Monday, February 6, 2012

EOD Analysis For 6th Februry 2012 and Outlook For 7th February 2012

Positive session in the morning following amidst positive global cues and some profit booking after Europe opened; OI in Nifty futures surged marginally higher to 27.8 odd million amidst signs of profit booking. Bell weather stocks extended their gains whilst some sectoral churns were seen.

Negative divergence observed today was the surge in VIX to almost 25 levels despite the positive session and Put / Call Premiums showed premiums shifting to Put side; The put premium on the 5400 Strike carried an extrinsic value of over 50 whilst the deeply ITM 5500 Put had an additional premium of 40 [premium over intrinsic value]; On the Call Side Deeply ITM 5200 Call had a time value of just 40 odd points whilst OTM 5400 Call barely budged during the trading session

Where do we go from here?
As mentioned on Friday as well, the close above 5300 levels was significant and global markets may impact price action for the next couple of sessions. Falls untill 4900 odd levels [if they come in] will just be routine profit booking.

Critical Levels and Outlook Remain unchanged from previous 3 posts. Today was the 5th consecutive close above the 5177-5196 band. If this holds out tomorrow on closing basis, then IMHO, we can expect this to stay firm on closing basis until Thursday EOD [following the basic Fibbo sequence 2-3-5-8]

Some Fundamentals for Those Inclined Academically:

From a Rollar perspective, lot of buying has been witnessed with Rollar above 52 and Rollar below 46 in the last few weeks. In between this price band, liquidity and other concerns drive buying/selling.

From the Fixed Income perspective, a clear negative divergence is the fact that the Bond Market is lapping up near-zero Treasuries and Negative Yielding Bunds! This IMHO is significant because despite so much upside in Dow, FTSE, DAX [from Dec lows], the bond market is lapping up 'safety'.

Such extreme behaviour has been observed on 5 major occasions in the past [based on some data lookup over the weekend across bloomberg, yahoo finance, investopedia and free EWI articles ] First 2 instances were prior to the World Wars, 3rd was around 1986-1987 when there was a royal crash of the roaring 80s; 4th prior to the dot-com bust towards 1999-2000 and 5th prior to the sub-prime debacle in 2007. Now is the 6th major instance - whether it will prove the jinx wrong - I do not know but it is important to keep this in mind - the bond markets are usually well ahead of the curve on what to anticipate......


shriram said...

The ST Cup & handle reversal has achvd its tgts.. generally 3x is max for ST bounces..

The engine of the upmove is running now w.o petrol, if the horses lose their power, we know wot will follow ;-)

RSI is lower than prev Highs, but price is RISING ?

Nifty has a spinning top today...
SHAKEOUT TIME again, if u ask me !

will c tomo ...

shriram said...

1. Engulfing BEar EOD

2. RSI not movin UP

2. Close below ysday close ...

U have it made, some prayer it was, thanks nagi ;-)