11 March 2014: Nifty Elliott wave analysis: Consolidation may continue near top. Resistance is at 6560-6600 and support is at 6480 levels. A possible pullback may be very close as hinted from VIX.

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For 11 March 2014: -

On 10 March 2014, FII Bought INR 1253.65 crs and DII Sold INR 1044.82 crs

Once Nifty hit new all-time high it has not given any sign of pullback yet. For yesterday I have quoted for resistance at 6560-6600 which found to be interesting. It must be the fundamental which should push the rally higher but we have not seen many changes there. Since the low of 6216 we have not seen even single negative closing. It is heavily over bought now.

We saw good buying in heavyweight like SBIN, Reliance and many other PSU banks too. There are few strong reasons to see this breakout and rally with some doubt. Have a look at fear index VIX. From the low of 12.50 it has shoot up and now it is at 17.77, almost near to 18. Yesterday also, it was high by 6.30%. In normal market condition, it should be trending lower.

Above fact suggests that higher number of market participants is under panic even after new all-time high and that panic is rising with rise in stock market. Can stock price go higher in panic? Basic of technical analysis suggests that that rally can be short seller driven. Remember, we are not talking about market like US which has greater money support. In India, it is only FII which are buying right now.

In clear words, if VIX crosses 18 then I definitely cannot see the possibility and scope of further rise. Still, it is the price only which pay to traders and that it still higher. If I am concluding something using VIX then also I have to accept that trend once established cannot be easily violated. Nifty can still try to move higher (resistance 6560-6600) with support at 6490-6480. If it breaks 6480 on downside then we can think about substantial pullback. Till then, trade less.

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Strategy for Nifty March future – Where is the scope of pullback? It is not giving room yet to play for pullback even after 350 points of sharp rise. I suggest waiting for something decisive to happen for intraday traders. On other hand positional traders can slowly load shorts at these rise. Intraday at these can be difficult and dicey. If market trades in positive zone, then avoid deals. Yesterday’s high of 6595 will act as still resistance.

S&P 500 (USA) – It has opened lower and hit 1867 yesterday but finally closed at the highest point of the day at 1877. I still feel that as long as it is above 1850 we cannot do much on optimism rise. This may be the zone of consolidation. Outcome of this consolidation is still beyond the scope of prediction. Most of trading activities has shifted to small cap stocks which generally happen near peak of the rally. It is the tempted money phase of current rally. I suggest be on sideline until some momentum comes for trading.