Dow Theory update: New high in Transorpts

Just a small update that y'day Transport index hit a new high for the Year 2011.
The Industrial is still below the 2011 high of 12392.

This coupled with the new highs in US Small Cap index Russell 2000 shows that the US indices are on a bullish trajectory.

US Small cap makes new high: Bullish indication

US Small cap index Russell 200 has made a new high for the year 2011.
This is a significant development as the major index SPX and Indu are still below their yearly highs.
The small cap index is generally regarded as leading index and its turning up is shows investors confidence in the markets.

Attached is the chart:

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.

Qunatifying Nifty Bollinger Bands Breakout

The recent upmove in Nifty is definitely a good study case for Bollinger Band breakout study.

The index has broken out of the upper band and has been staying above the upper band for last 3 days.

In the last post I mentioned some of points which came into play in this move. Do read this post link here.

Since the main trend before this breakout was of range trading we needed two consecutive close above upper or lower band for any breakout to succeed. See Point # 2.

This time it happened. Also the index had one of the biggest move on first breakout  (> +2%) which was followed on the next day with ~ +1% close. The volume action was all out in favor of bulls on breakout.

This was one of the best breakout which we quantified earlier.

One thing to notice in such breakout was rise from range. So the bollinger band expansion should happen.
Well that's quite evident as the uptick in the Bollinger bandwidth. See chart attached.

Related Posts:
Qunatifying Nifty Bollinger Bands : First down side breakout
  
Nifty and Bollinger Bands: Range trading indications
  
Quantifying: Nifty and Bollinger Bands Strategy

India Sectoral Trend Weekly 25 Mar

Last week has changed a lot in the sectoral trend.
The week was a breakout from the range with Nifty moving up by 5%+ with CNX Realty and Bank Nifty up by 9% and 6% on weekly basis.

The major changes are as follows:

1. Nifty weekly mode has now come to Sell from Lev Sell mode. The index Lev Sell was for 8 weeks.
  The Lev Sell net change for the index was 2.5% which is very less for a Leverage mode. This shows that the major trend is bullish only. It is in the bullish trend that Lev Sell produces such small gains.

2. Banking and IT indices are back to Buy and Neutral mode. These two sectors are good bullish bets going ahead as they are outperforming the broader market.

3. The BSE 500 and BSE 200 indices also recovered to Sell mode indicating that there is recovery in broader market.

4. The recovery from Lev Sell to Sell shows that we have made the bottom for intermediate term.
   The color of Nifty weekly as of Monday open in Neutral.

The sectoral color:

Nifty VIX move in tandem on uprise

VIX index is generally regarded as fear index. The VIX represents the expectation of the volatility of the market through the options premium.

The general rule is that when Index falls the VIX index rises indicating the rise in premium paid for protection. Thats a simple theory but what if the VIX rises when the Index also rises. Well that move indicates a lot about whats happening in options.

Taking  today's example the Nifty moved up more than 2% and the Indian VIX index was up >3%. Chart.

This clearly shows that the some one was caught on by the today's move and that's why the rise in options premium.Analyzing the options data for Nifty index there was huge OI decrease in 5600 call which was crossed by Nifty spot and the index closed above that mark by 50 points i.e. 1%.

Worth noting is that there were only 2 15 mins candle which were -ive after Nifty crossed 5600. That shows the strength in the move. And this led to the covering by the call writers and thus rise in premium translating into rise in VIX.

All this was because 5600 was regarded as the line separating the bulls and bears. See post here (Extreme pessimism) and post here.

This move is exactly same as when Nifty crossed the 5500 in Sep after gap up opening.

Related Links on IV:
Nifty IV moving higher March 8

Nifty IV and HV: Not painting good picture Feb 7

Which index is more volatile Nifty or SP500? Dec 3

Nifty Hidden Bullish Divergence: Trend line breakout.

Here is a setup I was waiting for many days. Today it was triggered when the index moved above 5600 levels.

The setup is Hidden Bullish Divergence in RSI when RSI makes lower low and Prices do not make lower lows.
Since this setup is on weekly charts the move can be sharp also.


The last setup occurred at May lows and ultimately resulted in Sep breakout finally. Attached is the chart.

SEBI circular and my disclaimer

SEBI has come out with a circular regarding the blogs/ forum chatrooms etc.
The complete link is here.SEBI Press Circular.

My disclaimer:

The information and opinions in this blog is purely mine own and has been derived from the use of various Technical, Statistical or Quantitative methods.
I have no relation with the companies/stocks mentioned in this blog.

The views are personal and should not be used for any recommendation to buy or sell anything. Please use your own discretion or take advice from some qualified person for any judgement you take regarding the market.

