 "Stay long till there is a clear trend reversal")
Global cues remain strong ahead of multiple macro-economic data releases and central bank meets. Trader consensus is strongly for liquidity coming through. Sentiment could suddenly swing in the opposite direction if the expectations are not met.
Today and tomorrow will see inflation and Index of Industrial Production data coming through from India. Some key China numbers are also expected. The Bank of England (BoE) will release its first post Breixt policy review, on Thursday. Plus, it is earning seasons.
The Indian and Chinese macro-data will probably not make much in the way of instant difference to sentiment. If the data is strong, markets will celebrate. Or else, there will still be optimistic about central bank action.
The BoE is widely expected to cut interest rates and perhaps, implement Quantitative Easing. In reality it has a difficult job. While pushing up liquidity to deal with a likely recession, the BoE must also ensure that the pound does not plummet.
The information technology (IT) majors will as usual, lead the earnings releases and their results and guidance would be watched very keenly. They will benefit from a stronger dollar but they will also lose out from a softer euro and soft pound. Lower demand could also impact volume.
Technically, equity looks firmly bullish. The Nifty surged above 8,450 yesterday, which is a new 2016 high. While there is strong resistance at every 50 points, every trend following system would suggest staying long until there is a clear trend reversal. In practical terms, news flow will continue to be the driver.
FIIs have bought equity in July (so far). Domestic institutions have been small net buyers. The breadth has been good since retail is strongly bullish. The monsoon has, so far, offered a boost to sentiment.
In the Nifty Bank, a long July 28, 18,000p (91), long July 28, 19,000c (64) costs 155. This is not zero-delta with the Nifty Bank futures at 18,485 and spot at 18,400. This long strangle position could be struck with only one or two big sessions and there's ample time to expiry. If the trader has the nerves, he can sell the July 14, 18,200p (25), July 14, 18,600c (36). If this short strangle is not struck, the premium will boost returns. If it is struck, the long strangle should also gain somewhat to offset the short strangle losses.
The Nifty July call chain has good open interest (OI) till 9,000. In the July Nifty put chain, there's good OI till 7,000p, with a big peak at 7,500p and another big peak at 8,000p. Put-call ratios are bullish at 1.14.
A bullspread with long July 8,600c (46), short 8,700c (21) costs 25 and pays a maximum 75. This is 135 points from money. A bearspread with long 8,400p (63), short 8,300p (38) also costs 25 and pays a maximum 75. This is about 70 points from money.
There is a promise of high volatility continuing. There could be a steeper uptrend if central banks do deliver. But, there may also be a sharp trend reversal if traders are disappointed.
Today and tomorrow will see inflation and Index of Industrial Production data coming through from India. Some key China numbers are also expected. The Bank of England (BoE) will release its first post Breixt policy review, on Thursday. Plus, it is earning seasons.
The Indian and Chinese macro-data will probably not make much in the way of instant difference to sentiment. If the data is strong, markets will celebrate. Or else, there will still be optimistic about central bank action.
The BoE is widely expected to cut interest rates and perhaps, implement Quantitative Easing. In reality it has a difficult job. While pushing up liquidity to deal with a likely recession, the BoE must also ensure that the pound does not plummet.
The information technology (IT) majors will as usual, lead the earnings releases and their results and guidance would be watched very keenly. They will benefit from a stronger dollar but they will also lose out from a softer euro and soft pound. Lower demand could also impact volume.
Technically, equity looks firmly bullish. The Nifty surged above 8,450 yesterday, which is a new 2016 high. While there is strong resistance at every 50 points, every trend following system would suggest staying long until there is a clear trend reversal. In practical terms, news flow will continue to be the driver.
FIIs have bought equity in July (so far). Domestic institutions have been small net buyers. The breadth has been good since retail is strongly bullish. The monsoon has, so far, offered a boost to sentiment.
In the Nifty Bank, a long July 28, 18,000p (91), long July 28, 19,000c (64) costs 155. This is not zero-delta with the Nifty Bank futures at 18,485 and spot at 18,400. This long strangle position could be struck with only one or two big sessions and there's ample time to expiry. If the trader has the nerves, he can sell the July 14, 18,200p (25), July 14, 18,600c (36). If this short strangle is not struck, the premium will boost returns. If it is struck, the long strangle should also gain somewhat to offset the short strangle losses.
The Nifty July call chain has good open interest (OI) till 9,000. In the July Nifty put chain, there's good OI till 7,000p, with a big peak at 7,500p and another big peak at 8,000p. Put-call ratios are bullish at 1.14.
A bullspread with long July 8,600c (46), short 8,700c (21) costs 25 and pays a maximum 75. This is 135 points from money. A bearspread with long 8,400p (63), short 8,300p (38) also costs 25 and pays a maximum 75. This is about 70 points from money.
There is a promise of high volatility continuing. There could be a steeper uptrend if central banks do deliver. But, there may also be a sharp trend reversal if traders are disappointed.