Profile charts for 16 th August

Nifty Future chart August Series :

Perspective : On Friday afternoon, before our markets closed we had profiled the SPX, which was a market trying to establish balance.We did say that the overnight cues from that market would influence our open on Tuesday.

On Friday, whilst traders on the NSE chose to close their long positions, the traders on the NYSE chose to retain them and the market showed short covering on Monday.

It remains to be seen if the overnight gains in our market can last beyond the IB hour or we see a repeat of the moves of the SPX.The SPX chart is below :

SPX Cash Market :

Back Ground :-

1) Huge gap between 5325 and 5233 which is a single print seller.
2) A failed auction at 5233


Chart Speak :

1) Friday was a Double distribution ( DD ) day.
2) We consider a DD to be two separate auctions.
3) Overnight sentiment based on SGX is long and shows an open in the upper distribution.
4) 5185 is PR3 for the day. PR2 at 5143 will be first sign of weakness till 5100.

AA + from S&P

First an updated Order Flow chart of the Nifty.

OrderFlow loves volatility and we picked some good coin from NF/ BN and even LT post earnings announcement.

We got a sell for the earlier buy and the day closes in the middle with no new short positions created today in the futures space.

In my perspective note on 15th July, I had made a point that these rating agencies need not be taken seriously by market participants.

My reasons again :

1) There are three of them and it's today a game of 1 against the other 2 ( Moody and Fitch) which still maintain the same rating. Are we speaking about the same economy here?

2) Back in 2007 this same agency made all mortgage backed securities AAA. Post Lehman, the world saw how good a job they do when they actually rate!

3) Ben runs a printing press and hands out money to the markets which go by names of QE1/ QE2 etc. Even if the entire world sends all the debt back to the US, they will pay them back in their own currency, printed in their own backyard !

4) The downgrade reasons are based on " political wranglings". It amazes me how political reasoning can be given when drawing economic agenda especially by an economic agency.

All in all, we will get a big rally out of this, not just in our markets, but in global equities.

There are technical reasons for the same also, but we will discuss in another report.

Stocks, Dollar and Gold.

Stocks :

Those who have been following our daily market posts before the market open, would have noticed the emphasis on the 4 day balanced profile we were talking all through last week. Since this is a weekly update, it gives a chance to project a slightly longer term picture than the intra day analysis we do everyday.

Have a look :

The profile on the left is a composite profile which is in a shape of a bell kept sideways. This always denotes a market in balance and ready for a move out. Such moves generally happen or start from the point of control (POC) of the balanced profile, something we saw early on Thursday morning.We did see a sell off from the open on Friday and a failure to hold the 5702 level marked as support in our friday's post, brought the market down a further 40 points.

But overall we are seeing value developed higher , which is a sign that the sell off on Friday was profit booking in the region of the 200 SMA, something logical and to be expected from traders who had brought near the lows 2 weeks earlier.

On Tuesday, earnings season gets underway and the market can quietly consolidate between 5673-5705 ahead of it on Monday.However any weakness, can also mean a trip through the balance area and can show 5607 below 5640 easily. Another level of support is near the 5550. Resistances for up-moves during the week will be at 5764/77 and then 5834.All the above are future levels for July.

Dollar :

The jobs report is the US brought some volatility to that market this week. We have noted the report to produce monthly highs/ lows in the index periodically.

Most of you may be aware that I felt back in May that the dollar had put in an important swing term low.With so much news filtering around QE2/ US economy etc, there is a big chance that should we break and stay below that 74.8 level marked as value area low on the chart, we should make new lows for the year.

Gold :

I'm purposely putting these last 2 charts up, as during this month Vtrender will be consciously analysing the commodity markets through Market profile.

Yes, we will have daily updates on Gold, Silver, Copper and Crude.

For the moment, Gold seems to have just confirmed a multi-month bottom last week and a further rise from here would bring in new highs for the year.

Watch this space for a daily commentary on commodities, starting this month.

Have a good weekend!

Nifty Road Map 29/06/11

Nifty Future chart June Series :

Perspective : With two days to go for the June settlement and global markets pre-occupied with Greece, it will be foolhardy to draw more longer term inferences from current market action.

