Updating the short term momentum
model for the week ending 21st October 2016.
Sunday, 23 October 2016
Sector Momentum Model Update
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.
Saturday, 17 September 2016
Technicals for week ending – 16th September 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 weekly for 28th
August. On a longer term time-frame a lot of data still suggests to keep a
positive stance on Nifty. However,
the elevated PE ratio is troublesome but maybe we might consolidate for some
time (weeks/months) before a trend sets in.
Observations (charts below):
In the previous weekly,
concerning the elevated PE ratios I mentioned that since we just saw a 20% cut
in the Index so a probability of seeing another deep cut in quick time seems
low at the moment. “Possible” – Yes but “Probability” well that’s a different
story. Let us not just base the entire argument
on the PE ratio alone since it has 2 components P & E. Let see how the
P & E have compared over a long period of time. In Chart 1 below, the red line is the (Nifty indexed – Earnings Indexed)/
(Earnings indexed) what this does is seeing how much the Nifty has gained
compared to earnings growth. All figures are rebased to 100 beginning in year 1999.
The Red line is above the danger zone of 100% from where it has reverted in the
past i.e. Nifty has grown by 2X its earnings but the conundrum is that the
Earnings represented by the green line is just flat and sloping downward a bit
as of now. So keep a lookout for any improvement in earnings as that will then
affect the red line and in turn the PE ratio.
On the weekly charts, (Chart 2) the broader Nifty 500 broke
out to new all-time highs before the Nifty 50 so it is important to monitor the
Nifty500 index for a breakout failure as that could mean a potential reversal
from here. So far Nifty500, Bank-Nifty and the Nifty 50 are holding above major
support areas.
Chart 3 The Nifty to Bond ratio is above its 40 week moving average
and we have a positive crossover as the 10 week moving average is above the 40
week MA. Thus, from a longer term perspective equities are in favour over
bonds.
Chart 4 this one has started showing some warning signs - the
average and median distance of the
sectoral indices compared to their highest
52 weekly closing. Both the readings took a hard knock this week and the
reading are at -4.8% and -4.2%. 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 5 On intermarket strength we now have Metals and Auto in the
lead, Realty has slipped to third. The defensive sector indices such as FMCG,
Pharma and IT are at the bottom ranks so RS ratios sorted by they being above
40 week moving averages suggests that there is no flight to defensives yet.
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 6 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 :
Chart 6 :
Sector Momentum Model Update
Updating the short term momentum model for the
week ending 16th September 2016.
Saturday, 10 September 2016
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