Nifty and INR : The relation is telling something

For any country the Stock index and currency moves are many times correlated. The relation though is that Currency appreciation leads to upmove

Sometimes a move in one can foretell move in other.

There was a triangle formation in both Nifty and INR recently. Thats why the index and currency moves were very limited and confusing.

Well that seems to be over now as INR has broken out of the support of 45 levels from the triangle.
The Nifty index while is making higher bottom while the upside is at resistance of 5600 levels.

The INR move indicates that Index can also breakout from the resistance of 5600 levels.Chart.

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.

Nifty and Bollinger Bands: Range trading indications

Nifty has been in the sideways mode for last 4 weeks. Lets check the bollinger bands. What are they telling us?

There are two main noteworthy points about the charts:

1. The first is that the Index has made the last bottom (on 25th Feb 2011 without breaching the lower band.) The low was 5230 on Nifty cash.

2. The second point is that the Index reverted back on touch of the upper band on 4th Mar 2011. The high was 5520 on cash Nifty index.

What this indicates is that we are in a perfect range trend as of now till the upper or lower bands at 5615 or 5295 is broken. This is very much consistent with earlier view of range trading.

Going further lets check the ADX.
It is at 13 levels with bearish DMI at 26 levels. The ADX below 20 levels is range indicator and that the setup as of now.

Looking at the timeframe we have 6 weeks of range trading already in place. Though there is no set rules for the timeframe in range but there is for sure a titbit that the longer the range trading the bigger the breakout from it will be. Example: the 3 month range trading of Jan - Mar 2009.

India Sectoral Trend Weekly 18 Mar

The weekly sectoral trend is still on bearish mode. The no change in the trend shows the range trading.

Worth noting is the Sell is maintained in IT indices with last week CNX IT index getting sell of by ~3% on w-o-w basis.

Attached is the weekly trend.

India futures confirmation awaits for the trend

Indian Indices broke the key supports of 5400 and 10750 levels on Friday and that was the first breach of the support lines.

Today opening so far has been good indicating that the range trend is still valid and we can see more whipsaw unless the close in below 5400 again.

This is one of the most difficult phase for trend traders.

If the close today is below 5400 and 10700 levels then there can be downside momentum buildup here.
Lets wait and watch.

Got CMT from MTA finally

Hello All,
I want to share a news that I have got CMT status from MTA (USA).
It is after a long time since I cleared the level 3 exam in 2009 itself.

A big thanks to my sponsors. I really appreciate your sponsorship and help.

Regards

Nifty triangle completion near update 17 Mar

Nifty is stuck in a triangle which is completing the last leg now.

Since this time the index has higher bottoms in place the top is somewhat horizontal line at 5580 levels.

As of now we are in the last stage of this formation as the daily band is getting smaller and smaller. Can look for breakout in next 3- 4 days. It is difficult to predict the direction as of now.

These kind of higher bottom triangle generally have upside breakout but I would not bet my money on it. I will watch the 5600 and 5400 levels for the direction of breakout.

Attached is the chart.

India Futures: High volumes shows support.

Nifty has strong support at 5400 levels which is the savior as of now.

Last two days had strong buying happening intraday with the index moving up by more than 1% from the open.
Y'day the volumes were were in the 90th percentile and above indicating strong buying at 5400 levels.

Who would be buying at these levels when the other markets are falling? Good question and I do not have the answer about why?

Anyway the volume structure indicates that many times the fall in Nifty gets over when such heavy buying happens. The color as of now:

16-Mar	Weekly	Daily	180 min	Hourly
Nifty	Lev Sell	Neutral	Sell	Sell
Bank Nifty	Sell	Neutral	Sell	Sell

The daily color is now Neutral from Buy two days ago.

Indian indices nuclear effect visible

Indian futures came down sharply today on the Japan's nuclear explosion.
There is sure a high cost associated with such event and every nation has to pay and I feel every one should help Japan at their times of test.

Coming to futures I feel Put buying has to be done from here as the downside is high from here.

There is every chance that these events can affect a lot of countries and companies. There could a big effect on the earnings and revenues.
The insurance companies has to pay and they can sell off most of the assets parked and equity is the most liquid among all.

Going by history the Kobe earthquake took the markets down a lot as posted y'day here. And this one is most severe that any on other on earth in recent times.

India although is safe from the financial tremors but in recent future there is still no trigger for it to outperfrom. So Put can bring protection to the portfolio.

Japan: The macro effect. The effect is yet to be seen

First of all my sympathy for Japanese people and I pray to God that the situation does not worsen from here and the recovery for them to be strong.

Now what does the event reflects in numbers.
The major things are Future of Nuclear Power industry, Japanese debt, the GDP growth and the effect on their exports and the financial impact of the event.