We will continue to focus on the immediate short term. Our views are valid only for today's session.

BackGround : We spoke about 5558- 5563 as resistance to the day and 5501 as support yesterday. The markets made a high of 5558 and a low of 5491. The low of yesterday was the high from Friday which the market met before strong responsive buying emerged to take the market higher again.

Chart Speak :

1) A balanced profile where value was created in the value zone of Monday.
2) The proper trade set-up would be a break of value or range either side when the market finds balance in a 2 day range or more.
3) The POC at 5540 is important for the day bias today and longs would be safe above it.
4) Resistance will be at 5608 today.

Desi MO (McClellan's oscillator for NSE) at EOD 16 Jun 2011

Desi MO (McClellan's oscillator for NSE) at EOD 14 Jun 2011

Desi MO (McClellan's oscillator for NSE) at EOD 13 Jun 2011

Desi MO (McClellan's oscillator for NSE) at EOD 09 Jun 2011

Welcome to April

On april fool's day, we start a new series with a pressing question on whether the move seen in the last half of march would continue to 6040 or we would see a revisit to 5550/ 5650.

We are currently working a balance zone between 5835 and 5880 with an excess both sides being rejected in the past two days.

The resolution of this balance zone will set up the next high probability trades.

Clearly the month of March was different from the past five months as we witnessed a stop in the one time frame movement seen from the start of November.

The current levels which are above 5800 seem to suggest that the downmove has been nullified and we are working our way back up to 6300 levels again.For this to be possible we will have to close out April above 5800 also.

The chart illustrates the buying seen above 5550 levels and continuation above the red line in the second pane will signify more buying interest.

However if 5800 breaks then a 100 point drop to 5700 is on the cards.

Profile precision

Nifty :

Charts from last night.

We said :

-5527/ 5540/5556 possible as long as NF stays above 5507 tomorrow.


High of the day has been 5554

Bank Nifty :

We said :

- 11140 is target on upside.

11134 is high done

We said :

holding 2639, SBI can do 2682/ 2704

2677 is the high

Reliance :

We said :

- RIL can go upto 1024/ 1030 tomorrow.

1025 is the high

LT :

We said :

1552/ 1569 are immediate targets

1564 is the high of the day.

Incidentally both the targets given in the chart posted yesterday were done.

Next week, we will put some alerts out real time for intra day movements here on the blog. You can choose to get notifications in your inbox by choosing to subscribe in the box on top right.

Ahead of the close

The Nifty futures profile chart as of 2.10 pm is below :

We saw an open drive which was the longer time frame player stepping up.

Value now is being built at the upper end of the single prints from 18th March.

Holding 5460 this market can move up to 5527/ 5556 by tomorrow.

5500 is also the series Point of Control and slow distribution was expected here this morning.

The BankNifty at 10950, SBI at 2640 and RIL at 1011 are at crucial points for the day.All reference levels of importance.

It's over !

It's a story I have been tracking for over 3 months now, even stopped following currencies as lead indicators in the trading room and can now declare that the co-relation is over.

The co-relation is that of equities and the dollar.

Take a look at some charts below of the USD/ Euro and the Nifty spot :

This is the euro against the Nifty spot.

Historically euro up has equated to a NF up.

The next chart is of the dollar and the Nifty

Yes the two rectangles are both pointing down from 2011.

and the dollar and the euro ( seems all right here)

Next time if somebody tells you that Dollar down equals equities up, tell them to have a look at these charts.

As a leading emerging market player, the story seems to be a bit more than what the charts are projecting at the moment.

In fact if the charts play out through 2011, we will soon have the rest of the equity world stand neck to neck with our dear Nifty.

The charts clearly show that our stocks have decoupled from their inverse correlation with the dollar and the Nifty seems over eager to join the dollar down bar for bar.



The decoupling may be due to rising inflation which eventually will hit at profit margins causing equities to run the same was as currencies are now running. It would also mean a strong flow into commodities and the recent buying tail which we saw in gold futures just after the balanced profile may be a sign that that particular low will be here for some time to stay.


When all that happens, the dollar will be buried as the reserve currency of the world ( about mid 2012 ) and the grounds may be ripe for a new bull market to emerge from there.


