BRANDs

Ticker: Markets Cautious Once Again

Trouble viewing this email? View in web browser

Ticker: Markets Cautious Once Again 1
Monday, 28 March 2022
TICKER
A weekly newsletter that delves into markets.

Ticker: Markets Cautious Once Again 3
By Vijay L Bhambwani

Here’s a great value proposition

A digital subscription to Mint plus WSJ can be yours at just ₹292 per month. Check out the convenient and affordable plans we have for you here.

Good morning!

Markets Cautious Once Again

Prefer audio? Now you can listen to your favourite newsletter.

Last week, I wrote that the feel-good factor may be returning to the market.

That turned out to be premature as the war in Ukraine escalated and the Houthis, based out of Yemen, attacked Saudi Aramco facilities in Jeddah.

Ticker: Markets Cautious Once Again 4   Ticker: Markets Cautious Once Again 5   Ticker: Markets Cautious Once Again 6   Ticker: Markets Cautious Once Again 7

In my January articles, I mentioned Saudi spokesperson Major General Turki Al-Maliki claimed to have documentary evidence of Houthi attacks emanating from Hodeidah and Salif in Yemen. Saudis stated their intent to bomb these two port towns as reprisals. That possibility has now escalated with the latest Houthi acts.

On the one hand, we have the mutual fund industry keen on propping prices for the year-end NAV considerations, and on the other hand, we have rising geopolitical stress.

Clearly, statistical Beta (pure price volatility) is likely to climb. That will make trading challenging for retail traders.

Traded volumes usually fall in March-end due to year-end considerations. That means a little bit of buying and selling can send prices on exaggerated trajectories. So cutting back on traded volumes is the best thing to do.

Rear View Mirror

Let us examine what happened last week to guesstimate what lies ahead.

Ticker: Markets Cautious Once Again 9

Last week, I presented you with statistical evidence using my impetus indicator about Nifty being relatively stronger than the Bank Nifty.

That hypothesis was validated by the Bank Nifty falling more than the Nifty. Two adverse triggers confronted domestic bulls – a rising dollar and zooming oil and gas prices. Both are inflationary.

That sent bullion prices higher on safe-haven buying. The Rupee lost 0.47% versus the dollar. Bond yields rose with fears of rising inflation. NSE shed market capitalisation as traders held back buying decisions.

Market-wide position limits (MWPL) continued to rise as traders built up exposure along routine lines.

Overseas markets were firm, which cushioned declines in our markets.

Hello there!

To advertise in this newsletter, hit us up at newsletterskatanalivemint.com.

Matryoshka Analysis

Let is peel layer after layer of statistical data to arrive at an actionable plan for the week. We start with the advance-decline ratio. It’s a simple metric that computes the number of rising stocks versus the number of falling stocks. It’s a one marshmallow study as per behavioural finance.

Ticker: Markets Cautious Once Again 10

The advance-decline could not test even the 1:1 ratio for a single day of the week. Intraday traders were clearly taking a defensive approach. Though the risk element is relatively lower for intraday traders due to the absence of price uncertainty on the next day, they did not bite the bait.

The second chart is the market-wide position limits (MWPL) which measures the risk appetite of two marshmallow traders. These traders roll over their trades to the next session/s. They are stronger hands with higher conviction in their trades than intraday traders.

The MWPL is the extent of cumulative exposure taken by all traders compared to the total exposure allowed by the authorities. Up to three months ago, traders ramped up the MWPL between 32-34% in the run-up to monthly expiry. This week is the expiry of the March series, and we are nowhere near 30%.

Ticker: Markets Cautious Once Again 12

The impetus measures the statistical velocity of any traded instrument. Looking at the daily impetus chart of both indices, the first thing that comes to mind is that both indices have witnessed a slump in velocity.

The reason is not far to seek. Intraday ranges of both indices were narrower, so traders sat on the fence.

Ticker: Markets Cautious Once Again 13

The fallout is usually unpalatable. When velocity is compressed like a spring, it stays compressed till the pressure applied on it remains in place.

Once the pressure is removed, the spring rebounds. This means we have higher volatility in store ahead of us. Which way the indices will be going when impetus expands is unknown, but the move may be sharp and swift is a given.

All in all, the picture painted by matryoshka analysis seems to indicate traders must take lower exposure in the markets this week.

Nifty’s Verdict

The daily chart of the Nifty shows the index falling on 4 of 5 trading sessions last week. The week-on-week change was negligible. That explains the lower impetus as discussed above.

The price remained above its 25-day average, a proxy for a month-long holding on the cost of an average bull. The absolute near term outlook remains optimistic as long as the price is above its month-long average.

The round figure of 17,000 needs to be defended on a closing basis if the outlook remains positive.

However, do remember there is trouble brewing in the Middle East after the attack on Saudi Aramco.

That can culminate into another geopolitical stress point at short notice. This is another reason that traded exposure must be curtailed.

Ticker: Markets Cautious Once Again 16

Your Call to Action – Last week, I advocated ranges between 38,350 – 34,500 and 17,975 – 16,600 on the Bank Nifty and Nifty, respectively.

Both indices traded within the specified parameters. This week I expect ranges of 37,325 – 33,500 and 17,825 – 16,475 on the Bank Nifty and Nifty, respectively.

Continue to trade light and maintain stop losses diligently.

Have a profitable week!

Vijay L. Bhambwani – Head of Research, Behavioural Technical Analysis, Equitymaster

Were you forwarded this email? Did you stumble upon it online? Sign up here.

Ticker: Markets Cautious Once Again 4   Ticker: Markets Cautious Once Again 5   Ticker: Markets Cautious Once Again 6   Ticker: Markets Cautious Once Again 7

Please share your feedback with us

What do you think about this newsletter?

Loved it Loved it Meh! Meh! Hated it Hated it

Written by Vijay L Bhambwani. Edited by Saikat Chatterjee. Produced by Samiksha Khanna. Send in your feedback to newsletterskatanalivemint.com.

Download the Mint app and read premium stories
Google Play Store App Store
View in Browser | Privacy Policy | Contact us You received this email because you signed up for Mint Top of the Morning or because it is included in your subscription. Copyright © HT Digital Streams. All Rights Reserved

Ticker: Markets Cautious Once Again 22


Click Here to u from this newsletter.

Ticker: Markets Cautious Once Again 23

Related Articles

Back to top button