Remember, the NSG will meet on Thursday

As the Nuclear Supplier Group meets on Thursday to decide on India specific nulcear safegaurds, we should be prepared for a sudden euphoric rally in the market.
Now, the understanding is that the NSG will approve the safegaurds. Thus, this news should be discounted. But, in the short term, a sudden euphoria could easily see markets move up. If you are long, then such conditions are perfect to take some profits. If you wish to buy, then buying in euphoria is not a good idea.
Sometimes, the market gets disconnected from reality. The impact of inflation is real, but the market ignores it. While the benefits from the nuclear deal will flow in after maybe 10 years, or more. Yet, the market behaves as if the deal will produce milk, honey and gold from today itself.

An earlier post on the market is below. Just move your mouse.

August 20: What lies Ahead

We will have a look at the possible market action in the coming days. It is sensible to move away from day to day trading and have a view of a slightly larger time frame. Given below is a daily chart for the Nifty with cycle adjusted stochastics. I have used a period of 51 days for %K.

The stochastics seems to have reached an area where resistance was faced on earlier occassions. It is reasonable to expect that the Nifty is likely to face resistance again, with the possibility of a consolidation or a decline. Also note that during the Sept – December 2007 period, this indicator stayed in the resistance zone for three months, but there was no correction or dip. This is the nature of momentum indicators. They will correctly forecast tops and bottoms when markets are range bound, but fail when markets are trending.

We have to ask ourselves: what is the condition of the market now ? If it is trending then the indicator will have little or no forecasting value. The answer is: markets are in a range. Then, we should expect the indicator to catch tops and bottoms. Again, there is no assurance, that is why the trader uses proper money management to protect himself.

To return to the main point: the outlook now seems to be that the Market will be facing resistance at higher levels with a strong chance of a consoldation or a dip.

Can this analysis be wrong ? Sure. Why not ?

What actionable ideas do we get from this analysis ?

Open you charts expecting more downside momentum. If you get a buy signal, take it since we could be wrong, but, trade with lower volume, keep tighter stops, plan for profit targets. if you get a sell signal, trade with normal volumes, keep stops a little wider, plan for bigger moves.