Of course, currently the dollar is hanging onto a slender thread ( red horizontal line) , but it is hard to see it not fall off by another 10 % to about 67 thereabouts.


For those who think that that 10 % fall ( hopefully in next 3 months) will be matched by a 10 % rise in our markets will have to look back at the charts again.


It's not happening...

Yo- Yo

We closed at the level we started yesterday morning.

So what changed...Only a lot of money.

Retail got shut and FII's bought.

This chart below will hopefully explain.



The chart is for a 2 day period.

The lowermost pane is effective volume or the net difference between buy volumes and sell volumes. The chart was sloping down all through yesterday and from this morning it sloped up before we had a 100 point rise in the markets.

In the weekend post, we mentioned "It's not a time to be too adventurous with leveraged positions, but to be careful with a good understanding of risk-reward for short term trades".

There is no shame in sitting out of the markets.Markets will always remain, it's the people within who will change.

And.. you don't go looking for trades, you just recognize them when they appear.

Nifty Expiry- Jan

Generally, the end of any series carries with it a little excitement on where it would end and pundits are known to record the value as a future reference.

We at Vtrender do not give any more importance to the closing expiry price than the close of any one trading day, and the larger auction process moves on regardless.

But we do have a little calculator which helps us arrive at an approximate range for expiry many days before.

That calculator has calculated the range of Thursday's action to be 5625-5748.

Before we get into the Open Interest break-up, let's look at the longer term view of the Nifty Jan Future in terms of Profile structure for this series.



The purple zone is where the Market has traded 70 % of the time and it's chosen region to auction.

The price point of control at 5700 represents the pivot around which moves have been made and should be the same for tomorrow's session.

Profile by itself would indicate the region around 5700 as a fair settlement price for the series.

Let's shift our focus to the Open Interest at 5700 strike for Jan.

5700 Jan CE :



The table is for the Open Interest over the past five sessions here. It shows a reduction of -850650 units and a total OI of 5992500.

5700 Jan PE :



Reduction of -156900 here over 5 days and a prevailing build up of 5034800.

The picture cannot be complete without considering rollovers as well as the Open interest in Feb at the same strike

5700 Feb CE :



1666200 added and the total OI is 2516400. Most of it added in the past five sessions.

5700 Feb PE :



1371550 added against 3315400 as total Open Interest.The chart shows almost a 100 % rollover from Jan to Feb.

So Open Interest clearly shows what profile has been saying all along - that there is uncertainty or in the language of profile a balance prevalent in the current market structure.

I won't be surprised if we expire between 5700 and 5716.

Nifty Update

We were trading the January Future yesterday, but for tomorrow's action we'll shift focus to the Feb futures.

Why?

There's a reason. At all times in the market we are looking for the presence of a longer term player who has a view of the market of more than one day. That person will be trading the feb tomorrow and it will be left to the day time frame to negotiate the Jan particularly from noon.Also we are "volume people" and there will be more volumes in the feb than in Jan tomorrow.

Here's a chart of Feb Action :



Looking at this chart I only remember one saying which I learn't years back : " From failed moves come fast moves".

As the Nifty opened above the previous excess zone of 5775 ( 5750 in Jan future) and buyers made a conscious attempt to stay above that level, the news flow in the afternoon was responsible to create a small selling tail at the top and a breakdown below value and Monday's open price added to the downside momentum before the High Volume Node from 20th Jan ( pink dashed line) arrested the downtrend.

The market continues to be in balance in the weekly time frame and only a break down below feb level of 5640 will invite fresh selling.

Bank Nifty :

In my last post on Bank Nifty I had stressed on the importance of the 10930 zone as well as the auction of the 14th of jan as a defining point for the Bank Nifty.

Have a look at what happened since :



The break above brought 11290, but the subsequent sell-off has brought us back to last friday's closing level exactly.

The profiles are each marked in the rectangles alongside.

From the current closing level, 10973 on the upside and 10873 on the downside should be watched for direction.

INP

Girish has been talking about the importance of the India Fund INP, particularly in light of the movement of foreign funds in our very own Nifty.

