Technicals for week ending – 12th February 2017.

Note : This is not a recommendation and I am not a registered analyst, these are just data points and an assessment of the positives and negatives from a longer term point of view.

Nifty Weekly

All the basic filters/scans indicate a positive environment but the discretionary side says to err on the cautious side. The solution, to me at least - seems like the middle path – not go to full allocation.

Observations (Charts below)

1 – The basic 40 week moving average filter shows all major indices above it except for IT & Pharma.

2 – BUT, on the weekly charts – seems like we have Doji’s on the Nifty, Bank-Nifty & the broader Nifty 500 indices. All 3 indices have major resistance areas above and the Doji formation is hinting at some indecision here. Since Banks have the highest weightage in the Nifty index, should look at that more closely for clues. The 20500-700 range on the bank nifty is a significant resistance zone and looks like we are testing it for the fourth time !. Some consolidation here and then a breakout past these resistance zone by the Bank Nifty & Nifty500 would be a major positive from a technical view point.

3 – On the monthly update end January (Monthly Update) the moving average based system flipped to buy Nifty while the momentum based rule is still in bonds so there is a 50/50 split there.

4 – The Nifty/Bond ratio for the total return indices has inched up above its 40-week moving average as bonds took a tumble last week since RBI held rates.

5 – Metals & Energy are still leading in terms of the relative strength ratio scan. But the Auto index has slipped to rank 6 while it was at rank 4 just last week. The Infra index seems to be making some good moves and closed the week above a major resistance zone.

6 – Now for the bad news, Nifty PE ratio is now above 23 and Nifty vs Earnings (indexed) is now in a warning zone as after hitting 100% this has led to corrections (previous tops were in the 107-110% range). History suggests high valuation tends to be followed by low returns in the long term, this does not necessarily mean a crash though, just that returns can be tepid from a 1/3/5 year perspective.

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Sector Momentum Update

Updating the short-term momentum model for the week ending 10^th February 2017.

Technicals for week ending – 5th February 2017.

Note : This is not a recommendation and I am not a registered analyst, these are just data points and an assessment of the positives and negatives from a longer term point of view.

Nifty Weekly

Bollocks! missed it! … what a difference the last week of Jan made and now most of the things flip to the other side.

Observations (Charts below)

1 – I know I am sounding like a broken record but well, Nifty PE ratio now hits 23 and Nifty vs Earnings (indexed) is now in a warning zone as after hitting 100% this has led to corrections (previous tops were in the 107-110% range). Nonetheless. Momentum rules the day !

2 – On the monthly update (http://indiasectortechnicals.blogspot.ae/2017/02/monthly-update.html) the moving average based system flipped to buy Nifty while the momentum based rule is still in bonds so there is a 50/50 split there.

3 – On the weekly, we are above the 40-week moving average & closed above weekly resistance

4 – The Nifty/Bond ratio for the total return indices has inched up towards its 40-week moving average.

5 – Metals & Energy are still leading in terms of the relative strength ratio scan.

6 – Nifty Alpha Index is at an all-time high along with Mid & Small cap indices – Momentum on the buy side.

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Sector Momentum Update

Updating the short-term momentum model for the week ending 3^nd February 2017.

Monthly Update

Updated figures for the equity-bond rotation models as on end January’17.

I first wrote about these here:

Sector Technical Analysis: Buy & Rotate

Sector Technical Analysis: The Simple strategy…

The moving average model switched to Nifty total returns index while the momentum model is still in bonds.

Technicals for week ending – 22nd January 2017.

Note : This is not a recommendation and I am not a registered analyst, these are just data points and an assessment of the positives and negatives from a longer term point of view.

Nifty Weekly

Data points suggest that this is not a favourable environment for equities and does not warrant fresh allocation at these elevated valuation levels. Risks to this are that there could be a momentum fuelled blow-off rally but I guess the probability of that happening is low.  Data suggests that the higher probability scenario seems that we may linger here or correct.

Observations (Charts below)

1 – Nifty PE ratio is a tad over 22 and going by history this zone above 22 has always led to corrections within a 6 month to a 1 year time-frame.

2 – Buy & exit rules based on weekly data still are in exit mode. The Nifty index is struggling at its 40-week moving average and as per our monthly models update for December end, the rules suggest a positioning in bonds. – so, all in all – risk off for now.

3 – The Nifty/Bond ratio for the total return indices is below its 40-week moving average suggesting that over the longer-term bonds may outperform Nifty.

4 – Metals & Energy are still leading in terms of the relative strength ratio scan and have been the clear leaders of this rally BUT are now at multiyear resistances. FMCG is now at rank 4 suggesting a shift to defensive's is building up.

5 – The FMCG/Nifty ratio is now above its 40-week MA and testing its upper range – seems to be a shift to defensive's which in turn supports the cautious view.

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Sector Momentum Update

Updating the short-term momentum model for the week ending 22^nd January 2017.

Surprised to see FMCG enter in rank 2! Metals still dominating but now appearing a bit stretched as the metals index is at multi-year resistance levels.

Sector Momentum Update

Updating the short-term momentum model for the week ending 15^th January 2017.