State of the Market|Reading the Psychology of the market

A 25 bps hike in the repo and reverse repo rates is expected. Will RBI just take this small baby step or will do something drastic to tame inflation? Will Nifty hold on to 5380-5400 or sell off?

Market Observations

1. The Big question: Can RBI monetary policy change the trend of the market? I doubt
2. Bulls may love this- Last Wednesday the copper futures broke out above the 50- and 200-day moving averages as well as a two-month trendline…Alan Farley
3. Copper is one asset class that is direct play on industrial recovery. On top of that - overnight FedEx came out with strong earnings and positive commentary - another sign that global economic recovery is for real.
4. US markets are in great shape. The scorecard
   Dow: +97
   NASDAQ: +26
   S&P 500: +12
   
5. US markets are now in the black for the year. Will S&P 500 conclusively breakout above 200 dma?



6. The good news: Fear Index CBoE VIX has slipped below 200 dma of 23.38. The anxiety seems to be ending
7. Coming to Indian market, on an index level, we are in a bullish market but not a momentum market. The support = 20 dma = 5340
8. Nifty Month to Date is up 1.9%. Year to Date - Nifty is up 4.1%
9. Are DIIs trying to cap the market upside? Yesterday, they net sold 715 crores worth of stocks in cash market.
10. Maruti: Damage is done. Minority shareholders have been taken for ride post the change in the sharp 43% increase in royalty expenses being charged by parent Suzuki


Nomura has come out with price target of 1062. The stock is sell/Avoid.

11. Stock to keep an eye on - SBI - on RBI monetary policy announcement day. The stock did sell off 3.5% on Monday ahead of announcement…Nervousness creeping in
12. If one is bullish on Nifty: then the best way to play - Bharti Telecom. The stock is now safely above 200 dma
13. Auto stocks = Losing interest. Hero Honda is at 200 dma post yesterday’s sell off. The stock has not broken 200 dma since Jan 2009


Source: Chartalert.com

14. The market seems to be in punishment mode. Yesterday most of the -ve reactions were quite harsh. Example: JP Associates was down 5% post earnings announcement
15. Speaking of harsh reaction: How will real estate stocks fare up today will be another thing to watch for. DLF and HDIL both have sold off in last couple of days.
16. Many Institutional investors and Brokerages have turned positive on Dish TV in last few weeks and months on fundamental basis. IDFC recently has come out with Outperform rating on the stock and price target of 61
17. Dish TV: Technically, the stock is BUY at 100 dma….the level which was earlier acting as resistance


Source: ChartAlert.com

18. IDBI: Morgan Stanley has come out with price target of 105 on the stock. It means more downside from current levels of 119. PLUS Technically, 125 has become too stiff a resistance for the stock to cross.
19. KS Oils = Double Bottom ?? Yesterday, the stock clocked huge volumes…is stock ready for more upside


Source: ChartAlert.com

20. Adani Enterprises is developing bullish pattern; and one can expect decent upside in next few days and weeks. The stock has strong support around 540
21. UB Holdings decline = Buying Opportunity with 245 as stop loss.


Source: ChartAlert.com

22. BHEL: Ambit has come out with EPS estimates of 110 on the stock and price target of 2760.
23. Alstom Projects managed a huge upmove on Friday. Yesterday, it pulled back - decline = buying opportunity?
24. Anybody who has studied psychology and history is much better prepared for the market than somebody who has statistics
25. The only logic that works in the market – Market can be illogical and can remain illogical much longer than anyone can imagine

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