Weekend View

The talk from the just concluded trading week has been the fall in the US indices in the past two days and suddenly you had bear blogs which were blown to extinction pop out with comments and analysis and the proverbial " we told you so..". Never mind if the "we told you so" have been wrong over a 100 times in the past one year!

Don't get me wrong. I am not a bull or a bear, and this blog sides with neither.We trade the market both up and down without getting emotion in the way of up or down prices.

That being said, let's take a look at what lies ahead for the markets next week.

I'll want to take a look with you, at the fundamental side as well as the technical side for the short term.If you have been reading this blog long enough then you would know that I count for a perspective on the fundamental side of the economy on none other than our favorite Baltic Dry Index ( BDI ).For the technical side there is none better than the NYMO.

To see if the fundamentals have been deteriorating, let look at the BDI.You can catch my last post on this subject here

Certainly does not show any signs of pain or a deterioration. On the contrary it is nearing highs.

Now a look at the NYMO for the technical picture.

As you can see it is extended and ready to move up again.

Just in case you have forgotten here is the co-relation again :

With the Vix at levels of 40 thereabouts,there will be volatility for the next 2-3 sessions which can swing big, either ways.Such an environment is ideal for day trading and you should not miss out on the opportunity.

Also a drop in the Nifty from 5400 to 5000 constitutes a 9 % correction which is fairly normal in a bull market and well within the 7-13 % expected range.

The charts above show that the bottom is near.

Updated Charts- Reaction Imminent

Here are the updated charts for the NYMO and the US Dollar.

You can find previous comments on these subjects here and here

NYMO

Earlier this evening, Viren and myself were chatting when he told me about an interesting thing he observed this afternoon on his platform.

He was watching a Nifty Futures chart and an ES chart.
Both were at Value area Lows at around the same time (uncanny).Both moved for a brief while in value before dropping down and moving away from their respective Value Area Lows.

Whilst to me, it points to the importance big money is giving to Profile data, to Viren it simply meant that right now "sentiment is the same across the globe" and always has been...which brings me to the subject of my post today- the NYMO.

Unfortunately, I do not know whether this indicator is present for the Indian set-up, but it is a very important barometer of overbought/ oversold levels.


The NYMO works for stocks traded on the NYSE, but if you are a believer in the notion that sentiment is global, then it's truth applies to all markets.

In the chart, you can see that we have entered in the red rectangle only six times in the past 2 years and we are in it now!

Of course in Oct, Dec and Mar the levels are even more elevated than today, but those times were different and the situation is not the same anymore.
There has always been a pull back in stocks once the NYMO has entered the red zone.

Here is another chart, more relevant to our market and to illustrate my point with our very own Nifty:

The red line is the NYMO and the black one is the Nifty.




The NYMO and the Nifty make their moves together-up or down.

The NYMO is due for a pull-back. the Nifty will follow...