Incisive Nifty Trend Analysis

If one considers this year to be a bear market, I just did an analysis of how the Nifty moved (retraced) every time it moved down. The market has never given a unidirectional move without a sharp bounce back as the below data will show. This year has been more rewarding to swing traders who would have changed their position and direction of the trade, as soon as the market showed sign of hitting the bottom.

The analysis of the data shows that if one had followed a simple STOP AND REVERSE strategy to buy above the previous day high and held on to the position till there was a close below the previous candle low, the trader would be able to capture large part of the moves on either side.

Move Date High Date Low Points % Move Days
Down 29-Jan 6,112 4-Mar 5,662 450 7.36% 35
Move Date Low Date High Points % Move Days
Retrace 4-Mar 5,662 11-Mar 5,970 308 5.44% 8

Move Date High Date Low Points % Move Days
Down 11-Mar 5,970 10-Apr 5,478 492 8.24% 31
Move Date Low Date High Points % Move Days
Retrace 10-Apr 5,478 20-May 6,228 750 13.69% 41

Move Date High Date Low Points % Move Days
Down 20-May 6,228 24-Jun 5,568 660 10.60% 36
Move Date Low Date High Points % Move Days
Retrace 24-Jun 5,568 23-Jul 6,092 524 9.41% 30

Move Date High Date Low Points % Move Days
Down 23-Jul 6,092 28-Aug 5,118 974 15.99% 37
Move Date Low Date High Points % Move Days
Retrace 24-Jun 5,568 11-Sep 5,925 357 6.41% 80

HI a1b1,
I don't undearstand any thing in Harmonics but It makes me always curious as
it looks fascinating.BTW which AFL set up is there that is showing green and red dots above the bars?
god bless

Called
Fractals

But do not think that you will get high/low dots in real time by this
These dots keep on moving/jumping/changing till settled finally. ( edit - This line is not meant for fractals points.)
In fractals, these dots do not appear immediately but appear much after the formation of High/Low

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@Prada.
Dude. The usdinr rate has been playing around the 63.50 mark for three days now.
This is the second close it has given below the 63.50 mark. I am already short since it came down from around 64 levels in the morning.....
Please share your thoughts......I am only holding for a short term.
Cheers!

From Reuters :

Investors took the withdrawal on Sunday of former Treasury Secretary Larry Summers as a candidate to head the U.S. Federal Reserve as a green light for risk, betting the bank's next chief would extend an era of easy money that has flooded global markets with cash.

Markets viewed Summers' move as leaving Fed number two Janet Yellen, a well-known advocate of looser monetary policy to support the U.S. recovery, the favorite to succeed the current chairman, Ben Bernanke.

Still, Yellen's nomination remains uncertain, leaving open the possibility that markets would react differently should one of several other possible nominees be chosen.

U.S. stock index futures and Treasury futures rallied as a result of the news, and investors and analysts said those gains will likely extend further into the Monday session.

"My first thought was that the markets will rally on this," said Scott Frew, managing partner and owner of Rockingham Capital Advisors in Hartford, Connecticut. "There's certainly a perception that Yellen is more dovish than Summers."

The Fed has taken extraordinary steps to try to buoy the world's largest economy both during and after the financial crisis.

Currently the bank is buying $85 billion per month in Treasuries and mortgage-backed securities, its quantitative easing program.

That wave of easy money has helped take U.S. stocks to record highs and yields on U.S. government debt to record lows.

On a total return basis, the S&P 500 stock index .SPXTR is up 20 percent so far this year - its best return since 2009, when stocks began recovering from their swoon during the financial crisis in which they lost more than half their value.

The Fed's efforts to keep interest rates low have sent investors scurrying for yield. High-yield debt - known as junk bonds because of their low ratings - has sold steadily, with the Merrill Lynch US High Yield Master II Index .MERH0A0 surging about 126 percent from 2009 through 2013.

Globally, investors have borrowed in dollars to invest in higher-yielding markets abroad, the so-called carry trade. MSCI's 45-country world index .MIWD00000PUS is up about 12 percent so far this year.

