FnO Datasheet - 29-08-11

"As I said, initially, next week is a shortened week. Remember further that we have had 4 continuous negative weeks. A moderately positive week is not an abnormal thing now, and may be the course of action to push out the week shorts."

a 200 point rally in Nifty can not be considered a moderate rally. :) I have been wrong in that. Still, considering the amount of fall we had in the last 4 weeks, this is not an abnormal thing.

My notes:

1. FII bought 45K contracts yesterday. Their net OI has decreased by 25K contracts. So, we can consider they have closed shorts to that extent.
2. Total NF OI has decreased by 10L contracts. So, shorts to that extent have been closed.
3. Volatility has decreased considerably. That resulted in option premiums being decreased.
4. I said that 70% of September OI has been rolled over in last 2 days. I had no way of knowing whether they are shorts or longs. Though OI increase with price fall indicates shorts in the system, Big institutions can hold on to their longs for considerable period and hence, they might be even longs. That is to say, FII bought longs @ 4850, NF falls to 4750, they still buy NF, so OI increases - but what we assume shorts are in fact longs. Considering the hypothetical explanation, I said, I changed my stand to neutral from bearish. However, today provided significant clues to the nature of OI. Today with price rise, and net buy By FII, the net OI has decreased. It means that it is short covering. So, we have to conclude that the huge NF roll over is shorts.
5. Now, by thinking that there are huge shorts in the system, even with a rally of 4%, only a tiny portion of them covered at EOD. FII 22K out of 5L, total 10L out of 2crore. So, I consider them to be weak shorts exiting.
6. Now, why there is no panic button pressed? There could be two possible reasons. Firstly, the bears have been caught completely off-guard and they are waiting for a pullback to exit, or Secondly, they know that this is a dead cat bounce, and market will resume its journey to south soon. Further action in the next few days will confirm one of them.
7. Remember, Institutions have been short from very high levels, 5700 from last month, and around 4900 this month, so a 100-200 point rally they can easily hold. Further, they will be making money by the written options, and the calls bought. So, do not get into a conclusion that a bottom is in place. Be bullish, but be skeptical.
8. You can find the entire data sheet here.

I request some feedback/interaction/participation from your end. That is what makes the notes sharing interesting and useful. It is not that I am seeking attention, but that is the minimum that we can do to encourage the blog owner, who willingly shared his space for all of us.