The Evil Twin

The world markets rallied sharply yesterday on the back of a better than expected US GDP data. I am not a strategist so I will not go into questions like whether the numbers were a result of unprecedented Govt support and whether it can be sustained in the future when the support is withdrawn. I will not even ask whether the Q3 numbers of companies already reflect this GDP number and therefore is already in the market price. I will not do all this and let somebody more intelligent work it out. I am a simple man and will therefore stick to the facts.

1] The S&P did not fall below 1020...the previous pivot low.

2] The rally of yesterday has erased the entire fall of day before and has taken the RSI to above 50. Normally these two points should be enough for me to expect the S&P to head towards a new high...specially if we break above todays first hour high on the S&P.

The DXY Index similarly has erased the entire previous days rally and has now moved below RSI 50. We have even broken below 75.859 (yesterdays low) today. This index too looks like it is headed to a new low.

The S&P and the DXY are both pointing towards a continued rally in Emerging market equities and commodities. Typically emerging markets have a higher beta with respect to S&P and should make bigger moves than the S&P.

know that this note is talking of a rally while just day before I had betted on the market going down. But then when did I ever say that I will be consistent in my views. In fact I think that as a trader an important thing is to accept one is wrong and to move on. Given this international scenario and knowing that 4826 was yesterdays high on the Nifty, I will cut my short positions if Nifty crosses 4830 and go long with a stop at 4745.

By the way I missed writing about Dhoni and his batting yesterday. I will be the first to admit that I loved the old dashing Dhoni-the Good Dhoni and hated his Evil Twin- the new, plodding, mature, Dhoni-the innings builder. I thought the Evil Twin was an imposter who had taken over the Good Dhoni who I loved. But yesterday our Cool Captain showed signs of the Good Dhoni and proved that both exist within the same person. He also showed that he is capable of recalling him at will. I only wish he does that more often.