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.

SPX profiled

As we head into the weekend, most traders with open positions would be nervous about overseas markets, with the kind of news hitting our open prices.

Need to be careful , as those markets are moving 3-6 % on an average everyday. With 2 full days lost before we open next Tuesday, it's enough to make any trader with a position nervous as he looks forward to the open on Tuesday.

Here's a look at the Profile chart of SPX in the cash market.

We discussed this trade in the morning on how a move below 1157 would bring 1145 which is the POC of yesterday. With the /es currently at 1160 ( 1.52 pm) the buyer at 1145 is playing out his hand.

The broader profile is sideways with buyers below and sellers above.

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.

Seasonality and markets

On a hot Saturday afternoon, I've decided to take potshots at my fellow bloggist and check out his theory on "NAV Management".

I've known quite a few smart people who look at times of the year for trend changes or confirmation. The Thanksgiving Holiday in the US is one example when people have put all their "spare cash" to work in the markets often with positive gains.The assumption being that markets do not go down during that period.

So to put "NAV Management" to the test, I thought of nothing better than to see how it holds up in the charts.

Here's a chart of the weekly Nifty for the past three years:


The close in the past three years for the month of March has been at the highs of the month. With three more days to go for this month-end, we are at the highs of the month in March.The only question remains, whether we keep these highs or roll-over from here.We will know in three days.

Those three years prove that these things happen.

Still being slightly skeptic, I've decided to put the theory to the test now with the SPX. Their calendar year ends in December, so let's see what their markets have done in December.


Close at the highs for three years in four.

So that is six times in seven occasions on two highly liquid exchanges, across continents !

Odds are, we see higher prices in the Nifty, maybe 5350 or more by Wednesday.

Now you be the judge of that.

Vix-Spx Update

Been 4 days since my last post on the subject and what has the SPX done- down 3 points. Sideways movement it certainly is.

Here is the updated VIX chart :


Still above my green trendline. I will stick to my prognosis for a side-ways to an up market for the near term.


Since this blog is all about inter-market relationships, I thought that it would be prudent to support my view with a chart of the US Dollar.

As you know that USD and Stocks tend to move in opposite directions on the graph, I put up this chart of the co-relation :



And here are the trendlines I have been following on the USD index:




Ever since the descending TL gave way in Dec, USD has been moving upwards, but confined within the two TL's you see in the pic.

The lower TL will have to give way for the upmove in stocks to continue.

Vix and the Spx-2

My last post here on this subject of the Vix called for a bottom in the Vix and a subsequent top in the index at 1146-1150 levels, levels which we have not seen since.

Let's look at where the Vix is today after that post.Here is a YTD chart of the VIX:



As you can see we are reaching complacency levels and it is the time to be careful in your stock selection.

Another look at the 10 year chart:

Complacency yes...but still not quite there

The McCellan is showing that the index has some more to go on the downside and we are not below my green line again.

So we will be here on the index for some more time...maybe flat to up but no major downside anytime soon.

SPX Futures- Swing trade perspective

My last post had called for a 20 point gain in the Spx after the vertical fall on Friday.

Seems that today we are on our way to realise those gains. The question now is where do we go from here?

We have a fed meeting on, though I do not see it make a big difference to what will play out on the charts.

We are back in the price channel ( white rectangle) from November after friday's drop, and so far today have done an excellent job holding on to the yellow Trendline from August.

It's quite clear from the chart that a break above 1110 would put us back in the 1125-1150 range again, atleast 1125 would be a certainty.

On the other hand a break below 1080 can put 1055 and even 1025 in play and in quick time.

We'll come back to this chart in the next few sessions and see how it plays out.At the moment though it is 1080-1110 in the futures.

SPX- Revisted

My last post here called for a halt in the rally at 1146 in the SPX, to be followed by about a 50 point drop in the index after it hit that level.Also noted was that the Vix had bottomed up and was wanting to resume it's journey upwards.

Let's look at where we are now. First the chart of the Spx

We are having important support ( green line)  which has been defended for the past 3 months. Also the oversold nature of the MOSC at a level last seen in October 2008, points to at least a 20 point pull back in the index in the next 2 trading sessions.

let's look at the Vix:

27.31- has been a vertical climb and now calling for a pullback.

Those who booked their shorts and carried longs would be a happy bunch on Monday.

Vix and the SPX

We are at an interesting time in the markets.

On a longer-term chart of the US Vix, we can see that complacency in the markets is at an interesting point.This particular point where the VIX closed yesterday used to be the high 'fear point' a few years back between '04-'07 when the bull market was in it's full swing. A print above the 19 level as that point was when fear was at the highest and market would resume it's bull run after the index moved below this level as can be seen in the oval points in the middle of the chart.

However between '00 and '04 and between mid '07 to today, we can see that the market has been well over the trendline, but far removed from the highs of 80 it touched in '08.So are we complacent now or are we returning to the 'fear' days.

Let's look at the index chart-SPX

Overhead are 2 important points at 1146-1170 levels.

To summarize, we are calling for a pause at these levels, just noting that VIX is a contrary indicator and should resume it's upward journey from these levels.The SPX should correct by about 50 points before it resumes it's journey upwards.