But the view that the Fed could withdraw its stimulus soon has rocked global markets, taking benchmark U.S. Treasuries yields to above 3 percent recently, a more than two-year high - underscoring how the U.S. central bank's every move affects investors big and small all over the world.

A spike in rates is worrisome because U.S. government debt is used as a benchmark around the world for everything from obscure derivatives contracts to mortgage rates.

If, in fact, yields rise too high, some economists fret the U.S. recovery could be derailed. Mortgage applications in the latest week fell, as 30-year mortgage rates matched a year-high of 4.8 percent - well over 100 basis points from earlier in the year.

Yellen has been a forceful advocate of the aggressive steps taken under Bernanke to spur U.S. economic growth, earning her a reputation as a policy "dove" who would tolerate a bit more inflation to drive down unemployment that she deemed too high.

Analysts said a Yellen nomination would boost markets because of that sense of continuing Bernanke's approach.

"I expect not only a rally in stocks but also a decrease in yields, as the Fed remains in the same path Bernanke set" under a Yellen nomination, said Michael Yoshikami, CEO and Founder at Destination Wealth Management in Walnut Creek, California.

Markets had already been leaning back into riskier assets such as stocks on a raft of strong U.S. economic data and eased worries about a military strike on Syria.

Investors in funds based in the United States poured $12.8 billion into stock funds in the latest week, according to data from Thomson Reuters' Lipper service.

But Yellen's nomination - and her perceived dovishness - are hardly guaranteed, with other options such as Donald Kohn, Roger Ferguson or Timothy Geithner - who has said he does not want the job - possibly in the mix.

"The Obama administration has shown little, if any, enthusiasm for Yellen, however, so we're not convinced she will necessarily get the nod," noted Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

The Federal Open Market Committee meets on September 17 and 18 and will discuss whether to slow the bank's asset purchase program.

My reading is that the fed will start tapering in this or next month. They have to do so as the rates in 2016, as per their own reports, are projected @ 3-4%. So next year will see end of tapering & 2015 will see a gradual increase of the fed rates.

So our RBI will also not be able to decrease interest rates, unless inflation comes down drastically. And the chances of inflation coming down are slim as most of the food inflation is driven up due to policy induced structural mismatch.

Prepare for a long squeeze till the new Govt. comes into power. If it is UPA-3 we will need to stock up on gold as everything else will go down.

Sridhar,

Good points... However we need to trade basis the market's reaction to the news or event as market reacts differently from expectations - many times against conventional wisdom - whipping the crowd on the wrong.

So till the events are decided, we can expect volatility - as happened with Gap up open today, while we are now trading in the red.

Re. the question of Fed. tapering - this is also factored in by the market - it is expected that the Fed. will reduce bond purchase by US$ 10 Bil. The appointment of the new Fed. Chariman was expected to be a market defining event - I had posed the same earlier.

Now we wait till 20th Sep. to see the new RBI Governor RR's policy action and if it as per market's expectations, and if the current honey moon will continue. This will be a decider of the market's direction.

Incidentally, FII's have turned bullish on India and invested 6,694 crore rupees over the last 5 days. (Compare this to -6,200, -7,120 and -9,318 crore over the previous three months) Rupee is below 63! Mark Faber has turned bullish on India as well, while at the same time big fund managers Stanley Druckenmiller, (one of the best performing hedge fund manager over three decades) thinks the DOW is topping out, and has the least exposure to US equities.

With markets moving on the dime based on anticipation, news, perceptions, we too need to be ready swing accordingly and to align our position to the market - or atleast avoid large exposure till the market defining events are played out.

The Sebi data shows that there is minimal investment in Equities, but mostly in Debt.
http://www.sebi.gov.in/sebiweb/investment/FIILatestSE.jsp?period=month

Some FIIs are buying but equally many are selling. So nett values are not significant. Inflows in 2012 were very significant and we are not expected to get that flow this year. So with worsening oil import bills & Gold season to start next month I see Rajan's hand pretty much tied.

SEBI's no's are as published by any Govt. dept. What can be clearly specified, will be published in an opaque manner, not clear at the first instance. CNBC has a much better format for reporting FII Investment in Equity and Debt - and it matches that of SEBI. Check the link :

http://www.moneycontrol.com/stocks/marketstats/fii_dii_activity/