On reviewing the last post I noticed two errors. One, the dates. And two, was an error in my excel sheets tracking FII and DII volumes.

The FII net since 1st July 2009 is +53K Cr and DII net is (-)28K Cr. Only since 7th Jan are DII figures consistently positive. Totalling to a mere 4K Cr compared to FII net being (-) 5K Cr since 5th Jan.

This leads to the question - at what price will FII selling abate? Or will it be decided by how much they have left to pull out in terms of profits or moving allocations to other markets. That question can hardly be answered as a forecast.

However, the breach of 5690 (or 5,700) on the Nifty has now made every trader, his MIL and every pundit exclaim that the Nifty is headed to 5,300 or 5,500.

This is the play of reverse psychology. Let me explain.

The fund flow charts show that FII net selling has indeed slowed down. But so has DII net buying. With everyone and their MIL expecting the Nifty to drop like a stone, what will the new buyer do? Buy slowly at progressively lower prices!

Essentially, trading must remain an intra-day strategy. Holding over night positions may be more risky than apparent since the global news flow assumes so much more importance. And that can never be predicted with any degree of certainty. 

The Nifty is headed down, by common consensus. Thus the trade is short the peaks. But don't be too sure!

@niftygroup