Market outlook for the day

The momentum which carried global indices thus far seems to be waning.Weak large cap stocks, heavy foreign institution selling & significant OI addition in midcaps are a potent mix for a selloff.My warning of booking profits and cutting losses paid of yesterday as stocks and indices were brutally hammered. More handy was the advice to put stop losses in small caps, as they are difficult to sell once everybody rushes for the exit. The US markets, on their part showed resilience and haven’t gone down as much as Obama set the agenda for more regulation.My take is that no regulator in the US blew the whistle in this meltdown. So having more regulators may not help.Charts have been damaged. The downward momentum has gathered speed. But as most stocks didn’t show any recovery till the last, there would be less pressure this morning form the BTST brigade and stocks could see some shot covering. The indices have closed below their 20 DMA. A second day close below the average will confirm the short term downtrend.The FIIs have continued to short and support has emerged at the 4300 level from put writers. However, this remains a sell at rallies market. Day traders, of course, can trade either way. My friends from the institutional side may use this dip to pick up Infosys as the Nifty switches to the free-float methodology from June 26.