State of the Market|Reading the Psychology of the market

What is the big picture right now; and what is market trying to tell us. Well - as far as I can read it - it looks like - the message is Don’t worry be Happy. Market is shrugging off all worries be it USD index technical set-up, deteriorating fundamentals in Eurozone, expensive valuations; US unemployment etc etc. Remember, in market - problems do not matter…what matters the market focus which seems to be right now is on +ve things than -ve.

Market Observations

1. Investing is an activity of forecasting the yield on assets over the life of the asset whereas speculation is the activity of forecasting the psychology of the market.
2. Current psychology: No Fear. CBoE VIX has collapsed with the current market rally.


Source: Stockcharts

3. Tonight, US Government will release jobs data…is market worried? Chart does not reflect that. S&P 500 is comfortably trading above resistance line and 50 dma
4. Bulls are ready with excuse on bad jobs data even before the number is out - Poor weather in US.
5. There has been tremendous amount of shift in market sentiment over last few days especially post budget.
6. The shift: Even if the upside is limited - market has a limited downside and hence we are in a stable market environment. Mantra - Go Stock specific
7. One reason for this belief - DIIs will protect the downside and FIIs will bring in upside momentum on good global market environment.
8. Yesterday, DIIs sold 635 crores worth of stocks in cash market. Are DIIs raising cash to protect the market if global environment worsens again?
9. Nifty Month to date is up 3.1%
10. The Nifty 5 -day chart indicates stability than any turbulence. See 5-day chart.
11. The real challenge for Nifty will come at 5180 - the level from where it broke out in early Jan 2010 and then failed.


Source: ChartAlert [www.chartalert.com]

12. Two stocks that seem to have hit the resistance wall: Reliance - 200 dma; and ICICI Bank - resistance around 910-920
13. There was no such wall of resistance for Sesa Goa. It made fresh 52 week high yesterday. Is Hindalco next in line to make fresh highs?
14. One sector that has become completely quiet post budget: Frontline Technology. Most of them have done nothing in last five days…is market concerned or this the reflection of lack of interest?
15. One Sector where there seems to be tremendous bullish momentum: Steel with Tata Steel leading from the front. Bhusan Steel made fresh 52 week high yesterday.
16. In stock market, the most popular show always remains - Follow the Leader. That is why stocks making new highs continue to making new highs despite all worries on fundamentals and valuations.
17. Example: Tata Motors


Source: ChartAlert [www.chartalert.com]

18. When stocks like Unitech and Suzlon make big moves - you know you are in adventurous momentum market.
19. What is more important than chart reading is to first understand how people think?
20. I will be on NDTV Profit on 2:30 factor show today at around 2:40 pm.

Let me know how you found this edition of market observations. Please suggest how I can make this notes more useful to all of you.

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