Market Outlook FOR 28 02 2011

The Arab States are in a conflict between the rulers and the masses who are the ruled. Demands for an open society and democracy have gained strength to such an extent that the resulting upheavel has caused a conflict in the stock markets, with the bears and bulls battling it out while the market remains volatile. The Nifty has retarced almost its entire up move from 5175 to 5600. I say almost since the low of 5175 did hold on Friday when the Nifty fell a 100 points suddenly, then equally suddenly rallied a 100 points to close the day with gains. But, the week ended with a net loss.
The Nifty made a DOJI today, where the open and the close are roughly equal. The DOJI is a sign of uncertainty. Since we have seen sahrp declines over the past few days, the uncertainty can be in the minds of the bears. After all, they were in full control, then, suddenly on Friday, inspite of lower levels intraday, the DOJi came about. This small pattern suggests that the bears may be apprehensie of further declines in the short term. his matches with the big event that is coming about on Monday – the union budget. Every year, traders enjoy a traditional budget rally. This year, the markets have fallen a 1000 points before the budget. Therefore, we are entering a big news event with declines in the market, and, quite possible, large short positions among traders. This is a strange situation just before the annual poilicy statement by the government. It is uite possible that all sorts of bad news relating to the budget has been discounted y the market. Even the slightest feel good can trigger a rally.

If you are an investor, the markets offer nothing for the time being. In case you have trading positions, a post bugdet rally (if it comes about) should be used to get out of problem positions.
If you are a trader, then the slightest sign of a rally should be used to take long positions. mrkets can surprise us, both on the downside and the upside. In recent days, we have seen many surprises on the downside. We may now be seeing surprises on the upside. When we enter a big news day, there are no valid support and resistance levels. The best way to trade such days is to either take options positions or wait for the news to be over then take a position.