ILLUSION vs REALITY (Liquidity vs Fundamentals)

Dear Investors

On Monday stock markets ended sharply lower for second day

It was a dream run in the morning, without the base, while it was

In a destructive mood in later stages. Within few minutes of opening

Nifty moved to 5900 and there after it was a massacre on Dalal Street

On one occasion it was thought that 5700 will be broken but to

The satisfaction of Bulls it took support at an important level of

5722 (200DMA) to close near the low.

Levels on Monday

Nifty: Open: 5824/ High: 5897 / Low: 5722/ Close: 5729

Sensex: Open: 19389 /High: 19649/ Low: 19071 /Close: 19091

What Next

Traders and investors should exercise extreme caution in

Building positions on both the sides.

Nifty has closed at 200DMA(5724) , substantial fall below it

Will lead Nifty to much lower levels of 5600/5650.

Monday morning rise was an ‘Illusion’ for the bulls while the

Fall in later period was ‘Reality’. The day was marked with very

High volumes and a broad base fall, indicative of huge unwinding

Of longs and fresh creation of short positions.

At 5729, one has to watch next moves of market, we are at the

Cross roads of TRENDS. From here if Nifty breaks below 5700

then market will enter in to  a lower range of 5606-5570. All depends

on results of the Cap. Good/ Banking and FMCG majors. Investors

and traders should exercise caution in all the trades and go with

short trades and positions , work with strict stop loss on either sides.

In doing so keep watch on technical levels …

Technical View

During last few weeks Nifty tried to break 5917/5959 levels,

On up side, three times but could not succeed and corrected back to

Lower supports at 5700.

Thrice Nifty has bounced back from 5700 support to test 5959 to fall

Back to 5769

Today Nifty has broken the support level of 5750 on closing basis

It has to be seen how Nifty behaves on Tuesday (Today)

5724 IS 200 DMA , any close below 200 DMA for few sessions is

Not a healthy sign for bulls, SO WATCH 5700 as most vital level

Pivot at: 5782(19270)

To move upward, Nifty has to cross and close certain levels.

Immediate, resistance is @ Pivot (5782)

Next resistance will be a 5850 level, if taken out we will be

Back to the wall of 5906/5959.

In an up move from here Nifty has supports at

5700/5668/5607 and then free fall to the levels

Of 5559 and 5480

VXI (Volatility index)

Pivot at: 22.19

There is very high volatility indicative of fear in

The minds of traders, no one is sure of the trend

And trades, even a small news is enough to create

Panic in market leading to precipitate falls.

. Now whether this volatility transforms into a bull or a bear

Is difficult to ascertain just by looking at the INDEX but

 TEORATICALLY VIX moves in the opposite direction of Nifty

. Which means if, VXI moves up there are higher chances of

Nifty to correct in the coming days.

DMAs (Day moving averages)

As the markets are at a crucial levels of ‘Make or Brake’

One has to look for trend reversal signals , Day moving averages

Are the best guide to decide further course of market.

      Watch for

5 Day Exponential moving average @ 5806, to remain in an up

Trend Nifty has to close above it , If Nifty moves above it then

It will face stiff resistance at 150 Day Expon. Average @5824.

Nifty has immediate  support at 30 Day Expo. Average @ 5696

And 30 Day simple Average @ 5643

Nifty is at 200DMA (5724) any break below it on closing basis

Will open lower range in coming days.

Watch for 100DMA @ 5707 and 100 Day Expo. Average @ 5670

While Nifty moves down.

To keep ‘Bulls’ above water levels Nifty must manage to remain

above

100DMAs (Simple and Expo.), otherwise markets will be gravitating

Passively towards lower levels of 5609/5559.

COMMENTS

The rise in valuations was without fundamental support, Monday morning's

Rise in prices was a typical trap set for Bulls by Liquid Bears. Early

Morning rise had no obvious reasons to move so fast and that to

Against the Friday’s fall. The early morning trades show either the

Immaturity or Fear in the minds of traders, as soon as there were

Some up ticks ‘Bears started running to cover and bulls ran behind

Beaten down stocks, as if market was ‘Running in Hurry to the TOP”

All this suggests that the markets are driven by Fear and Greed balanced

At a critical level. This is not a sign of healthy market

Traders and investors are advised to

Keep small positions on either sides

Reduce the time frame of trades, do not carry trades

for next day

If at all you want to carry trades for next days, keep stop

loss and follow them

Do not get carried away by the News or Intra day swings

Sell the strength (At higher levels) and buy weakness in

Market( At lower levels)
Have a medium to long term exposure

No stock specific callas for the day

 As we are moving towards

Uncertain periods. Carry all the, Investment Buys, do

Not sell in panic. Do not trade for  a while, remain on side lines

IMPRESSIONS

AT CROSS - ROADS

Thanks

Dr. Vasant Bele

All the views are personal , Invest after consulting experts