Indices have corrected 5 days in a row! Expect a bounce back as July closing levels held!

Volatility has increased in our markets during the current week, as bears are pressing sales taking advantage of global cues, and bulls are on back foot for valuations to become attractive. After touching July closing levels fund buying emerged around 2 p.m. which lead to short covering by intraday traders, which was quite visible as the premium on Nifty futures rose to 42 points in the last minutes of trading. Nifty futures finally closed with a premium of   points to the spot even on adjustment basis, indicates some positive build up and further short covering can take the indices today higher levels, as the correction is already 5 days old, and indices have closed around technical level 4365 on Nifty is important to watch. VIX has closed at 34.92 finally but the day's high was 61.99 indicates huge volatility in store. Higher volatility is one indication of formation of a top in case the markets are in uptrend and in the present case as markets are correcting it may be an indication of temporary bottom, if held today then bull charge can push for short squeeze in the days to come. US markets witnessed further sell off yesterday, as the economic data was negative, and fears of recession linger in the minds of investors. Crude is trading in a range of 112$ to 117$ currently. Higher crude prices have pushed for lesser demand even in emerging economies like China and India too, thus, it might seek further lower levels, as inflation raises in developed economies too. Japan Central Bank has left interest rate unchanged at 0.5% as the slowdown in exports was hurting the growth.

 

Oil ministry has reviewed the recommendations of the Chaturvedi committee on pricing of petroleum products, and dicided not to implement any recommendation for the present. Since the inflation has already reached 12.44% by last week, any raise in petroleum products will push it further and affect growth of manaufacturing sector. Singapore Nifty futures are currently quoting flat to previous day settlement price and asian markets are trading mixed. 5DSMA placed at 4454.66(Nifty) might offer resistance, as sentiment is weak on any rally, support can be expected at 50DSMA currently placed at 4290.70(Nifty) today.

 

Range for the Day: Nifty might trade in the range of 4300 to 4450 today.

 

Strategies for the Day: 1.Buy 4500 puts on rallies for intraday trading. 2. Go long on Nifty futures at the opening with a stop loss at 4310.