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What do you make of this?

May 28, 2010

What do you make out of it

I dont use channels, trendlines much in my work, though I have a soft spot in my heart for them.  For the hard core, quant junkies overhere, overlook this part, but for the rest of us humans, trendlines visually confirm to our instincts.

Its enticing to believe that, markets will rally to new heights. Amongst a little more knowledgeable people(at least those who have a misconception, like yours truly),its fashionable to get all passionate about the global bear story.

But, as long as SEBI doesnt give us a total blanket permission of what to do with our money, as in eat it when we are hungry(destroying currency is illegal), invest it in fly by night operations (comes with risks but legal) or invest our entire wealth in Bangladeshi markets(not possible), we are left with only one option. Invest or Trade in Indian markets.

So, the end point is: Dont bother about whether Euro will crash or not. Care whether you are positioned on the ‘right’ side in Indian markets.

I wont deny predicting about the global economy is all the more ego boosting (we are solving and strategizing on a grand scale, come on!) but it bothers us much more, if we are able to understand how our investments/exposure positions are affected.

So without setting any more, prologue, I would delve straight in to the matter.

I am on a conceptual level short VIX. That is, I dont see,a)  much movement in the index.b) even if there is movement, it will be more on the upside rather than downside.

Given that scenario to hold right, it makes sense to imagine the index in particular and bourses in general to lack any decisive direction.

Though, I dont really prefer giving a time horizon, but a consolidation can extend over 5-7 trading sessions. Historically, whenever the trading sessions have seen a range and volatility contraction, the odds of a very profitable breakout increases, but then thats another story.

There is another possibility going in. Its also possible, that NIFTY say, “screw-everybody” and say, I am going to keep bouncing between these two levels, for God-knows-when.

Which one will be sweeter?

I dont know. Traders will absolutely love, this bouncing stuff, making close to easy money. Raja Retail (the Indian take on Joe Retail),will hate it.

If the market sleeps for sometime, I would welcome it even more. In that case, the Raja Retail, the Punter Trader both will hate it. And that being said, I might like to steal another getaway 😀

Aah, nice sweet dreams!
Soham

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