Cautious Optimism-Written on 8th Dec but posted today

From the unbridled optimism of the last few days to pessimism is too big a step for me to take. So I move to cautious optimism instead of outright pessimism. I am still hopeful for the Nifty. However if it breaks below 5950 (slightly below yesterdays low) I will get out of my long positions on the Nifty and enter short trades. Until that happens I will continue to let my long positions run.

Ideally, for my long positions, I would like to see the Nifty make a strong upmove today. As soon as I wrote the previous sentence I realised that I am moving into dangerous territory. Whenever a trader starts wishing for the market to behave in a particular manner, he is asking for trouble. It is just one step away then from getting married to ones position and refusing to see the reality of the market place.

The reason for the caution is as follows. For one, the Euro, like an errant infant, is refusing to behave. If it trades below 1.3190 in the coming days then the trend would change from up to down again and that would mean trouble for my long Nifty view.

Secondly, the US 10yr bond yield has started trending higher. I will not be surprised if we see it closer to 4% in the next few months. That could tame the rally in stocks. Most importantly, banking sector stocks that had been leaders during the rally upto first week of November have been the weakest in the last few days. The trend in that sector needs to move back up fast--like today-- for this rally in the Nifty to sustain.

Having said all this, I reiterate that I will continue to remain long until 5950 is broken in Nifty FUTURES. Come to think of it, this is all I really had to say. I am getting really good at making three paragraphs out of one sentence. Maybe there is hope for me after all. An analysts job must be round the corner!