Clouds on the Market Horizon - Unfortunately NOT the Rain Clouds

In the last hour or so, all the news channels including the financial channels and websites have been repeating that the monsoon forecast has been changed from "near normal" to "below normal" - 7% below normal as the report goes.

Now the last two days, we have been living in semi euphoria. On Thursday Nifty successfully dodged a bullet when it broke through 4200 only to reverse from 4140 and we heaved a sigh of relief. Today nifty did not even go anywhere near 4200, instead it went above 4300 briefly; many of us were planning to celebrate short covering tomorrow to propel nifty to 4350 and beyond.

And now comes this piece of uncertainty in one of the most important sector of the economy, Agriculture.

As we all know market does not like uncertainty.

So what can happen tomorrow? One possibility is that the market may shrug of this piece of information and keep moving up as if nothing has happened.

OR,

it may go down big time.

All this analysis is useless if we cannot formulate an actionable plan.

So here are my thoughts for tomorrow 25 July 2009:

I will trade with a negative bias. If Spot Nifty goes below 4260, it will confirm my negative bias and might provide me with a shorting opportunity with SL at Nifty 4310, with targets of 4240, 4220.

Can 4200 break? Now we are deep into speculation territory, but the short answer is NOT impossible!! And if that happens, we will see how the fight takes place at 4140!

Of course, if the market takes off on the upside and Nifty goes above 4352 ( the highest of the week so far) I should think that the market has some communication from the rain gods that we mere mortals are unaware of and I shall respectfully either join the party or stand aside.

If you have any comments please write to me at stockmarket.methods.in.madness@gmail.com

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Disclaimer: The above analysis is just that - my analysis. If you choose to trade on the basis of this analysis, you will be solely responsible for the outcome of the trade - profit or loss. Please keep in mind that trading and in particular day trading is not for the novice and there is significant risk of loss of capital in trading.