Update for 10th February 2011

   The Day of Capitulation Over ? 

• Nifty futures opened flat on Wednesday and for most of the morning session, the futures contract tried to recover.
• However, the Nifty contracts kept on trading  flat on the back of some strength seen in some of the index heavy weights. All attempts to trade higher ended below the previously indicated minor resistance of 5350.
• However, the so called popular trading shares or midcaps kept on falling heavily, even in the morning session. 
• Nifty futures also joined the capitulation of the midcaps in the afternoon session. Nifty contracts fell to the lower minor support of 5225. However, Nifty futures recovered from the low to close at 5284 for the day.

  Nifty Futures - Intra-day Chart 

Update for 9th February 2011

  Another Day of Losses, What Now ?

• The last post's title itself said that some upsides may be expected for the simple reason that no follow up selling in the Nifty futures was seen on Monday  following the bearish engulfing candle of Friday.
• However, in hindsight, it seems that the sellers were just waiting for some upticks to restart their liquidation and they restarted the selling in the absence of any uptick on Tuesday.
• Therefore, not only that the expected positive move didn't take place, but instead, markets resumed the downtrend belying all expectations. The best lesson from this episode is that any kind of analysis can fail in the market and therefore, it is better to stop trying to call the lows. 
• Some lower than expected results declared by some of the popular trading midcaps also didn't help at all for a recovery.
• For the first time after the down trend started, some fundamental analysts have started to talk about the possible earnings growth downgrades at the index levels. It always happens this way. First, the market falls. The downgrades come later. Actual lower profit / growth reflects later on. Market goes further down. More earnings downgrades follow. Markets starts the recovery while the downgrades continue  unabated. Finally the upgrades start. By this time markets might have gone up considerably. More upgrades follow. Markets peak and analysts will continue with their upgrades. And the story comes to a full circle. It's just like the case of a dog chasing it's own tail !
• Nifty futures opened flat at 5411 and tried to move upwards but the attempt failed at the 5420 levels which was the high point of Monday's initial narrow trading range. 
• However, when the upward movement started to fail, another bout of selling started as is usual these days.  Nifty futures sold off to the widely known six month low and support of 5340 - 5350 levels and traded around the levels for some time.
• All efforts at recoveries from the said support  were also sold in to, resulting in to a break of the support in the last hour of trading. Nifty futures closed at 5320 for the day after recording a low of 5304.

 Nifty Futures - Intra-day Chart