It was written Tuesday morning that wide swings in either direction were very much on the cards, but yesterday was something else. Yesterday saw anywhere between forty and fifty point up-down shifts in a rare volatile session.
A lot of what happened was anticipated in that post:
http://www.traderji.com/35919-post925.html
Analysis, whether TA or otherwise stands no chance when the headless hosts of popular business channels begin to create hysteria and fear while flashing lethal sounding FII numbers. Then all hell breaks loose.
These dingbats should be trained better to deal with sensitive information that can cause thousands of crores of investor money to vanish into thin air within seconds. And vanish it did.
It wasnt Varanasi nor murky politicians, but these shrill lamebrains and their downright lack of professionalism that caused much of the damage.
Else, the markets were grinding along in an organic manner, coping with the bull-bear pressure at dizzy heights, bomb blasts, fear of correction and stretched valuations, stressed world markets etc etc. Nothing was amiss in that picture.
The a/d ratios were looking good lately, midcaps were joining in, beaten down sectors were waking up. There was no call for a voluminous crash like this.
Sure the market has its own mind, but this was utterly mindless.
Big money is always smart. There is no two ways about that. And its ruthlessly hardnosed too.
So whats the big deal with the huge FII numbers in the f&o.
When there is fierce competition amongst the big money, with huge amounts being invested in a market like ours, which does not have much of a depth in terms of value picks and variety, wouldnt it be a smart thing to do to buy huge insurance. If these guys hedged their long positions, they are just doing their job well. Especially when markets all over have been struggling lately.
Then there is this phrase that every media analyst parrots: liquidity driven rally.
Hey, has anyone ever seen a long sustained rally anywhere on earth without plentiful liquidity.
Smart money is smart because it has learnt to recalculate PE Ratios in the light of the visible growth factor of the companies and the country it is investing big money in.
This simple point is evading the vision of the not so smart analysts who cannot think out of the box, all the while saying yeah, so and so would look like a good buy but only after a correction of 10-12 percent.
But guess what, so and so just gained another 20 percent and still going.
I guess these chaps are under pressure to justify the money they get paid. Theyll cry wolf every time an index or scrip makes a nice move, create fear and uncertainty, cause a crash, then say I told you so.
Then when the index or scrip makes an abrupt u-turn and climbs back hard, its back to the sheepishly parroted phrase liquidity driven rally.
Ok!
Which leads us to the question if this is the end of the party, beginning of a multi-month correction, interim consolidation etc.
A one day sharp fall is not going to draw me into all that. While I really appreciate the keen interest in tracking the technicals, academic interest aside, wheres the need to panic if the Nifty rolls back another hundred points after all that it has gained.
March is well known to cause restraints on cash flow, and most emerging markets having run up hard to high levels are now spooking the analysts world over.
For all the reverence I hold towards WD Gann and Elliott counts, I dont take what happened yesterday as a technical issue.
If the Nifty had collapsed with its own weight, then we would have seen it coming clear enough. That the levels were too high is not reason enough. The momentum was clearly to the up from all counts and Tuesdays expected flat closing appeared more like a pause with some volatile up-down sideways move coming on to sort out the conflicts over a period of time.
We can look back after a few weeks or months and try and make sense of the price/time factors and wave counts, but as daily log-keepers of the market wed do well to be clear on what really happened yesterday.
On the other hand what happens over the next couple of days and early next week would be more a technical issue: After a severe fall it may be likely that the Nifty would thrash about to find some levels where to come to rest. It may continue to shed some more or flatten out for a bit or it may make a u-turn and climb back to safety earlier than expected.
Well know soon enough as the picture unfolds, but lets not panic.
And let's not short even if there is a gap down opening.
For supports,
3111-3107-3102-3097-3093/91-3087-3082-3077-3072-3067.
3063-3058-3053 look strong at this point.
For an upside, the vital line to take and hold is
3124-3128-3132-3135-3138-3144.
