Month: September 2012

Here are profile charts of the Nifty and the Bank Nifty October Futures

 

First the Nifty :

 

 

Friday's move up in the Nifty was on negative delta and was promptly reversed by a spike into the close.

 

The Profile chart above shows the chart of Friday on the extreme right and to the left of it are two distributions made from the Friday prior i.e. 21st Sept from 11.45 am.

 

We have bracketed that move from 11.45 on the 21st as one auction up until the 25th of Sept. The move lower on the 26th and the 27th is shown as a separate auction,

 

Friday's move came from the POC of the first composite and promised bigger things , but what was missing was the Delta.

 

We track delta live in the trading room and is the net difference between volume traded at the ask and bid prices. Thus a negative delta would imply selling into the move up.

 

Have a look at the chart below :

 

 

 

 

The tick chart of the Nifty future above has the October future in the top pane and delta in the pane below.

 

As can be seen delta is making Lower Highs ( LH) and Lower Lows ( LL) through out the day.

 

Back to the first chart and 5754 is the clear ref lines for longs on Monday and the rest of the week.

 

First level of support is at 5716 followed by 5684. The single prints at 5660 would play the most important role for the rest of the series should the market find it self there.

 

Bank Nifty :

 

 

 

The Bank Nifty chart above is showing consolidation after a big run up in the last series.

 

The Bracket range is defined between 11600 and 11350.

 

The three POC's near 11478 are the first level of support and even supported the market on Friday. It may function as the Pivot for the range in the bracket .

 

Below bracket lows of 11365 , the single print  at 11244 is an easy target. Above 11600 short covering will bring 12000.

 

And finally a look at a chart which explains the recent rally as also the fact that we will not be accelerating anytime soon.

 

This is a chart of the Bank Nifty Nifty spread .

 

 

 

The chart shows the spread reaching two year highs which has always pushed the market down from the highs.

 

With No other sector being strong enough to replace the banknifty, it seems the index would find it tough to sustain these high levels.

 

Further more, the recent reductions in the Nifty constituents by adding defensive names to the index and reducing the high beta metal space would mean that the index may be slightly off even if there is a liquidity driven high beta QE3 rally.

 

That's another topic and we will take it up another day.

Nifty and BankNifty Profile

Here's a look at some profile charts :

 

Gold Oct Future :

 

 

Gold operated a 31580 to 32095 and back to 31513 last week.

 

Profile chart shows a composite POC which is in balance and a move from there on Friday. The POC is near 32200- 32300.

 

Price will continue to be weak in the short term below this 32300 level. Once crossed on a 30 minute closing basis we can expect Gold MCX to get to new highs.

 

Immediate support lower is at 31313 and 31113.

 

We believe one of those two levels should be hit early in the week.

 

31113 is the place where aggressive long positions can be tries with a tight SL.

 

Silver Dec Future :

 

 

Unlike the Gold chart above, the Silver chart shows it still clinging to the composite profile,though just below the value area.

 

The correct way of looking at the above statement would be to say that silver is a tad bit stronger than gold though both are showing signs of profit booking or weakness. This could be only short term though.

 

Silver will remain weak below 63700 LVN.  Last week's' low of 63111 is minor support but a clear break of that should bring the lower LVN near 62230 in play.

 

62273 is also the point from where Silver MCX rose from on the 13th after Ben's QE3 or should we say QE infinity!

 

Crude Oil October :

 

 

Crude broke down big last week on rising inventories and the House of Saud's assurance to the market to control the run away price. Ay Comex $94 has been breached which should put the market technically to the $ 88 handle.

 

The Profile chart above shows a balance appearing after the big imbalance of 400 points. The market tries to rise above the balance high at 5035 but failed on poor follow through buying. It was then pushed to the lows at 4960.

 

Going forward the market will trade in this balance zone till we see a decisive break below the purple line at 4950.

 

There is minor support at 4929 below which 4890 and 4859 are possible.

 

CopperM November :

 

 

Copper trading above the balance profile on the left and failed to break above it.. The balance was created between 10- 14th Nov. Sellers then took over and we had a trip through the balance area and below.

 

Copper is seen some long liquidation in the past session and is now poised to test 442.5 .Weakness will continue till it closes above 449.5 now.

 

Natural gas :

 

 

Natural Gas is again balancing after the big move lower from 171 levels.

