If you frequently track gap in Nifty (Spot) you would understand that there are so far 10 unfaded gaps since the start of March 2016. Current leg of rally is almost 8 months old and during this leg we had hardly made only 2 gap downs, 19 gap ups and 10 unfaded gap ups. which indicates that we are in a emotional buyers market.
Why does that Matters?
It matters a lot from a short term or medium 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 as current juntion might not be a wise decision though.
Previously we had spotted a emotional market behavior in CNX IT. As everyone know that IT sector under performs drastically compared to the benchmark index Nifty 50 and also made a negative returns YTD.
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.