Next two days crucial for mkts

What a difference a day can make - yesterday morning the mood might have been very different, this morning the mood might be completely different. We are not totally out of the woods but at least a small step has been taken yesterday. Global markets are supportive too but Infosys turned on the heat yesterday and we have seen a closing above 4,800.

So is there life beyond that level? We have been stuck in a very narrow trading range, yesterday was the first sign that we might be getting ready to break out of that trading range but we need conformation, we need follow up, we need the next few days without any kind of reversals, which takes us back within that trading range.

So next couple of days are extremely interesting and important and we are in the midst of earnings season in any case, so lot's to play for at least there is a sign of hope for the traders at least after a long time.

On the mood in the mkts:
 
The mood would be better for sure because all of a sudden we have closed above 4,800, which is the stuff that bullish traders would want to see. The bears would have lost a small skirmish yesterday but they had to cover up their positions. The dash to nearly 4,900 would have taken the bears by surprise; there is no question about that. But this morning also the mood wouldn’t be too bad after yesterday; a bit of support from technology, global cues are okay.

It is just that one statement from the RBI Governor that sounds a bit ominous but let us see whether we can deal with it. The next couple of days are very important on whether we can stabilise above these levels giving traders the confidence that they can still trade long and yesterday was not just a flash in the pan. So, there is a lot to play for in this truncated week of trade.

On Asian indices:

US was okay and Asia is largely okay with the exception of China which started weak, recovered and has weakened again. So that is a difficult market; of course there is a lot of data coming in from China today, and it is 1.5% down. But other markets are holding on an average, 1% gains today, which is encouraging. There is Japan, Korea, Taiwan and Singapore all up about 1%, even the Hang Seng is up quite a bit. So, good tidings with the exception of China from across Asia.

On trading ranges for the market:

There have been too many false breakouts over the last few days. So we need to wait and watch and see whether this is a confirmed trading breakout which takes us a whole lot higher from here. There are two camps in the market right now, one which believes that after crossing 4,800 the Nifty is probably good enough to break 5,000 and carry its upward journey, may be towards 5,200-5,300. There is another camp, which believes that this will not be a convincing breakout because we have still not climbed that hump of 5,000-5,050, and this rally will terminate there if it gets there.

So it is hard to tell which view is correct but there might be a little bit of a tussle around that 5,000 level, if the Nifty is to get there. So the next couple of 100-150 points for the Nifty are very critical, and if we can scale those levels there will be quite a bit of a change in the trading sentiment, if nothing else. But we have seen hopeful moves earlier getting close to 4,900 and then fizzling out. So we don’t want to take too much for granted. There was a lot of short covering.

The problem is that there is no great buying, so therefore trading ranges tend to sustain and a bit of  short covering takes you to the higher end of the range and since it’s traders which are governing the markets moves, they will go short again and will wind up their long positions and the market will stop moving up there, because you haven’t seen the force of money coming into the market yet from FIIs or mutual funds or any large segment, which takes delivery of stocks. So if it is only a trading rally and a short covering rally then we need to watch, whether we can scale beyond the next 3-4% on the Nifty or this is just the move to the higher end of the trading range.

So it is difficult to preempt what the Nifty is going to do. All one can say is that in the next couple of days and the next couple of 100 points on the Nifty are extremely critical from a trading point of view, because on it may hinge the near-term trend of the market because these are critical levels. But we don’t know whether it will go to 5,000, if it goes there, it will cross that and stay above it, or it will turn from there. It’s all too difficult to predict, but at least the market has given itself a bit of a shot at the top end of the trading range.