Updated
figures for the equity-bond rotation models as on end October’16.
I
first wrote about these here:
For
the benchmark indices – Both the moving average and momentum models are still
invested in Nifty total return index.
Monday 31 October 2016
Sector Momentum Model Update
Updating the short term momentum
model for the week ending 30th October 2016.
Sunday 23 October 2016
Technicals for week ending – 21st October 2016.
Note : This is not a recommendation and I am not a registered analyst,
these are just my observations and an assessment of the positives and negatives
from a longer term point of view.
Nifty Weekly
Still
sticking to a broader theme of a consolidation with a positive bias as
mentioned in the previous weekly posts. On a longer-term time-frame data still
suggests to keep a positive stance on Nifty. Exit rules – weekly close
below 40-week MA or monthly close below 10-month MA.
Observations
(charts below):
Chart 1 Some global context here – on the weekly charts of
the ETF’s of Emerging markets (EEM) and BRIC (BKF) we see that both are sustaining well above support zones
that go back 5 to 6 years! The 40-week MA on both these ETF’s had been
flattish for years and have now started sloping up. Sustaining below the
support zones would be worrying but till then the scenario seems to be
positive.
Chart
2 On the weekly charts the Nifty
index gave a bit of a scare last week but closed this week well above the
support zone. Drilling down to the smaller time-frame daily chart this price
action could be called a failed break-down but I am not so sure about that. Anyways,
other indices like Nifty 500, Midcap and
Smallcap indices are way above supports and even above the September expiry day
(surgical strike) highs. The broad strength still makes me lean to the
positive side and we have not seen any break-downs in the broader indices. Even
Bank-Nifty which has the highest weightage in the benchmark Nifty has showed
strength by closing above supports and previous week’s highs. The momentum based Nifty Alpha Index is
also in new all-time high territory!
Chart
3 this one had showed some warning signs but is back in positive territory now
- the average and median distance of
the sectoral indices compared to their highest 52 weekly closing. Both the
readings took a hard knock the week before and recovered this week. Current
readings are at -4.5% and -2.6%. I have not tested this but on a glance if the
readings stay below 8/10% for longer it has led to corrections in the benchmark
index.
Chart
4 On intermarket strength we still have
Metals, Realty and Auto in the lead. The defensive sector indices such as FMCG,
Pharma and IT are at the bottom ranks so RS ratios sorted by them being above
40 week moving averages suggests that there is no flight to defensives yet. Also,
if you refer to the page “Weekly Sector Relative Strength
Charts” all broader indices are beating Nifty
and the 10 year bond index and most sector indices are beating the 10 year bond
index – not a negative from any angle! Since Metals, Auto and Realty have been
the leading indices on a relative basis, keep an eye on these indices for any
breakdowns – If they break past supports then would be a good time to evaluate
and take some risk off the table.
Chart
5 As for the broader trend, all
indices except IT are above their 40 week moving averages. Still supportive of
the bullish stance.
Chart
1:
Chart 2:
Chart 3:
Chart 4:
Chart 5:
Sector Momentum Model Update
Updating the short term momentum
model for the week ending 21st October 2016.
Sunday 9 October 2016
Technicals for week ending – 7th October 2016.
Note : This is not a recommendation and I am not a registered analyst,
these are just my observations and an assessment of the positives and negatives
from a longer term point of view.
Nifty Weekly
Keeping this one short as there
is not much change in the data. Instead, will focus a bit on the relative
strength ratios of few key indices. Below are 3 charts of broad indices Junior
Nifty (now known as Nifty Next 50), Nifty 500 and the Midcap Index – all divided
by the benchmark Nifty index to arrive at a ratio chart.
Since these are ratio charts – a rising
ratio means that the numerator is outperforming the denominator. Now, looking
at the history of these charts from 2003 onward there are few periods where
all these ratios have risen in unison and those periods have seen some abnormal
gains. The current trajectory of these ratios looks similar to the periods
mentioned above- yes, we are seeing some mid/small cap stocks that have given phenomenal
returns and it is in line with what we have seen previously. Whether we are
near a top – I do not know and there is no way of telling that. BUT for NOW
just like in the past these ratios are rising and we are seeing the broad market
outperform the benchmark. So from a
longer term perspective the data suggests to keep a positive stance on
equities as an asset class.
Lastly,
the FMCG index has outperformed the Nifty in times of distress as FMCG is a
defensive bet. As of now the FMCG/Nifty ratio broke down, so from the ratio
it looks like there is no rush to the defensive names yet.
Broader indices RS ratios rising and FMCG index RS ratio falling is a powerful combination and can't take this lightly I guess. Anyways, these ratios
are slow to turn and we cannot base decisions on a single data point but it helps to keep these in mind while judging the longer term outlook.
Sector Momentum Model Update
Updating the short term momentum
model for the week ending 07th October 2016.
Sunday 2 October 2016
Monthly models update
Updated
figures for the equity-bond rotation models as on end September’16.
As
of today will also be publishing the return data for these models applied on
the Nifty and 10 year bond total return indices as those are the respective
benchmarks.
So,
accordingly there are different sets of charts i.e models applied to the
benchmark vs. HDFC funds. The HDFC fund models are just presented as I have a
longer data set available and it is just an attempt to see how it can
work in the real world. Of course costs, transaction charges and taxes need to
be accounted for but these are just models, it is just a broad framework and please treat them as such.
I
first wrote about these here:
As
for the benchmark indices – Both the moving average and momentum models are
still invested in Nifty total return index.
Monthly
models on the HDFC funds – Moving average model remains invested in Nifty BUT
the momentum model signals a shift to the bond fund.
Benchmark comparison and stats:
Moving average model on HDFC funds:
Momentum model on HDFC funds:
Sector Momentum Model Update
Updating the short term momentum
model for the week ending 30th September 2016.
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