I am pretty sure that the whole world will have to rethink of their push of Nuclear energy. Some protests have already been reported in Germany, UK and India. The major nuclear power equipment suppliers are GE, Areva, Westing house to name a few and state owned company of Russia. The Uranium suppliers from Canada and Australia can also be impacted.

The Japanese have the highest debt per capita of $ 44,722 as of Jan end. The only good thing is that about 75% of that internal debt. But that sure can limit to finance the recovery. The Govt was alrady under pressure to reduce the debt and is now faced to raise more. The BoJ has already doubled the massive quantitaive easing program to $ 120 bn.

Third the demographics of Japan is completely changed from the WW II and is now much more older. This sure can be a bit of dampener if they do not immigration some workers from Asia.

The Kobe earthquake effect was of 2.5% of the GDP. They counrty took about 2-3 months to recover from the shock itself leave the recovery.

Here is the chart of the Index at that time.

The equity market recovered after 4 months later.

I am also more worried if any Barrings bank like event this time as the index has plunged 6% in a uptrend.

The large picture macro buy would be Steel companies in China and Infra stocks in Japan. More about that later on.

India Sectoral Trend Weekly 11 Mar

India sectoral trend showed not much change from last week.

Most of the Sectors gave some of the gains of the last week.
The weekly candle in most was of Doji near the lows which indicates that there is some respite in selling coming at low levels.

Tech index is still relatively better placed then rest of the indices as it is only sector in Sell mode while others are in Lev Sell mode.

Here is the complete color:

Nifty Bank Nifty futures: Stuck in Neutral zone

Nifty and Bank Nifty futures are stuck in neutral zone.
The various indicators are at mean levels like Daily RSI at 50 levels. It has been there for last  weeks.

The intraday timeframe though showed weakness y'day. It needs to be seen if that persists below the crucial support levels of 5400 and 10650 levels.

The trend as of now is

14-Mar    Weekly    Daily    180 min    Hourly
Nifty    Lev Sell    Buy    Sell    Sell
               
Bank Nifty    Sell    Buy    Sell    Sell

US Indices and Commodities vs 50 DMA

The US indices y'day closed below the 50 DMA after 130 days. Here are the charts

 

The commodities meanwhile are still above the 50 DMA. The Base metal index has broken the 50 DMA.

Is all this sign of QE ending?

Nifty and Magic of 13 SMA

There is something special between Nifty and 13 SMA these days.

The index is seeing a spurt whenever it it touching it. Attached is the graph below.

Today it is at 5452 levels so lets see how Nifty behaves at those levels.

Timeframe Trend Summary today:

11-Mar	Weekly	Daily	180 min	Hourly
Nifty	Lev Sell	Buy	Sell	Neutral
Bank Nifty	Sell	Buy	Sell	Neutral

FII flows strategy: Buy on dips

The FII and DII are large movers of the Indian markets.

Their recent buying/selling figure can be of some idea in this range market.

The FII have been buying the India equities after two months of selling. They have bot more than $1.1 bn till now. The DII on the other hand have been buyer for last 3 months and have bot about $60 mn till now.

The Nifty till now is 3.7% up this month.  Going further lets see when has FII buying w.r.t market.

I have considered the close and open change as that can correctly indicate the buying and selling pressure.

The above chart clearly shows that FII have been aggressive by buying on dips.

And that’s the only strategy right now. I mentioned it in my post that indices are covering the losses intraday.

India futures: Range trading: Timeframe trend

Indian Indices are trading in a range. The indices though have slightly bullish till they hold 5470 levels.

Lets see how the different timeframe trend is:

As can be seen that the trend is alternating in the time frames which is typical of confusion state.

Its time to relax and learn something and trade light.

India Futures showing momentum: Resistance nearby

Nifty and Bank Nifty futures are still in buy mode on daily charts. The indices are covering the losses intraday.

The resistances though are very close so that can decide that will they turn back from 5600 and 11100 levels or close above them.

The daily bollinger bands are still flat so can expect some more range trading here.

Nifty IV moving higher

Nifty IVs cooled down after the budget and from the last update on 26th Feb. The current IV is higher than the 30 Day and 60 Day HV's.

The IV are not only higher than average but also highest among major stock indices of the world. Here the snapshot:

Worth noting is that the 1 month IV for the Asian Indices are higher than the 3 month IV's.

Looks like funds are bearish for near term but see the indices bullish for next 3 months.

Nifty Bearish Death cross: Breadth following: Is it time for a rise?

Nifty had cross of 50 SMA and 200 SMA. The last such occurrence was in March 2008.
The cross signifies the bearish momentum which has been in place for last 3 months.

