Technicals for week ending – 29th May 2016.

Note : This is not a recommendation, these are just observations and an assessment of the positives and negatives.

Nifty Weekly

What a week and all charts just flipped!. Evidence has turned bullish for the Nifty index over the coming months vis-à-vis bonds but Gold is still in the game for now.

Observations (charts below):

Positives:

On the daily chart it is clearly visible that the 8k zone on Nifty had been visited several times in the past and we have punched through that with ease. On the weekly time-frame we have a positive crossover of the 10 & 40-week MA. MACD is above 0 and RSI above 50 – as long as both these indicators have been above 0 & 50 there has been an upward bias as per past history.       

After more than a year the Nifty/Bond ratio is above its 40 week moving average and average of momentum across time-frames has also turned in favour of Nifty. Also, the ratio has improved for the broader Nifty 100, 200 & 500 indices.

Most of the broader indices & sectoral indices are trading above their respective 40 week moving averages. With reading above the 0 line there has been a positive bias over next few weeks and months and when both these reading have hit the full score we have seen major uptrends. Till that does not happen looks like we might just be in for a range-bound scenario with moderate/low gains over next few months.

The Gold divided by Nifty and 10 Year bond index ratios are still above their respective rising 40-week MA’s indicating that Gold could be a potential outperformer over the coming months. Risk to this view is if Gold falls below its respective 40-week MA.

Though the Nifty has broken out but the Mid 100 & Small cap 100 indices are still stuck in the previous range and are testing the upper boundary. From a relative strength perspective these indices are lagging – the ratios of Mid/Nifty and Small/Nifty are below their 40-week MA and had a breakdown this week. This suggests that the rally is concentrated in the Nifty stocks and not yet spread to the Mid and Small cap indices. (Refer Weekly Relative Strength Charts section for more ratios).

The FII net long index futures positions is at the highest for this year and as a percentage of total open interest their net long position is at 51%.

Negatives: (there is always some bad news!)

Index PE ratio is back above 1 standard deviation of its long term average and the last chart is a comparison of Nifty and earnings rebased to 100 – the spread between these two (indexed) as a percentage of indexed earnings is a tad below 100% and has usually topped out above 100%. – of course earnings have been flat for a long time now and if earnings improve so will the ratios.

To conclude – the weight of the evidence has shifted to the bullish side with more positives. RISK to this would be the Nifty and Goldbees closing below their respective 40 week moving average. A close below that moving average and I will be out.

Nifty Daily & Weekly chart :

Nifty/10 year bond ratio chart :

Broader Indices/10 year bond ratio chart :

Indices above 40 week moving average :

Gold relative to Nifty and 10 Year bond index :

Mid & Small caps :

FII Index Futures :

Index PE & Earnings :

Sector Momentum Model Update

Updating our momentum model for the week ending 29^nd May 2016.

I first wrote about this model here Sector Technical Analysis: Sector Momentum Model

Technicals for week ending – 22nd May 2016.

Nifty Weekly

Still no change to previous week’s. Evidence still shows that Bonds or Gold might generate better returns than the Nifty index over the coming months.

Observations (charts below):

So far price action of this month has been within last month’s high & low which is called an inside month. If this continues for the rest of the month, then expect a volatile move in either direction.

On the daily chart it is clearly visible that the 8k zone on Nifty has been visited several times in the past and has acted as Support & Resistance. A break above 8k would be a positive but till then better to wait it out. Similar situation for the 17k zone on the Bank-Nifty.

The Nifty/Bond ratio chart is still below its declining 40 week moving average and we have a similar situation across the broader indices. Common theme in the past big bull markets has been that these ratios should be going up. So far we have not seen this happen – Better to wait it out before committing.

Most of the broader indices are trading above their respective 40 week moving averages but that is not the case with the sectoral indices. When both these reading have hit the full score we have seen start of major uptrends. Till that does not happen looks like we might just be in for a range-bound scenario with moderate/low gains over next few months.