 

The POC around 156 will cap upsides , but a move above it is likely to bring 160 immediately.

 

Support is 151 and 148.25.

 

 

 

 

Weekly commodity check

Since the 14th of September last Friday since up until today the market has been seized by news flow both of the good kind and the adverse kind.

 

Whilst QE3 and the diesel price hike caused a gap up on the 14th, the FDI news on Monday and the political situation on Tuesday have caused large differences between the open and the closes on each of these sessions.

 

The result has been a profile which has looked like this :

 

 

So we have short covering at the open on the 14th with a buying tail and long liquidation or profit booking on the 17th with a selling tail and two balanced profiles on the other two.

 

The most important aspects of the above chart are the buying tail below at 5530 and the selling tail above at 5670.

 

The process looks random but not until you merge the profiles where a distinct pattern emerges.

 

Have a look :

 

 

 

The merged profile above in Market Profile parlance is called a double distribution or a DD in short.

 

You can read more about the DD here- https://www.vtrender.com/content/double-disitribution-dd-0

 

Now that the market has formed the DD there are only two possibilities :

 

1) It will auction the zone between 5574 and 5616 and form a larger balances over a few more sessions. We saw this kind of a structure developing in the BankNifty a few weeks back. Such a move immediately from tomorrow will be positive for the markets and keep the uptrend intact and give a stronger base for a launch up later in the year.

 

2) The market will auction immediately the single prints 5528 to today's close and then proceed lower in the next few sessions. If such a possibility has to play out then the market will stay below 5574 over the next few sessions. Even if it does move above 5574 for a few points, the single prints in the middle of the profile will check upsides. The key to further downsides would be to see where the market establishes value relative to the lower distribution of the profile.

 

 

 

Nifty in profile

 

 

After Mario Draghi's follow up action on his infamous " we will do whatever it takes"  last week, the markets rejoiced as the FED chairman promised to spread more liquidity in the system in a program popularly known as QE3.

 

The latest program is an open ended purchase of $40 billion a month  mortgage backed securities in addition to continuing Operation twist which aims to lower longer term treasury bond yields.The combined effect would be $85 billion per month till the end of 2012.

 

Since the eruption of the financial crisis in 2008 the Fed had spent $2.3 billion from till 2011 in two rounds of non standard
measures known as QE1 and QE2  and in the process Gold has gone from just about a $1000 to about  $1800 today.

 

The strategy hence would be to buy on dips especially in both precious metals.

 

Let's look at charts :

 

Silver :

 

 

In yesterday's intra day post we spoke about 64700 levels being support as traders booked the gains of the previous session. The news on foreign inflows strengthening the Indian currency lead to some profit booking and silver could not climb higher even though COMEX futures held on to the gains.

 

A crossover of 64750 early in the week can still give a 1000 point rise to 65800 where the market should consolidate for a few sessions.

 

65470 and 63220 are the HVN's marked in the chart and 63580 and 64700 the LVN's.

 

63580 is lower level support.

 

Gold :

 

 

Gold's profile chart from last Friday shows a tight range around 31880 which is also the HVN now.

 

A move away from this point was rejected on Friday as prices closed at the same level it's known all week.

 

Support is 31570 marked in red whereas resistance during the week will be at 32420- 32360.

 

Crude :

 

 

Crude has been working the 5430- 5270 range for the past four weeks with moves above 5430 being sold into and buyers stepping up near 5300 levels.

 

Profile chart is balancing and developing energy to move out.

 

5350 continues to hold the bias for a 50 point move either direction.

 

Value area line at 5292 and 5403 when cleared on a closing basis can give a trending move away from this zone.

 

Copper :

 

 

Copper has begun to consolidate after the big move from 430 levels.

 

The HVN at 453 will invite buying effort and the bias will continue looking up above the LVN at 448.

 

461 and 465 are targets on the upside.

 

 

 

 

 

 

Commodity check

If you are trading stocks with big money and are interested in knowing how the global money flow works then you need to move your horizons beyond the universe of stock specific action and understand the global play between bonds, stocks, currencies and commodities.

 

Smart money which trades all of the above is known to move in and out of the above mentioned and a small weekly study keeping a tab on the inter market associations will definitely help in your broader understanding of the financial markets.

 

At Vtrender we track the Nifty and the bankNifty along with the USDINR in the currency space as well as Gold, silver, copper and crude and natural gas in the commodity sphere.

