Excerpts from my comments to subscribers:
Who is in control?
We ask this question since we want to go with the long term players who have the strongest influence over the markets. When there is a conflict between the day traders and the long term players, we find that the long term view always wins. This is reasonable because the long term view is supported by the larget amount of funds available in the Market.
So, our question is: who is in control? Are long term players in control of the market? The answer seems to be: they are currently absent. Their absence is reflected by the breaking of support levels, and, the dramatic declines we see intraday.
My sense is that the market is currently in control of the day traders. When the market is in control of the day traders, we are likely to see volatility. Day traders have a very short time span, which is why there are sharp up and down moves.
Long term players are probably waiting for a base building process. They think: we cannot say where this correction will end. So why rush to buy now? Let the market stabilise.
Yesterday, I suggested that all long positions should be closed if the Nifty were to go below 5950 without waiting for the close. Today, in retrospect, this seems to have been a good idea. We are currently in a correction. We must wait for the correction to give signs of coming to an end. These signs will come over time, not suddenly. So, wait!