iCharts Discussions

[rk_a2003]

Re Posting the following extracts as per the request of this thread founder.

[ajayhkaul]

Dear Friends --- RK had posted the rupee devaluation versus market bottom in another thread. On my request, it is repeated here.

We have seen it work this time around just as in March 2009 - as per data compiled by RK.

Thanks RK for this classic and valuable 'market mind' marker .

[vinay28]

the question is whether 20-22% fall in rupee is the limit. the minority will be happy if yes.

[psalm]

The situation was very much different in 2008...Rupee was not under-performing in comparison with other Asian currencies....most of the Asian currencies have fallen as much as the rupee, I believe......But this time, rupee is clearly under-performing in comparison with its peers.......Rupee could fall further.....that means exploring unknown territories.....means facing uncertain times.....is there a way to find the bottom??....

[vinay28]

will someone explain to me whether factors such as inflation, high interest rates, fiscal deficit, revenue deficit, corruption scandals, policy paralysis and host of other problems we have been hearing about for a year have any effect on rupee-dollar rate? I am not sure.

But then if falling rupee is the reason nifty/sensex have gone down and rightly so, in what way are above mentioned factors affected the market. Or has the currency delinked itself from all other economic factors i.e. is it a fight between currency traders and equity traders?

May be I haven't put the question properly. That's because I don't understand this equation.

[rk_a2003]

[rk_a2003]

[ajayhkaul]

Without digging too much into the data and causes .... since it is impossible to find a direct connection of a host of variables to the 'effect'.

I would use the data presented by RK as a 'co-relation' between depreciating rupee ( linked with FII Outflows) and the market seeking a bottom. This can be supplemented with other data/indicators for confirmation.

Fund outflows can be due to a multitude of reasons( such as mentioned by Vinay) , but they tire our brains. It is difficult to cull data exactly co-relating outflows to political nonsense.

That why techies look to charts like astrologers!

[vinay28]

yes ajay, but the questions I asked are "F" in nature and nothing wrong to pursue them for GK! One more reason is that I am not convinced they are related, at least directly. For example, is fall in rupee only due to FIIs taking money out, which in turn is due to factors I have mentioned? Or is it something else e.g. speculative currency trade, which preceded FII's sell. Do we know/can we find out quantum of dollar buying in India by non-indians before equity market started tanking? I get a feeling FIIs started selling after rupee started sliding.

[ajayhkaul]

Friends here is some exciting input from Swing Trader being posted here with his consent as it is truly mastermind content for you to factor into days when you are wondering where the market is going intermediate and long term: Thanks ST !

Here's ST verbatim :


I am posting my investing/position trading sentiment indicator. I use this chart (I have been using it since early 2008) to do serious long-term accumumation & liquidation of stocks and also for position trading the intermediate moves.

Kindly don't ask me more about this indicator but I do promise to post updates on it when I see key points / trend changes etc. I am posting this just to give my point of view on the state of the current market. I may be wrong so please take your own decision

Explanation of the chart :

The blue line is the long-term sentiment indicator and the red line is intermediate term sentiment indicator. Both are used for overall analysis of the current state of the market.

Blue line above zero means there is a long-term uptrend going on and if the blue line is below zero it means there is a long-term downtrend going on.

In an uptrend or downtrend the red line will indicate intermediate moves that can be position traded. I mainly look for climax of bearish moves in uptrends and climax of bullish moves in downtrends to initiate trades for the next 2-3 months (or as long as they allow me to stay in the trades). In the chart I have indicated these bearish & bullish climaxes in both uptrend & downtrend.

For change of trend I look at two things. One is clear cut - blue line going above/below zero. But to get a jump start on change of trend I check this : in a downtrend if the red line goes above 80% then there is a good chance of a significant upmove that can result in a change of trend. The blue line going above zero will finally confirm this. Vice versa for change to downtrend (red line must go below -80%, blue line will confirm later which is the final confirmation).

Examples of change of trend :

2009 change to uptrend was clear, early indication was given, later I got final confirmation.

Nov-Dec 2010 change to dowtrend - no early signal was given both signals were simultaneous.

Apr 2011 - there was a fake change to uptrend early signal but no confirmation by blue line. This was clearly a fake as it was too early in the down move and market had not got really oversold.

CURRENT STATE OF THE MARKET :

The way I use this chart....I would still like to see really oversold condition like the one we had in end of 2008 - early 2009. The long-term sentiment has really not climaxed to the downside....I would ideally like to see it fall below -80% and then give change of trend signals. This would make me really bullish. Until then I am still bearish. Of course, if the blue line moves above zero then no ifs & buts, it will be uptrend confirmation. This down move gave excellent shorting opportunities in Apr, end Jul & end Oct, I have indicated these on the chart.

NOTE : This chart and the above discussion applies to long-term investing & position trading only. I use stocks for long-term and futures & options (NF only) combinations for position trading signals.


Updated NSE long-term market sentiment chart (as of 16.12.2011)

Sentiment needs to fall below -80%, like it did during 2008 end, for me to begin long term accumulation. Confirmation of bull market will be only when the blue line - main sentiment indicator - moves above 0% which is long way off at the moment.

The long term market sentiment went below -80% during the Jun 2008 down move. It stayed down until early 2009. This is why I feel we have a climax move down left before a significant bull move up. Of course, the pattern will not be same this time, it never is, but I would feel much more confident buying into a bullish move if we see a climax move before the bottom. If we don't get a climax move but long term sentiment moves above zero then I go into buying mode as I do every time but then I will be more cautious as the move up may not be strong.

[ajayhkaul]

[vinay28]

"...little brain..."? Most modest, double superlative!

[pkholla]

Swing Trader: Hi, is your chart of mkt sentiment for everybody or only for a select few? Boss, we would also like to benefit from your excellent reading of the market senti. Please tell us how to access updated copy from ICharts website ON REGULAR BASIS
Thanks in advance (both for posting AND for clear picture of market shown there) Prakash Holla

[rainbow]

vinay,

in this context, 'little brain' must be an oxymoron, no?

hope to be back in bangalore for good after closing these contracts (not nf contacts) by end jan.

Cheers

[vinay28]

we will lie in wait!