Found this chart at Marketwatch. Interesting.
The major corrections which are Happend During 2000 & 2008 is having some characters which are missing for this crash as per my observation
-in 2000 before the crash in just 4-5 months most of IT scrips are rised 2-3 fold valuation are very high for those scrips from 100-150 pe. And it was happened globally
-Where as also in case of 2008 before crash in 2007 from August to 10jan 2008 all Scrips are more than doubled market was rised around 40%in matter of 4-5 month, market was highly leavraged in f&o by retailers, and global crash, sub prime etc
-In current market all above points are missing broader markets is already 9 months in correction. If earning improvement along with crude Softening happens we may see market rally in next few months in broader market
So are we saying that Midcaps are almost at bottom while Nifty is expected to fall another 10% or so?
Thats what is confusing…
But just going back with the 2008 fractal comparison, it might form a base meanwhile…
Midcaps had divered a lot.from the largecaps.already…
2018 will come to be known as the year of decoupling. Globalisation and low interest rate regime caused everything to move in lock-step. Since economies were extremely interlinked and money was flowing freely in and out and discounting rates were low and non-discriminating irrespective of risk class, riskier small/mid caps commanded valuations on par or even higher than large caps.
Now that rates are about to move up, suddenly discerning risk is back in vogue - be it interest rate risk, country risk, politics risk, market cap risk, liquidity risk, volatility risk. What we saw with the Nifty getting decoupled from mid/small caps was one such move. The other was US markets continuing to run despite carnage in EMs. EMs are in a way small/microcaps in comparison to the US market caps. That again was a similar decoupling. Now US markets are also correcting after EM carnage, just like our Nifty started correcting after mid/smallcap carnage.
I personally don’t think 2008 comparison makes much sense here though, as both economic cycle and market cycle peaked then, along with excesses in both. Now the excesses are only in the markets and not in the economies - which still have unused capacities, scope for margin expansion and scope for growth in earnings etc. Interest rates are still at historic lows and inflation well under control. All we are seeing is shedding of market excesses owing to markets discounting all the risks which they should have done long ago.
Not sure why I wrote this (the midcap/largecap divergence triggered the thought-process), but since I did, might as well post.
Yes this might not be 2008. But excesses and scams are only in hindsight. Today market cap of US stocks is 61% of world stock capitalization but is US market 61% of world GDP? It is the nature of Bull markets to creates excesses and everytime a downturn will be a surprise and maybe not a repeat.
Probably yes. Most of the large global companies are US owned, so even though they earn their revenue globally, their earnings are reported in US and the stock is listed in US. Hence, the market cap can look very skewed. Companies like Coca-Cola, Pepsi, Citibank, P&G, Colgate, Pfizer, Glaxo, Johnson & Johnson and practically all major tech company are American.
Surprisingly this line of argument is found in a lot of market commentaries now a days. But, I believe we are in a late expansionary stage of an economic cycle after seven years of economic expansion. Whether it will peak now, or after couple of quarters, your guess is as good as mine.
A view of economic and market cycles is explained below in this seven month old article.
Not just that, incremental earnings are also going to US companies. For ex. recently (before being acquired by Walmart) Flipkart announced a deal with Microsoft that Flipkart will run on MS cloud and they will shutdown their own cloud service. So when you transact on Flipkart, MS is getting a cut. The bigger Flipkart becomes, the more MS earns.
Apple’s market cap is half of Indian GDP or market cap of all Indian companies. US companies market cap is twice its GDP. The growth markets and consumption is in developing economies. Oil is on the boil which is a strategic push by Oil companies and Trump policies. Since his last visit to Middle east the oil is on rise and that is in favour of US and Saudi’s so why tweet oil is high. The whole shale gas industry was in standstill with millions of dollar stuck. Reliance sold its oil asset in Eagle Ford shale, the pessimism in oil market and fast growth in EV is very much a reality. Milking the best out of the resources in current 5- 10 years was the only opportunity this price fixing can achieve. Every policy is directed to ensure sustenance of oil price.
It might disappoint a lot of bears but 2008 will never recur. I agree with Janet Yellen here, having worked with implementing the capital and liquidity regulations that her predecessors at the Federal Reserve put into place. Everything is monitored, too closely, to discretely for a systemic financial contagion to ever happen again. The new crisis may be localized to EMs but will not be a systemic financial crisis.
The bounce back in indices today after a few days of big volatile moves may signal a temporary bottom atleast (if not a long lasting one.) Coming to where to expect resistance on the way up for nifty, there are some retracement levels, 200 day moving avg, and 2 falling gaps which need to be watched for resistances. My guess would be that the 50% retracement level coinciding with the big gapdown at 10800-10880 should prove to be a stiff resistance to conquer.
Comments on chart
Seems so Sir. The way some of the stocks have moved - Yes Bank from 180 to 250 (40%), Edelweiss from 150 to 180 (20%) and Bajaj Finance from less than 2000 to around 2300 (15%) it seems that some of the bears will feel like missing out. Let’s see how much the market teases them and if FOMO sets in for next 2-3 months at least.
this is zinc futures contract overlayed in violet line chart with hindustan zinc, although the later si a diversified player, but the prices have a good correlation…
this scrip didnt fall in this market carnage much, not even a lower low has been made, and the volumes on decline has come down, compared to that when it was getting distributed in 2018…
dont know if there is absorption going on, or the bottoming out of the zinc prices has led to lesser supply in this stock…
although the margins might continue to be under pressure due to coal, metcoke and crude price inflation, but the management is focussing on keeping the input cost under control, and the zinc inventory is on a rise…
something to keep in the watchlist…
Seems like Naukri is done with all 5 waves up. May go for a correction and a possible retracement till 1100 range.
Vinati Organics could be in the similar situation as well:
Apollo Hospitals going through WXY correction. If at all, the correction is done (best case scenario), it can start moving up (volumes are tentatively indicating). 1200 level to be watchout for the breakout.
In case more correction left (worst case scenario). It can go for further complex correction, which will be WXYXZ. Like this:
Disc: I’ve no position, closely watching, not a buy/sell reco.
Is there any way to calculate New high new low index indicator to find market breadth. Any website provides it?
This indicator from Elder Alexander books look intriguing. Tried checking this in different platforms but couldn’t succeed. Or is it thatonly way to plot is taking it directly from NSE or BSE website and calculate it manually?
Any direction would be of great help!
Nice read for traders and aspiring ones. May be irrelevant for fundamental investors.