July 15, 2014

Market outlook

NIFTY forms  higher high higher low bar... within a downtrend, 2-3 pullback days are acceptable.

So far, the move/ rally is sluggish. Considering the fact that markets have bounced off very significant supports, one would expect a strong rally. But this was not the case. On the other hand, VIX continues to drop and today it came down by another 5% so there is no fear within option writers.

Option writers continue to be bearish in the sense they do not expect markets to cross 7800-8000 this series. This was the situation right from start of this series and this has not changed. What has changed is a substantial cut in 7500 put options (most probably at a minor profit as these positions were written at higher IVs).

Intraday charts (spot):

On 5 min charts, we had a sell signal when nifty spot broke 7505... the first 3 boxes show signs of early warning. These boxes contain candlesticks being formed showing selling at higher levels. The 3rd box is significant as it shows inability of bulls to take market higher.

Short trade got stopped out at 7475 and got converted to long.

On hourly charts, trend is still down and there is no buy signal. If short, the SL is 7725 spot.

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