high. BSE Auto index tells the whole story of bullishness


Source: ChartAlert [www.chartalert.com]

17. Two disbelief trades of last six months: Hindalco + Tata Motors. It was all gloom and doom; and I remember one brokerage came out with price target of Rs. 200 on Tata Motors just 6-7 months back.
18. There is very strong bull market in Power related Capital Goods space be it Crompton Greaves, Siemens or Thermax. Crompton broke out and made fresh 52 week high yesterday.


Source: ChartAlert [www.chartalert.com]

19. Steel and Cement is another pocket of strength. Oversupply argument in Cement is losing momentum. UltraTech Cement made fresh 52 week high yesterday.
20. Three Nifty stocks that curbed market enthusiasm - Reliance, ONGC and SBI . They refused to participate in the upmove
21. It was not all bullish - GAIL did disappoint with breakdown below 100 dma - level which it held for long time.


Source: ChartAlert [www.chartalert.com]

22. One Sector where bears now are in complete control: Sugar sector. The selling is just relentless be it Renuka, Bajaj Hindustan or Dhampur
23. Syncom Healthcare - Another Thinksoft in the making? Chart formation looks interesting.
24. Alexander Graham Bell, the inventor of the telephone, was born on March 3, 1847. Thank You…and Happy Birthday
25. Follow me on Twitter during market hours - http://twitter.com/smarket

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