What a day again! So the high addition in yesterday's call option data was indeed a build-up of calls and were crushed fairly well today. VIX zoomed past 28.5 levels and despite a positive Euro-Dollar [in relative terms compared to yesterday] BNF melted and did what it was supposed to do a couple of days earlier.
Even a dovish stance on European bourses brought little cheer! Again, a surprising element today was despite such a steep fall, OI in Nifty futures was lower and significant premium retained as well.
Markets are not out of woods as we have clearly been cautioning from time to time; as mentioned yesterday as well, even if one deems the correction to be over, a back-test of 4944-4994 was on the cards if not 4911. Today's close has been below 5032 and hence I would cap the upside for tomorrow at 5032-5050 levels. Volumes were low today, VIX very high and lots of shorts still in the system. However, the Friday factor may once again play out and we should not be surprised with a retest of 4880 on the lower side tomorrow and 4994 on the upper side tomorrow.
Once we close below 4880 on the downside, floodgates will open for a another 120 odd points slide if not more. Sell on Rise is still a preferred strategy until 16th Dec after which one can go long from whatever level Nifty is at for a small upside prop-up Santa Rally.
Keeping my fingers crossed as the hypothesis of Jan Nifty graphs on EOD basis is so far playing out as expected [but can only be confirmed after Dec expiry] As I keep saying, sovereign debt default in Europe has been discounted by markets already as suggested in the yield curves and credit default swap premiums. What hot money really wants to know is whether the swaps will be triggered or no; whilst nobody has a clue on exact level of positions in the system as far as swaps are concerned, if swaps are triggered, one can be sure that the next crisis will be worse than the Lehman Brothers debacle; if the swaps are not triggered [CMA has already made an official statement that 'haircuts' on debt won't qualify for default swaps i.e. insurance] then also there is pain in the system but perhaps much lower than what the masses estimate
[Justification: Just as with hot money mixing up Long and Short Options on indices and shorts, banks and hedge funds have a hybrid mix of Long/Short Swaps and in the case of swaps not being triggered, the downside will be limited to the net debits in swaps prmeium and of course the write-down on debt. As of now, the estimated sovereign debt due for maturity in the medium term works out to be an estimate of 5 trillion dollars and that is manageable with concerted efforts from central banks]
For other markets, Dow still has the potential to retest 12400 levels; DAX still has the potential to retest 6200-6400 levels. Euro-Dollar will collapse to 1.1850 levels after it stages 2 consecutive closes below 1.3275
Even a dovish stance on European bourses brought little cheer! Again, a surprising element today was despite such a steep fall, OI in Nifty futures was lower and significant premium retained as well.
Markets are not out of woods as we have clearly been cautioning from time to time; as mentioned yesterday as well, even if one deems the correction to be over, a back-test of 4944-4994 was on the cards if not 4911. Today's close has been below 5032 and hence I would cap the upside for tomorrow at 5032-5050 levels. Volumes were low today, VIX very high and lots of shorts still in the system. However, the Friday factor may once again play out and we should not be surprised with a retest of 4880 on the lower side tomorrow and 4994 on the upper side tomorrow.
Once we close below 4880 on the downside, floodgates will open for a another 120 odd points slide if not more. Sell on Rise is still a preferred strategy until 16th Dec after which one can go long from whatever level Nifty is at for a small upside prop-up Santa Rally.
Keeping my fingers crossed as the hypothesis of Jan Nifty graphs on EOD basis is so far playing out as expected [but can only be confirmed after Dec expiry] As I keep saying, sovereign debt default in Europe has been discounted by markets already as suggested in the yield curves and credit default swap premiums. What hot money really wants to know is whether the swaps will be triggered or no; whilst nobody has a clue on exact level of positions in the system as far as swaps are concerned, if swaps are triggered, one can be sure that the next crisis will be worse than the Lehman Brothers debacle; if the swaps are not triggered [CMA has already made an official statement that 'haircuts' on debt won't qualify for default swaps i.e. insurance] then also there is pain in the system but perhaps much lower than what the masses estimate
[Justification: Just as with hot money mixing up Long and Short Options on indices and shorts, banks and hedge funds have a hybrid mix of Long/Short Swaps and in the case of swaps not being triggered, the downside will be limited to the net debits in swaps prmeium and of course the write-down on debt. As of now, the estimated sovereign debt due for maturity in the medium term works out to be an estimate of 5 trillion dollars and that is manageable with concerted efforts from central banks]
For other markets, Dow still has the potential to retest 12400 levels; DAX still has the potential to retest 6200-6400 levels. Euro-Dollar will collapse to 1.1850 levels after it stages 2 consecutive closes below 1.3275
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