Reduced Autocorrelation

I woke up today morning to see that S&P ended with a strong gain of 2.92%. But in the markets these days, everyday is a new day and there seems to be very little spillover from the previous days activity. I therefore live on hope. I am short and will remain short until either 4953 is taken out by Nifty futures or the first hours high is taken out whichever is earlier.

It is highly likely that one of the two events will happen and I will end up long on the Nifty. Just the thought of that happening sends shivers down my spine. I mean who knows? This market could go up and trigger my buy levels only to slide all the way down again as fears of some future catastrophe hits the markets again. Currently the markets are being driven by only two things. One is the fear of a catastrophe and two is the hope that the catastrophe can be avoided. Depending on which of the two viz Fear and Hope have the ascendancy on a given day, the market reacts violently in that direction. Therefore we have very little connection between the previous days trading and the current days movement. In statistical terms it means that there is very little autocorrelation. Not the best of the markets to trade, you will agree. (I again have to admit that I have done no statistical analysis that tells me that the autocorrelation has reduced in recent times but you know the thing about sacrificing accuracy for the sake of a story. On top of that, this is a nice way to explain the lack of profits in trend following these days!)

Even as I wrote this note, the markets have opened and are trading lower...I have therefore revised my buy levels to 4876. If that is triggered, I will cut my short positions and go long. Until then... fingers crossed.