What was Unique About the August series. What Lies ahead For the Markets Now

August series for 2013 was a unique month in lot of ways.  This will also go down as one of the trading outlier months for more reasons than not.

What happened in August that made it unique?

Point No 1: Well for starters markets showed tremendous amount of volatility with more those acceptable volumes. We witnessed major index futures moving to the tune of 5-8% on some of the days. This is something that we don’t hear often in advanced market. Do you remember when was the last time Dow jones or S&P moved to that extend

The interesting part was that we witnessed a gradual downside trend despite this move and more that acceptable volumes.

Point No 2: Most days in August saw a gap up or gap down of 2% plus on the major indices and yet on many days we didn’t see a follow up move on the side of the gap. This is something unusual for major indices. While our markets are known for this. The frequency was staggering.

Point 3: Our long time readers will recall that way back in Jan-Feb 2013 we had written that Weekly ATR was at its all-time lowest value and we should see volatility increasing over the next few months. This is what we exactly saw in the last few months. With Volatility peaking to a unusual high levels in August. This was in expected lines, but at the same time now the daily ATR stands at very high non sustainable limits.

Point 4:   In august thanks to increased volatility we saw India VIX peaking to its highest values since Mart 2011. VIX jumped significantly clearing indicating decreased risk appetite and confidence in the investor segments.

Now what lies ahead for September:

NIFTY FUT CHARTS-2ND SEPT -2013

Since the volatility indicators have deviated significantly chances are they will consolidate here. But even then since they are at such high values we expect a moderate consolidation to come through. This only co relates to the rate of market move and not the market levels.

Trading levels wise Critical swing hurdles lie near 5530 levels and clearing that we are all set to test 5605 levels on the upside. It will be important to see if we manage to close above those zones to indicate any signs of trend reversal on the charts.

While on the downside 5450 and below that 5300 will form a strong base for the series.  From a swing trading point of view it may be good to trade reversal within these zones both at upside and downside and look for a break out trade outside this trading zone.