State of the Market|Reading the Psychology of the market

5400 is acting like a dead end. Good news, bad news - it doesn’t matter. The market is just not able to find enough strength to go past 5400. But dead end does not mean market may collapse from here. One of the reason I am not bearish on the market: markets do not collapse after putting up posters. Markets do not give signals like - Please sell as 5400 is peak. Numbers like 5400 or 5000 can best act as psychological barrier.

Market Observations

1. Overnight US market scoreboard:
   Dow: +77.77
   S&P 500: +12
   NASDAQ: +23.84
   
2. The best part: there was no significant positive news flow to support the up move. Well, some traders are attributing this to China [soft landing]. Really, who cares.
3. Markets are inherently unpredictable, ruled by unruly mobs of irrational investors. Most of the time there is no rational explanation for major moves up or down in stock prices.
4. Has US market reversed the downtrend? - No - for that - S&P 500 need to cross over 50 dma of 1088.
5. More than that - CBoE VIX [Fear index] will have to collapse below 200 dma. Overnight action points to that possibility



6. Bears are banking on European Bank Stress test results to be published this week; and weak technical structure of Global markets. The street is split down in middle.
7. Day before yesterday, I wrote a piece on how 20 dma on China is acting as resistance. Guess what Chinese market has broken out above 20 dma.



8. There are positive reports coming out of China that Chinese government is loosening the restrictions on real estate growth by allowing development for lower-class and middle-class houses. This will sound music to commodity buyers.
9. NIFTY Month to Date is up 1.04%; and Year to Date is up 3.2%.
10. DEFTY: Dollar denominated Nifty is down 0.5% Month to Date; whereas Year to Date - DEFTY is up 1.8%. Under performance and the reason - INR weakness. INR actually never recovered in the current rally.



11. The most surprising thing: INR is weak despite FIIs pumping money in our markets. Yesterday’s provisional figure indicates FIIs net bought 297 crores worth of stocks in cash market. DIIs net sold 104 crores.
12. With China in rally mode: expect sharp turnaround in Metal stocks be it Sesa Goa, Tata Steel or Hindalco
13. UBS has come out with buy rating on Sesa Goa with price target of 440+. The company is a direct play on spot iron ore prices. Risk: Government imposing taxes on mining.
14. Speaking of metals: one chart that looks quite bullish - Monnet Ispat


Source: ChartAlert.com

15. Yesterday, despite Nifty decline: real estate stocks be it Unitech, DLF or HDIL held its ground in bullish territory - surprising. On charts - HDIL looks good
16. With no sign of inflation moderating in the next few months, economists polled by the leading industry body Ficci expect a 0.25 percent more hike in the policy rates by the Reserve Bank on July 27. Has market priced in this news?
17. The two terms which get abused so frequently by analysts that people will lose trust on them: i. Higher Tops and Higher Bottoms; and ii. Breakout.
18. Breakout Watch: Yes Bank. Will Yes Bank breakout above 300?.


Source: Chartalert.com

19. Breakout List Updated. Please subscribe to get access to the list.
20. Aban Offshore: The stock made a stunning upmove from 650 to 900 till early July. The stock has pulled back on low volumes to 20 dma = Buying Opportunity? The chart says YES


Source: Chartalert.com

21. Two stocks where trading noise is making me optimistic: Power Trading; and IRB Infra
22. One bullish theme: Auto component stocks be it Motherson Sumi, Ucal Fuel, Amtek Auto or Clutch Auto - all these stocks have bullish pattern
23. Adani Ent: A case of Moving average buy - Adani Enterprises seems to be consolidating around 100 dma and any meaningful bounce from current levels can lead to significant upside.


Source: Chartalert.com

24. Two small stocks on move - i. Bartronics; and ii. Micro Tech
25. Market is one place where it pays to shut off your brain when it makes excessive noise. Market is dead against Intellectual arrogance.
26. Market rewards - Sharp eyes, and Common sense. Do yourself a favor. Just watch the market action. It will tell you want you need to know.

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