The Gold divided by Nifty and 10 Year bond index ratios are rising and above their respective 40 week MA’s indicating that Gold could be a potential outperformer over the coming months. Risk to this view is if Gold falls below its 40 week MA.

Broader indices seem to be under-performing the Nifty index but when compared to the 10 Year bond index – the broader as well as sector ratios for majority indices are below their respective 40 week MA’s. Which means that Bonds are beating almost every index out there. (Refer Weekly Relative Strength Charts).

And finally on the shorter term time-frame – last chart suggests that FII net long index futures positions have fallen below their February and April levels suggesting that they are positioning for a pause or a fall in coming weeks.

To conclude – the weight of the evidence still suggests a stance to the neutral to bearish side over next few months, while the most important point to look for will be if we can breakout and sustain above 8k on the Nifty and 17k on the Bank-Nifty.

Nifty Monthly & Daily chart :

Bank-Nifty Daily chart :

Nifty/10 year bond ratio chart :

Broader Indices/10 year bond ratio chart :

Indices above 40 week moving average :

Gold relative to Nifty and 10 Year bond index :

FII Index futures :

Sector Momentum Model Update

Updating our momentum model for the week ending 22^nd May 2016.

I first wrote about this model here Sector Technical Analysis: Sector Momentum Model

Returns across Indices, Bonds & Gold

Technicals for week ending – 15th May 2016

Nifty Weekly

Still continue with the consolidation theme, and leaning to the bearish side TILL we do not close above 8k on the Nifty index & 17k on the Bank-Nifty index.

Observations (charts below):

On the daily chart it is clearly visible that the 8k zone on Nifty has been visited several times in the past and has acted as Support & Resistance. A break above 8k would be a positive but till then better to wait it out. Similar situation for the 17k zone on the Bank-Nifty.

The Nifty/Bond ratio chart is still below its declining 40 week moving average and we have a similar situation across the broader indices. Monsoon or no monsoon, don’t think it is going to be a dream bull run till we see improvement in those ratios and their respective 40 week MA’s start turning up!.

Most of the broader indices are trading above their respective 40 week moving averages but that is not the case with the sectoral indices. When both these reading have hit the full score we have seen start of major uptrends. Till that does not happen looks like we might just be in for a range-bound scenario with moderate gains over next few months.

On the VIX projected range chart we are treading close to the upper boundary and max high is around 8100 but with the addition seen in the 8k strike call option this looks unlikely to be breached in the short term (next 1-2 weeks).

Broader indices seem to be outperforming the Nifty index but when compared to the 10 Year bond index – the broader as well as sector ratios for majority indices are below their respective 40 week MA’s. (Refer Weekly Relative Strength Charts).

To conclude – the weight of the evidence still suggests a stance to the neutral to bearish side over next few months, while the most important point to look for will be if we can breakout and sustain above 8k on the Nifty and 17k on the Bank-Nifty.

Nifty Daily chart :

 

Bank-Nifty Daily chart :

Nifty/10 year bond ratio chart :

Broader Indices/10 year bond ratio chart :

Indices above 40 week moving average :

Nifty VIX projected range chart :

Sector Momentum Model Update

Updating our momentum model for the week ending 15^th May 2016.

I first wrote about this model here Sector Technical Analysis: Sector Momentum Model

Sector Momentum Model Update

Updating our momentum model for the week ending 8^th May 2016.

I first wrote about this model here Sector Technical Analysis: Sector Momentum Model

Monthly models update

Updated figures for the equity-bond rotation models as of Mar’16 ending.

I first wrote about these here:

Sector Technical Analysis: Buy & Rotate

Sector Technical Analysis: The Simple strategy…

Buy & Rotate model has been in Bonds since 30 April 2015

10 SMA model has been in Bonds since 31 August 2015

Data & charts for Buy & Rotate model: 

Data & charts for 10 SMA model: 

Sector Momentum Model Update

Updating our momentum model for the week ending 1^st May 2016.

I first wrote about this model here Sector Technical Analysis: Sector Momentum Model

Short term momentum model still remains in Metals & Realty indices