 

Here's some charts of the Nifty, the USD and the CRB.

 

For those of you who aren't familiar with the CRB index for commodities it is spelt here- http://en.wikipedia.org/wiki/Thomson_Reuters/Jefferies_CRB_Index

 

 

The charts illustrate the inter market relationship between stocks, USD and the CRB.

 

Notice the inverse relationship between CRB and the USD.

 

Stocks are driven by not only the dollar but to some extent by commodity prices. When commodities start to surge too high they act as a drag on the economy and consequently the stock market begins to stagnate.

 

In particular one has to take a careful look at rising crude prices.The surge from $ 50 to $ 100 in 2007 followed by a further move to $ 150 almost guaranteed that the stock market would not sustain the highs.

 

The charts above show that the CRB has some more to rise and the USD some more to go down.The difference this time around is that the liquidity flow is not just from QE but also LTRO which should make the commodity pack the better equation for savvy traders to park their funds.

 

The rally is stocks and commodities should continue through 2013.

 

 

 

 

Of stocks, currencies and commodities

Here is a 240 min chart of the Nifty spot for this calendar year.

 

 

In my last post I had mentioned about the liquidity flowing in the global stream.

 

When liquidity decides to walk in the door, all your indicators and analysis take a back seat as Price pushes higher.

 

The saying goes- Only price pays!

 

In the chart above we have :

 

1) A composite POC in white running across the chart currently at 5247

 

2) A profile charted from the last top at 5630 made on 22/2

 

3) Value areas in green for this profile

 

4) The pink lines are the low volumes nodes running across the chart

 

5) The green lines are the high volume nodes

 

We are currently holding above the last LVN at 5545 which will keep the movement up in the short term. Expect bulls to rule as long as this point is held in the spot.

 

Right above it is the last HVN for this profile at 5590 which is a target for this move up in the Nifty above 5545 spot.

 

Lower levels of support are 5514 and 5470 in the spot.

 

The advantage with using prices from the profile for support/ resistance is that they do not move or change every hour or day and can be memorized easily.

 

The bias for the move up remains strong as long as spot is above the VAH at 5400 spot now. Every dip to this levels will be bought.

 

The white composite POC is also an indication that buyers are controlling the action.

 

The auction should slow down as price reaches HVN 5590.

 

Today's upmove has not seen strong responsive selling at the open and prices are likely to finish around here today. a pull back if any to fill the gap can be only on market disappointment with the RBI on Monday.

 

It's been that kind of a week where news has driven prices and is likely to continue until Monday.

Nifty spot- 240 min chart from feb

When you do technical analysis the one thing they teach you is that " Only Price pays"

 

Truly when Price is moving up or down ,it pays to stop everything in your analysis and just listen to it's message. Price movements are heavily dictated by liquidity and when liquidity starts gushing in through the door, you just have to make way for it.

 

The past week has seen a renewed pledge by Global bankers to get more liquidity into the system and equity markets have celebrated the world over.

 

Mario Draghi's bond purchase plan for the embattled European region is a game changer and may be looked back as the end of the financial crisis in Europe. The Euro has been celebrating ever since the " will do whatever it takes " announcement much ahead of last week's meet and is on course to hit the the 1.30 mark by this month end.

 

Major news today would be IIP data expected to improve sharply and the German court ruling on  whether to grant temporary injunctions against Germanys ratification of Europe's new bailout fund, the European Stability Mechanism (ESM), and on the "fiscal compact," which raises collective enforcement of EU budget rules.

Many expect an approval which will keep the rally intact.

 

The IIP is expected at 11.00 am  today and the German courts decision at 1.30 pm.

 

According to Reuters there is a 60 % chance of QE3 being  announced at Thursday's FOMC meet. But  despite the disappointing Non-Farm payrolls reading and falling unemployment rate, improving services ISM and rising retail sales are among the recent economic data standing against a September QE3. The FED may just give another twist to it's statement on interest rates whilst keeping the door open for QE3 in the future.

 

The lack of any QE3 on Thurs may lead to a temporary pullback in stocks and precious metals before a rebound later on Friday as the market figures that QE3 is simply an eventuality.

 

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I will be back with charts and analysis later.

 

 

Ahead of IIP, German Courts, FOMC and RBI

 

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