Will mkts catch up with its global peers today?

US  markets:

Particularly the way US flattened out yesterday is not very comforting and also if one looks at the internals of the US market yesterday, the breadth wasn't good and there are still problems floating around there because the financial stocks all ended deep in the red so clearly the system is not very certain about how things will pan out.

If one read the news on Capital One and Thornburg yesterday that's also suggesting that problems are still there. You have got a temporary steroid short you run for a couple of days and then again the illness will resurface at least in the US and you will find volatility there. Unless things improve dramatically and there are some important data points coming up over the next few days, which should not be very rosy, the way things are going.

Very uncertain about how the US market will pan out from here, sure some of the global internals if improved, as you would expect them to, the CBOE VIX is cooled off a bit. But not quite cooled off significantly from 37 it reduced to 28-29, which is very high by as the CBOE VIX goes. It still remains in choppy kind of territory.

The Yen is retraced to 115 but not quite out of the woods yet, you have had a reasonable rally in Asian markets, but India is not quite picked it up just yet. Lets wait and watch the global situation. I think the situation is that; yes you have had a bounce in the emerging markets but people are willing to give it some more time.

Politcal noise:

This is an element, which everybody on the street regards with a lot of suspicion because suddenly something develops and you are left blue in the face because of that. The inherent suspicion of politics in market is very high and very intelligent people always get swayed by this kind of noise. Nine out of ten times, this kind of political flash point will end up in nothing. Nothing will happen, life will carry on but everybody will work themselves in a tizzy.

The big question is, is this that one time out of ten when actually the government is under threat? You do not know how much of this is posturing, whether indeed it will come to that big flash point that everybody is apprehensive about. I am sure that it is something that you cannot wish away, it is something which is best not ignored and the market is not ignoring it at all but we will know in the next couple of days; I am no political expert, I do not think anybody can call with certainty how things will pan out but the statements from both the sides seem quite hard, their positions seems quite hard at least yet.

As long as the market does not figure out that they will fight but they will not destabilize the government. As long as that kind of comfort does not come in, you may find the out performance restricted. It may not sell off just now but every time it goes up 1%-2% it will keep lingering at the back of your mind and cap the upsides.

Approach to market:

People are taking off their trades now. Even the shorts the first signs they got yesterday of a little bit of a dip from the highs of the day they covered their shorts and went home. I don't think too many longs got build yesterday may be in a few stocks but not overall for the market and the longs which got opened up on Friday might have closed out in a certain part.

Both the longs and the shorts are watching over their shoulder now; there is one global uncertainty and one local uncertainty and you don't know how things are panning out, so neither the bull camp or the bear camp wants to be particularly brave at this juncture.

I think the Nifty may, from the current levels amble up to 4,270-4,320 that kind of band, I think there would be some supply coming in around on those levels not to just to follow technicals but last time too there was a certain amount of hesitancy in that 50-point band for the Nifty 4,270-4,320. We may get around those levels this morning but crossing that might be a bit difficult unless you get a big push from the US markets or some political resolution because people will be a bit skittish after the cut which they have seen, and even the Sensex might struggle to immediately run away well above that 14,700 kind of mark, ballpark give or take a 100 points.

I think we live in that range for the moment and that in the next few days we don't get knocked back by any bad global setback or political setback. If we just observe the screen psychologically the market is somehow getting prone to accepting bad news now. When the market really feels good it ignores bad news it just goes up because it just has to.But right now I think you are in that frame of mind where everybody saying- okay if there is bad news tomorrow I am more prone to acting on that and going down because of that bad news rather than ignoring it and going up.

The screen is not looking terribly hot it may change in the next couple of days but for the moment it's not flashing bright green.

More to come...