I did a quick check on the INP particularly as the previous best known funds the IFN and the IIP were under performing our broader market.

Here's the comparison with our Nifty :



Next I plotted a 60 min candle chart on a 90 day period and used volume profile to see the movement :



Clearly we are below the 74.25 reference line which is the biggest volume over the entire 90 day period.

We will continue to track the INP every day at the Open.

Volume Point of Control ( POC)

Many of you following this blog would be familiar with the terms VAH, VAL & POC.

These are the value area high, value area low and point of control.

Whilst the VAH & the VAL are important for a particular days action and the next, and lose their relevance after some time, the POC becomes even more important as time passes by.

Markets have memory and great auctions, up or down have been known to halt around the POC.

Since this is the area where the highest volume is traded, markets try to gravitate towards all such points, past and present. The POC is called the efficiency point of the auction process and the single area at which both buyers and sellers agree on fair price for the day.

One of my good friends, Chad Payne from Linnsoft put up a post sometime back on the effectiveness of the POC in trading the ES futures. I asked him to share the chart with me and together we put up the following chart for our very own Nifty.



Let me explain :

The question we put together were :

1) How far is the distance between a point of control of a given day from that of the previous day?

2) How many times did price open up above the previous days point of control?

3) How many times did price open up below the previous days point of control?

4) How many days had a POC very close to the previous POC by a factor of 5 points?

5) How many days did the Nifty open within the previous days range and touched the previous days POC?

6) How many days did the Nifty open outside the previous days range and touched the previous days POC?

The answers are all there in the chart above ( you may have to download it ) .

The top most pane is that of the Nifty spot for a period of 158 days as shown by the green line in the pane below.this is also our sample size.The yellow dots on the chart ( updated till the close of today) are the volume point of control ( VPOC) for the current day and the blue dots are the VPOC for the previous day.

1) How far is the distance between a point of control of a given day from that of the previous day?

The answer is in the third pane in blue bars from the top. The average range between VPOC's is 72 and

2) How many times did price open up above the previous days point of control?

The fourth pane in green bars gives a value of 90 days in 158 days which is 57 % statistic. So 57 % of the time, price opens above the previous days POC.

3) How many times did price open up below the previous days point of control?

The fifth pane with red bars gives you 68 times the market opened below VPOC or the balance 43 %.

4) How many days had a POC very close to the previous POC by a factor of 5 points?

9 days in 158 had a distance between the POC's separated by a difference of 5 points. Percent wise that was less than 6 % .When I increased the difference to 10, the nos of days increased to 23 or 15 % of the time, the POC's had a separation of 10 points.

5) How many days did the Nifty open within the previous days range and touched the previous days POC?

54 days.yellow bars in the second pane from bottom.

6) How many days did the Nifty open outside the previous days range and touched the previous days POC?

12 days.Bottom most pane.Another statistic (not in chart) showed the Nifty opening outside of range 58 times in 158 or 37 % of the time. Only 20 % of this time did the market go and touch VPOC.

So what do we know, that we did not know already.

One is that the distance is good between POC's. Two is that they rarely are found near each other and three that if the open is out of range, the previous days POC has to be forgotten !

Nifty/ Bank Nifty

The Nifty is at the important 5840 levels and the bank Nifty is struggling at value low and vwap.

Here's a look at the orderFlow at current prices.(5832 in Nifty and 11290 in BN )

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.

Closing Comment (2)

Couldn't resist. but I closed out 3/4th's of my shorts at the close today.

Here's why:



Regular followers of my comments on this blog and on Just Nifty would know the similarity of this chart with the one I posted last Thursday, exactly a week back.

To be noted is the location of the POC very near to VAL and in a downtrend implies that strong hands were buying into the close.So I had to let go of a few shorts...

For tomorrow if we get an open around POC, one can buy for a quick 30-40 points with a Sl just below today's day lows.Remember open has to be around the POC.

Last Friday, the index moved between the two ends of the bracket 5305-5395 and subsequently we have moved the same range all these days up until today afternoon.

I expect the tape to check for unfinished business at the lower end of this bracket (5305 thereabouts).From here it can be value area high or today's lows depending on who prevails.

Below 5260, the high volume POC at 5225 calls.