Insight into why the NIFTY is probably heading down
- Thread starter SwingKing
- Start date
So what is the choice..
Become super comupter and processs all the info from all over the world and trade based on that.. OR
- Look at the chart, and define understand WHAT it is tell you and trade that.. Rather then getting lost in WHY it is doing that.
At the end of the day, we have limited capacity to process info so better to understand what to focus on and what to ignore.
Job of Media is just to sell the news and get the viewers/reader. If mkt is going up, they will find +ive stories and if it is going down then they will find -ive stories. So why bother about them.
Happy Sensible Trading
Become super comupter and processs all the info from all over the world and trade based on that.. OR
- Look at the chart, and define understand WHAT it is tell you and trade that.. Rather then getting lost in WHY it is doing that.
At the end of the day, we have limited capacity to process info so better to understand what to focus on and what to ignore.
Job of Media is just to sell the news and get the viewers/reader. If mkt is going up, they will find +ive stories and if it is going down then they will find -ive stories. So why bother about them.
Happy Sensible Trading
If you believe so, then better make a LT portfolio and enjoy the returns. It is good you have identified yourself as someone who does not bel in such signals. This is the most difficult part. Most of the traders can never identify their type and hence lack conviction.
Now make good use of what you have written. Else its just pointless.
Good luck going ahead.
Tc.
Now make good use of what you have written. Else its just pointless.
Good luck going ahead.
Tc.
Insight into why the NIFTY is probably heading down - II
The last time I started this thread, the market's were at 5300 levels and I had given some valid reasons on why the market's should be heading down. After about 1 week of my post, the market's fell from 5300 and tested the lows of 4700 -4800.
This time around, I am again expecting the market's to start correcting. However, the reasons this time are not completely technical. Let's begin.
1. Divergence in Countries - China and India, somehow follow each other. If you map out the indexes of the two countries, China and India show similar movements. Whenever there has been divergence in their prices, either of the market's have corrected. India has made a new high (52 week) whereas china is struggling to cross that mark. There is significant divergence between the two indexes.
2. Divergence in Indicators - Advance decline line has been continuously making lower lows and lower highs. Now, this is a very bearish indicator and shows that internals of market's are actually very weak. Market's are rising with fewer securities rising and this is never a healthy sign for the markets. RSI and other momentum indicators are also showing similar activity. Though divergence is not 100% accurate, it is still very useful in market analysis.
3. Bond Yields, Prices of Commodities and Inflation - Now, the 10yr Government bond yields are steadily moving upwards. Now, this is never a good sign for the markets. Bond prices and stock markets move in same direction and Bond Yields and Stock market move in opposite direction. Similarly, rising commodity prices are steadily putting pressure on prices which in turn is leading to high inflation. Now this has two implications, firstly, commodity prices directly impact bond prices (bond prices have been falling) and secondly, rise in commodity prices (leads to rise in inflation) which pushes the interest rates higher (never good for stock markets). Dollar is currently rebounding which is keeping commodity prices in check (Dollar and Commodity prices share an inverse relationship). Soon, the dollar will resume its downward journey and will lead to commodity prices being pushed higher. With interest rates in U.S. so low, there is no where for the dollar to go except down. The same intermarket relationship is valid for U.S. market's. One needs to be very circumspect now going forward.
4. Derivative Data - Derivative data is also suggesting similar kind of story. The volatility index is near all time low levels and the Open Interest figures are touching all time high levels. Now, many analysts do not pay attention to these factors and usually discard them. But, historically, these indicators have been accurate enough to call an intermediate top. When you couple the data with the factors mentioned above, then the significance of the same increases to a larger extent.
5. Long Term View: 4 Year Cycle - Long term view of the Economy remains intact. The kind of sectors (Transportation, Technology) which are currently driving the economy suggest that we are currently in a economy expansion phase. Hence going forward things do look healthy. The above mentioned factors will come into play for the shorter term horizon. Hence, if things do play out the way mentioned above, then it would be a very good opportunity to enter the market's.
Above mentioned points are more from a economic perspective and hence will take time to materialize. Market's may well go higher as intermarket relationships take time to playout. But there is no doubt that we are rising on shaky grounds at the moment. Perhaps a good correction from here would indeed be very helpful. At present its better to keep tight trailing stop losses. As traders, we can never anticipate a market top and hence we must ensure riding the trend.
Lets see how things shape up.
The last time I started this thread, the market's were at 5300 levels and I had given some valid reasons on why the market's should be heading down. After about 1 week of my post, the market's fell from 5300 and tested the lows of 4700 -4800.
This time around, I am again expecting the market's to start correcting. However, the reasons this time are not completely technical. Let's begin.
1. Divergence in Countries - China and India, somehow follow each other. If you map out the indexes of the two countries, China and India show similar movements. Whenever there has been divergence in their prices, either of the market's have corrected. India has made a new high (52 week) whereas china is struggling to cross that mark. There is significant divergence between the two indexes.
2. Divergence in Indicators - Advance decline line has been continuously making lower lows and lower highs. Now, this is a very bearish indicator and shows that internals of market's are actually very weak. Market's are rising with fewer securities rising and this is never a healthy sign for the markets. RSI and other momentum indicators are also showing similar activity. Though divergence is not 100% accurate, it is still very useful in market analysis.
