State of Market: Large Cap Breadth following

The Nifty index has rallied 8% this month and has outperformed the regional peers.

The move has been limited mainly to large cap namely the Nifty and BSE 200 indices.
Attached is the screenshot of the Indices showing Nifty outperforming all the other indices.

This is the same kind of move we saw in Sep 2010 where the Nifty index outperformed the other broader indices.

Analyzing the BSE 500 stocks w.r.t Nifty.
Nifty has crossed the 200 DMA while BSE 500 index is still below the 200 DMA.

There are 26% of the BSE 500 stock above 200 DMA which shows the poor breadth as of now.

The Bullish MA setup is in only 15% of the BSE 500 stocks till now.

There is pickup in volumes recently in BSE500 index which is above average. For any full fledged rally we need the volumes to return to broader market.

India Sentiment poll analysis: Extreme bearishness

Today ET gave results of the Survey  Is the market likely to correct in the near future? Link Here.

The results were Yes : 65% No 29% Can't say 6%.  They have not given the sample size but if one read the comments (there are 4 only) then the sentiment is extremely bearish.

So lets see how much % age is truly bearish. We can remove the Neutral 6% to arrive at correct number.
The Bullish % age is 29/94 = 30% while bearish is 65/94 = 68%.

Well the bearish %age at 68% which is just bordering the crucial 70% and above of extreme sentiment reading.

These kind of near extreme readings for sure changes the trend for some time.

I just wish we have more direct survey like these to gauge the market sentiment which is a crucial element to Technical Analysis. US has whole lot of indicators just based on survey like these. More here.

State of Market: New lows at extreme

Last State of Market report on 1st Feb (Link here) was about the increasing selling pressure with a little divergence.

In this edition the divergence is gone and the New lows has been increasing day by day.

First the liquid F&O stocks analysis. The color of the stocks indicate that the whole market has just one color which is red. The readings are:

These are new levels which are generally hit in bear market sell offs.

Going further to BSE 500 index the story is same.

The number of stocks below the 200 DMA are 90% which was 80% on 1st Feb. 

No respite here. Selloff is in the broad market also.
But this figure does not tell us completely if we have hit the oversold levels as the trend is towards bearishness so the broad market would follow also.

Same logic goes for RSI and macd also as in the bear phase the bands of the indicator changes and it would not be good to consider RSI below 30 as oversold.
Checking the New highs / New lows ratio for NSE exchange as whole:

So lets see the parameters based on the standard deviation of the price which is the best given the current circumstances.

As of now there are 61% of BSE 500 Index stocks trading below their 2 Standard Deviation price.

All of the above points to bearishness and for sure the change in larger trend to bearishness.

State of Market 1 Feb: Breadth is at extreme lows: No signs of buy now

State of Market report tries to capture the pulse of broad market by analyzing the stocks and other factors of market breadth. The previous issue was about the stocks diversion from 200 DMA and the breadth did pulled Nifty below 200 DMA. Link here.

The bearishness still remains at extreme though some divergence is there at the lows today. Analyzing the stocks color with last report.

Worth noting is that Markets have come down but the breadth slightly has improved since 19 Jan as seen above.

This kind of divergence generally happens in the last leg of fall although this can keep on changing, so no perfect conclusion can be drawn fro this alone. Since the above stocks are liquid ones lets see the broader market picture if there is any such divergence.

The broad market index BSE 500 does not show any kind of divergence. BSE 500 stocks vs 200 DMA.

The stocks below 200 DMA has now increased to 80%, earlier it was 67%.

Going further let me analyze  the New high and New lows and the Advance Decline graph for NSE as a whole.

 While the new highs are getting less and less the new lows are increasing. There is no divergence on that chart as well.
The Advance Decline line is downward sloping one suggesting the selling pressure is huge at every highs.

State of market 19 Jan update;Bearishness at extreme

I have not updated about the State of Market for quite some time now. The last report was bang on time as the stocks did moved lower after the update on Jan 10. Post here.

The bearishness now is at extreme as a very high %age of the stocks are in sell mode. Table below:

The ratio of  buy and sell %ages are at extreme for last 6 months which shows deep oversold levels in the not only for the index but also for the breadth of the market.

We can for sure see some rally from here which can correct this over sold levels.

Taking stock of the market breadth from BSE 200 and BSE 500 stocks.

I tried to calculate the number of stocks below 100 and 200 DMA for the above indices. The results:

Stocks of BSE 500  below 100 DMA is more than BSE 200 Index  for both the 100 and 200 DMA count. This indicates the sell off was more in midcap & small cap stocks.

Worth noting is the # of stocks below 200 DMA which is higher than 50% while Nifty has still not broken the 200 DMA. What it means? As per my understanding it shows that the market can bounce very strongly as Nifty is staying above the 200 DMA and this can sure trigger some buying in mid cap stocks.

Do write back with ur interpretions.

State of Market 10 Jan: Change in Outlook

The state of market completely reversed from Bullishness to Bearishness. See the last post.
This is consistent with the chart of Nifty which shows we are in a bearish range.

First the mode reports.

Now  lets check how are stocks w.r.t 50 and 100 DMA.

Conclusion: The state of market is Bearish with 50% of stocks in sell mode.

The number of stocks above the 100 DMA is also quite low at 21% which shows that there are less chances of Nifty pulling above 100 DMA at 5956 as the upward pull is quite less.

Also note the difference between Stocks above 50 DMA and above 100 DMA which is just 2%. This shows that bullishness is in very selected pockets.

Nifty in Regression channels.

This indicates the current trend as per the regression from last peak is down. Consistent with our state of Market.

State of Market 3 Jan: Bullishness follows

Nifty gave the leveraged buy signal on 22 Dec in post here. The Index still continues to be in Lev buy mode. The index has made two gap ups in the process. Updated chart.

Doing the state of market analysis shows that about 50% of the stocks are in leverge buy mode with 75% in total buy mode.

I have chosen the liquid FnO stocks for the analysis as by doing so the liquidity can be tracked in a better way.

India State of Markets

We can found the state of the market by knowing the state of major stocks. By doing this we can get to know what's the undercurrent of any move.

With this understanding I tried to get the state of Market from the top 100 liquid stocks traded in futures.

The methodology used is based on the price action with the Moving Average and Macd. If have earlier used the strategy in the post about sectors here. I will write a detail post about this strategy later.

The results are complied on Buy, Neutral and Sell basis.

As of today the results are as follows.

This shows roughly equal number of buy and sell with about 15% stocks neutral. There seems to be no inclination towards any side.

The conclusion that can be drawn is that the markets could remain range bound for some time.