Premarket analysis: 05 August 2020
Global market continues to go higher
Economies worldwide seem to be getting out of recession
Continued FIIs support
Indian economy is underperforming
DIIs continue to sell
Border dispute with china is getting louder
Global Markets: -Positive
Global markets rallied on positive economic news. Manufacturing Purchasing manager’s index indicated economic rebound and many large economies seems to be coming out of recession. European markets closed in green and wider Euro stoxx 50 closed flat. American markets continued to rally.
Risk assets: Risk assets was largely positive. Some of them such as high yield bonds and emerging market equity ETFs were up. Local government bonds of emerging Asia were in sideways coil. Copper and Industrial metals index were flat.
Safe heaven assets: Dollar index after a small pullback was down again yesterday. Japanese yen rose Volatility indices were down.
ASIA this morning: - Negative
Most of the Asian markets are trading in red. Escalating US China trade tensions are rattling the market. Taiwan’s Topix and South Korean Kospi are two expectations which are trading in green and has gone above the recent swing highs.
European and US equity futures are trading flat. SGX Nifty is trading flat compared to yesterday nifty’s futures close.
Services PMI for July is expected to be released today by 10.30 AM. AT 38.8. even the expectations are low. Therefore any upside surprises from low expectation will be positive.
India: - FIIs are supporting
The FIIs continued to buy yesterday in the cash market while DIIs are still selling. Economic reality in India is not in the focus right now. Global liquidity and FIIs buying is holding up the market for now. DIIs and large proprietary traders are holding short positions in the derivative markets while FIIs have reduced their long position.
How will Nifty perform today?
Markets rose strongly yesterday from Fridays’ fall. However, the volumes in both Nifty 50 and Nifty 500 stocks were lower than Friday. Asian and SGX Nifty indicates that the Nifty may open flat today. Market could pause and consolidate today and tomorrow.
NIFTY -Technical Bias: Sideways
Nifty price action:
Nifty and Bank Nifty strongly reversed after they broke down from the support levels on Friday. However technically indices have not negated the breakdown yet. Therefore, I expect couple of days of sideways coil before moving in either of the direction. A follow-on bullish candle today will cancel the break down and the technical bias will become bullish. Therefore, traders need to watch out for Nifty close above 11150 and Bank Nifty close above 21850 and accordingly adjust their option strategies/spreads.
Support: Immediate support exists at 10880
Resistance: 11150 K.
Markets are likely to coil sideways. Hence range bound strategies are appropriate. I had to adjust my bear spread in to vertical ratios yesterday. Depending upon where the indices are likely to close today further adjustments is necessary.