If you frequently track gaps in Nifty Metal (Spot) you would understand that there are so far 10 unfaded gaps since the start of March 2016. Current leg of rally is almost 10 months old and during this leg we had hardly made only 5 gap downs, 23 gap ups and 10 unfaded gap ups. which indicates that we are in a emotional buyers market.
Also the Monthly trading sentimental charts are showing extreme readings which indicates that the reversal odds are high.
Why does that Matters?
It matters a lot from a short term or medium term investors perspective. An Emotional Buyers market is sort of overbought market where an short term/medium term investor rarely benefit in the given scenario. statistically, the odds of closing the gaps favor a lot. Chasing the trend at current junction might not be a wise decision though.
Previously we had spotted a emotional market behavior in CNX IT and the emotional market behavior in CNX NIFTY. As everyone know that IT sector under performs drastically compared to the benchmark index Nifty 50 and also made a negative returns YTD and CNX Nifty crashed from 8900+ levels to 8000 levels.
In any Emotional Market longer timeframe players are hungry enough to drive the market along with the mad crowd. This is not a healthy situation for a trending market.