The Numbers Theory

There was a time, not too long ago, when I would be blissfully unaware of any data releases. I guess most people in the market would be unaware too and there would be no sharp movements whenever any Govt data was released. Typically the next day in the morning meeting, the economist/strategist would discuss the implications of the numbers and since time makes for saner reactions there would be little or no movement in the markets.

Compare this to the current scenario where the markets go thru 4 distinct phases on announcement of any numbers.

Phase I- The expectation phase. This is typically minutes before the actual announcement where all short term trading based on expectations/rumors/inside info reaches a crescendo.

Phase II- The knee jerk reaction phase or the its great/its terrible/its no great shakes phase. Here the market gives a knee jerk reaction up or down to the announcements. This phase lasts from the minute of the announcement to around 10-15 min after. This is where most stops are triggered.

Phase III- Its not that bad/not that good phase. Depending on what the knee jerk reaction was, this is the phase when sanity begins to prevail. This phase starts 15 min after the announcement and lasts for another hour.

Finally we have phase IV- The day after phase or what numbers? phase. This is when the market acts as if there was never any announcements and just goes on with its normal trend.

Today we are in Phase IV of the IIP data announcement. Since this is the day when the market ignores the data, we will too and get on with our lives by looking at various trends in the international markets.

S&P, FTSE, Kospi and Nikkei are trended up while HSI and HSCEI are trended down. The Commodities like Crude, Gold and Silver are in downtrends while Copper is still holding on. Dollar Index is in an uptrend.

As far as Nifty is concerned, I recommend a short position only below 5040. Until then it is difficult to call for a change in trend to down.

Oh by the way, if it is so difficult to trade in India where numbers come out only once in a while, just imagine how hard it will be in the US where something crawls out of the woodwork every day?