Fed Rate Cut and Long Weekend to Bring Volatility

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The Nifty opened a few points in the green today, came down in the next hour and a half to find support between our levels of 4480-4500 and then staged a dramatic recovery to go up more than 100 points above yesterday. But in the last one hour it came across heavy selling which pushed it down to 4526 to close only about 35 points in the positive.

Seen above is the 60 minutes chart of the Nifty along with its Relative Strength Index (RSI). The bearish head and shoulders pattern seen on the RSI yesterday did not get confirmed today also and it went on to make another small shoulder today. Sometimes multiple shoulders are also possible in such a pattern. This pattern would stand cancelled if the RSI were to go above 60. The Nifty continues to trade in a short term downtrend. This trend would change to up if it were to go above 4620 (a new pivot high made today). Support is likely between 4480 and 4500.

At the time of writing of this newsletter, Dow Jones was up 285 points, Nasdaq was up 50 points and FTSE 100 was 176 points in the green. All of them are positive on expectations of a 100 basis points rate cut to be announced by the Federal Reserve in the US later tonight. This rate cut is essential to bring in more liquidity into the system which should help the US economy, which is fast slipping into a recession. This expected rate cut has helped the US markets to go up today and our markets should follow suit when they open in the morning. As suggested in yesterday’s newsletter, the Nifty should find heavy resistance between 4700 and 4720 and any rally to these levels should be used to cut long positions or to create fresh short positions.

Markets are closed on Thursday on account of Eid, on Friday on account of Good Friday and on Saturday on account of Holi, though they are always closed on Saturday and Sunday. This four day long weekend may trigger selling in the markets because a long weekend means higher uncertainty than the usual weekend. And it is a well known fact that markets do not like uncertainty, hence we should expect the markets to come down in the afternoon session tomorrow. That is all the more reason why the morning rally should be used to exit longs. The sun outage period of the markets is now over and they will be open between the regular timings from 0955 hrs to 1530 hrs from tomorrow onwards.

As mentioned in earlier newsletters, we are inviting our esteemed readers to send in their contributions in the form of articles to be published on this page. Take this opportunity to voice your opinions to the world about the markets today, the markets in general or anything remotely connected to the markets. Please e-mail your articles and don’t forget to mention your name and location so that you are given due credit for the article that is published.

Happy investing!!! Wish all Muslims, Christians and Hindus a happy festival weekend.

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