Last time the cross took about 2.5 months from the peak and this time it took roughly 3.5 months from the peak.
The 200 DMA though is still rising which is the only bullish sign as of now.

Just a quick observation: The markets after the bearish cross ends higher for next one month. The previous probability is at 70%.

The Bank Nifty cross came last week which shows the banking sector weakness.

Doing such a analysis on F&O stocks shows that 75% of the stocks have bearish cross as of yesterday.

This is clearly a bearish breadth of the market. More details about this in the State of Market report later.

For futures the 5600 and 11100 are resistance for Nifty and Bank Nifty with support at 5400 and 10700 levels. Looking for more range trading here.
In time like these the ladder options strategy is a good one to adopt.

India Sectoral Trend Weekly 4 Mar

Last Week all the sectoral indices rallied with Nifty itself up 4%. This was more of the Budget rally we witnessed.

Since the recovery more or less stalled at Feb highs indicates that the market trend is bearish.

The color of most of the sectors though still remains in Lev Sell or Sell mode.
Not a single sector is in Neutral or Buy mode.

The Bank Nifty and BSE Bank Index is now in Sell mode recovering from Lev Sell mode.

Here is the complete sectoral picture.

India Futures: 5600 is the bulls barrier

Nifty is not crossing the 5600 levels. The close below opening levels on Friday indicated that sellers are looking for higher levels for sell.
The fall came near the 200 DMA (exponential.) Now bullishness will come on close at 5600 above levels.

The sell came at today's open below 5500 levels.

The Nifty bollinger bands are flat and Nifty reversing direction on touching the lower and upper band. The upper is at 36.8% retracement adds more to the resistance at those levels.

All this indicates that the market will be in range mode for some time. Can look at options trading for range behavior now.

HFT: The rise of the picosecond

Today let me share a news article on High Frequency Trading where the trading in near future can be even faster than millisecond. The term of breakup of second is "picosecond." i.e. one trillionth of a second.

How will this affect the traditional trading is yet to be seen?

The article:

Just when you thought high-speed cash equities trading could not get any faster, trading geeks have thrown a new concept into the mix: the picosecond.

 

A second is a long time in cash equities trading. Four or five years ago, trading firms started to talk of trading speeds in terms of milliseconds.

A millisecond is one thousandth of a second or, put another way, 200 times faster than the average speed of thought. In the time it took your brain to tell your hand to click on this article, a broker or market-making firm trading in milliseconds could fill hundreds of orders on an exchange.

Milliseconds, however, are now ancient history. In the past two or three years, trading speeds have been shaved down to inconceivably tiny increments: from milliseconds to microseconds, and more recently to nanoseconds.

But in recent weeks trading geeks have started to talk about picoseconds in what is a truly mind-boggling concept: a picosecond is one trillionth of a second. Put another way, a picosecond is to one second what one second is to 31,700 years.

Speaking at a London conference on Tuesday, Donal Byrne, chief executive of Corvil, a high-speed trading technology company, caused a ripple of audible incredulity throughout the room when he suggested that trading speeds could be reduced to picoseconds in the not too distant future.

Read complete article at  The rise of the picosecond.

India futures change in color

Nifty daily color is now Buy after today's open. If the index closes above the 5600 it will be considered bullish sign and the weekly color will change to Sell mode from Lev Sell mode.

The hourly charts have been in buy mode from 5410 levels and Bank Nifty from 10700 levels.

Today we have got the bullish confirmation in Daily charts. Attached are hourly charts.

Quanting India: What does a 3% rise of Nifty means?

Nifty moved up 3% with the day open being the low and the close the days high. Single side session.

These kind of moves are rare and has a probability of 1-3% which is quite extreme. They are outliers and make the fatty tails.

Anyway what does these kind of move implies going forward. Lets dissect it.

There are many ways these moves can be analysed. I used the following criterion:

1. Is its a bull or bear phase?
2. What is the color of Weekly charts? (Buy/Sell or Lev Buy/Lev Sell)
3. When the nearest bottom (or top for bullish phase) occurred?
4. Previous instances of such 3%+ moves.
5. And lastly the volumes on that day.

The main theme that came out is that in Bull phase these moves come mainly at the top formation while in the bear phase these kind of moves do break the otherwise decline while further upside is not always there.

The top (Close) of such moves do offer resistance while bottom (Low) does not give much support unless it is the first lowest low. In bear phase the move after such days does become more range bound than trading (going by occurrences in past.)

Also there is remarkably more such instances in bear phase than in Bull phase unless the market is recovering from a major bottom. This shows short covering moves in bear phase.

Since we are already in bear phase, I feel that we can expect some sideways trading here with 5600 to be resistance. The trading from here will be erratic with lesser trend trading opportunities.