01Cold open: the direction was wrong, the map was right
Yesterday I got the direction wrong. The iron fly that we entered went into a loss of its maximum. So those two are different skills, and only one of them is optional. And this morning Brent crude is 66 cents from 100 dollars.
02The receipt: the invalidation fired where it was stated
The Nifty settled yesterday at 23,635. I said 23,900 in the pre-open. The high was 23,758, so the target was 150 points away and it never played out. In the first 15 minutes the market slid down and it did not come back to that 23,700 level. So I will put this on record. I said 23,700 decides it, and below it I am on the sidelines looking for 23,650 and 23,600. It broke early and never came back. The low was 23,623 and it settled at 23,635, right between the levels we discussed. The direction was wrong. The map for being wrong was right.
03The tape: five banks and Reliance took the index down
The Nifty was down 144 points yesterday. In the first few minutes it made a high of 23,758 and never touched it again. Seventeen up, 31 down, that was the breadth. The Sensex fell harder, down 555 points to 75,577. India VIX is around 11, and I say around because the two feeds disagree again. The index fell three times harder than the market underneath it. The Nifty 50 fell 0.61 percent, the Nifty 500 fell 0.22, the total market cap 0.18, and the Next Nifty 50 actually rose 0.52 percent with 32 up and 17 down. India Defence rose 2.5 percent with 18 of the 19 names higher, media was up 1.31 and pharma 0.77. So where did the index go? ICICI Bank was minus 2 percent, Axis minus 1.72, Kotak minus 1.2, Reliance minus 1.16 and HDFC Bank minus 1.17. Five large banks and Reliance took the index down. The other 490 odd stocks did not get that message.
04The board: both sides on one strike again
Day one of the 15 September Nifty series added 4.76 crore calls and 2.99 crore puts. The PCR is at 0.649 and max pain stands at 23,750, around 115 points above us. And the number that matters is this. The biggest call add of the day was 41 lakh at the 23,700 strike. The biggest put add was 24 lakh at the 23,700 strike. Both sides piled onto the same strike on day one of the new expiry. Above it, 24,000 carries 82 lakh calls. Below it, 23,500 has 46 lakh puts and 23,000 has 61 lakh, a long way down. Volatility is just below 10 and one standard deviation is 115 points. The band for the day is 23,520 to 23,750. And the basis came back to a premium of 115 points from 88, with futures open interest up 2.73 lakh at the same time. So that was fresh buying of premium rather than short covering.
05Positioning: the one book that never turned
The Nifty model is still in sell. The Sensex model is also in sell. Both indices. The foreign index futures short went to 2,61,000, another run high. So the FII book has gone up every single session of this run and has never once turned. It is the only position on the board that has been right the whole way down. The retail naked put book fell to 7 lakh 43,000, but most of that is expiry settling out rather than a decision. Same reason total option open interest halved overnight. Never compare option open interest across an expiry. And the FIIs bought 17,952 crore of index options, the largest of the run, but on an expiry day part of that is settlement mechanics as well.
06Overnight: oil is the biggest thing on the screen
Brent is 99.34, up 1.45 percent, and is now 66 cents from 100 dollars. WTI is 94.30, up 1.34. Look at the path. Twelve sessions ago Brent was 86. Now it is 99. A hundred dollar Brent is a different macro for an oil importer, and it is arriving on a rupee that weakened against the pound, the euro, the yen and the yuan yesterday, on a day the dollar index actually fell. So we should have strengthened against those currencies, but we weakened against everything. That is a domestic signal, not a dollar signal. Watch oil and gas, paints, tyres and airlines. North Asia bounced straight back yesterday and this morning, the KOSPI up 1.2 percent after falling 0.59, Taiwan up 0.84 after minus 0.47, the Nikkei up 0.26 after minus 1.73. So I need to correct myself. This is not a clean reversal. It is chop, and in a downtrend we are seeing some bounce in Asia. America fell again on Tuesday, the S&P 0.58 down and the Nasdaq 0.32 down. The Dow future is roughly flat. Gold has bounced 0.4 percent but is still under 4,400 and still rated bearish.
07The plan: the order of the questions changed
GIFT Nifty is at 23,662, down 50 points. That points to an open near 23,560 to 23,600, so a gap down of around 40 to 60 points. That has changed from last night, which pointed to a flat open, and it opens us below 23,600, which changes the order of the questions. The first one is whether we reclaim 23,600 and stay above it. 23,700 now becomes an extremely heavy resistance and the second question, not the first. 23,700 is still the whole map. Under it the magnet and the drift are towards 23,750 to 23,800. Take it and hold it and it becomes a trigger, because the people who just wrote 40 lakh calls there are the ones who are going to buy it back. Resistance, keep a watch on 23,700, then 23,750, then 23,800. Support lies at 23,600, then 23,500, and the final support at 23,000 is a long way back. The band for today is 23,520 to 23,750. And let me be straight about the disagreement in front of us. The weekly board points one way, the monthly points higher, and the foreign futures short points lower. Those cannot all be right, and the one that has been right every single day of this run is the short. The risk that outranks the rest is oil at 99 landing on a weakening rupee. After that, America lower again, the foreign futures short at yet another high, and the Sensex expiry tomorrow with a max pain 322 points above spot on a call heavy board. That is exactly the shape the Nifty and the Sensex had going into yesterday, and yesterday the magnet lost. So no structure for me today, unless the market comes to a level. After a settlement that cost the maximum, the right size is smaller, not bigger.