3. Bond Yields, Prices of Commodities and Inflation - Now, the 10yr Government bond yields are steadily moving upwards. Now, this is never a good sign for the markets. Bond prices and stock markets move in same direction and Bond Yields and Stock market move in opposite direction. Similarly, rising commodity prices are steadily putting pressure on prices which in turn is leading to high inflation. Now this has two implications, firstly, commodity prices directly impact bond prices (bond prices have been falling) and secondly, rise in commodity prices (leads to rise in inflation) which pushes the interest rates higher (never good for stock markets). Dollar is currently rebounding which is keeping commodity prices in check (Dollar and Commodity prices share an inverse relationship). Soon, the dollar will resume its downward journey and will lead to commodity prices being pushed higher. With interest rates in U.S. so low, there is no where for the dollar to go except down. The same intermarket relationship is valid for U.S. market's. One needs to be very circumspect now going forward.
4. Derivative Data - Derivative data is also suggesting similar kind of story. The volatility index is near all time low levels and the Open Interest figures are touching all time high levels. Now, many analysts do not pay attention to these factors and usually discard them. But, historically, these indicators have been accurate enough to call an intermediate top. When you couple the data with the factors mentioned above, then the significance of the same increases to a larger extent.
5. Long Term View: 4 Year Cycle - Long term view of the Economy remains intact. The kind of sectors (Transportation, Technology) which are currently driving the economy suggest that we are currently in a economy expansion phase. Hence going forward things do look healthy. The above mentioned factors will come into play for the shorter term horizon. Hence, if things do play out the way mentioned above, then it would be a very good opportunity to enter the market's.
Above mentioned points are more from a economic perspective and hence will take time to materialize. Market's may well go higher as intermarket relationships take time to playout. But there is no doubt that we are rising on shaky grounds at the moment. Perhaps a good correction from here would indeed be very helpful. At present its better to keep tight trailing stop losses. As traders, we can never anticipate a market top and hence we must ensure riding the trend.
Lets see how things shape up.
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Bascially indicators are indicating correction for quite some time, But FII money inflow is postive and hence market instead of correcting is going up for the last 8 weeks continuously. Market will only fall if FII start taking their money out.
When they can get USD at near zero percent interest from US, they are borrowing in US and investing in all growing markets. They will look at returning the money only if US funds stop or become costly
Even on a down day FII in flow has been postive.
What is their action plan, only they know.
When they can get USD at near zero percent interest from US, they are borrowing in US and investing in all growing markets. They will look at returning the money only if US funds stop or become costly
Even on a down day FII in flow has been postive.
What is their action plan, only they know.
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There are more countries in the world then India and US. And Global Smart Money (FII) has lot more options with them then we can even think of.
Yes, the fund is flowing in cause INR has become attractive after rate increase..but there is limit to it. Stronger INR is not good for our export and hence overall growth. It As soon as you see that INR-USD has reached a balance level, Indian mkt may not look that attractive.
In my view, current environment is where nobody is bothered about risk and hence risky asset class like emerging mkt, commodities, oil etc are attracting the funds. But as soon as risk sets in, the funds will start moving out of risky assets into more conservative assets including cash.
Oil is zooming.. 24% up in 2 month from the level of 70 to 86 now. This is going to trigger inflation next month and then banks will start tightening the rope which is not good for stocks or risky assets.
For the time being, Lets enjoy the sun till it lasts and be prepared to face the rain when it comes or when we see darker clouds around.
Happy Trading
Yes, the fund is flowing in cause INR has become attractive after rate increase..but there is limit to it. Stronger INR is not good for our export and hence overall growth. It As soon as you see that INR-USD has reached a balance level, Indian mkt may not look that attractive.
In my view, current environment is where nobody is bothered about risk and hence risky asset class like emerging mkt, commodities, oil etc are attracting the funds. But as soon as risk sets in, the funds will start moving out of risky assets into more conservative assets including cash.
Oil is zooming.. 24% up in 2 month from the level of 70 to 86 now. This is going to trigger inflation next month and then banks will start tightening the rope which is not good for stocks or risky assets.
For the time being, Lets enjoy the sun till it lasts and be prepared to face the rain when it comes or when we see darker clouds around.
Happy Trading
. Rajadawn,
Indicators are just reactionary. They react to the price action as such. They are not the cause for the market's to move up or down. Coming back to what you have written, yes the indicators are confirming our views on price analysis and macro economic analysis. It has to be seen if this has a cascading effect or not. So let's be patient and see how things span out.
Tc
Indicators are just reactionary. They react to the price action as such. They are not the cause for the market's to move up or down. Coming back to what you have written, yes the indicators are confirming our views on price analysis and macro economic analysis. It has to be seen if this has a cascading effect or not. So let's be patient and see how things span out.
Tc
Yesterday we also saw bearish engulfing bar.. It was 108 points range day compared to average range of 68 points. That means, we saw bearish price action at 1.5 times of current mkt range. Today's candle with lower low is also confirming the action of yesterday. As it is rangebound day so far (at 2.45 pm), it is possible that last minute action could make it either green or red with very little effort. But that doesn't change the broader picture.. reality is we spent major part of today below yesterdays low and yesterdays close.
Lets see what comes out on weekend and on Monday to get clearer picture. (just my views )
Happy Trading
Lets see what comes out on weekend and on Monday to get clearer picture. (just my views )
Happy Trading
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