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Market Direction
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Author Market Direction
SwingTrader
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Joined: 11 Aug 2006
Posts: 2884
Location: Hyderabad, India

Post: #1   PostPosted: Tue Nov 22, 2011 9:59 pm    Post subject: Market Direction Reply with quote

I am posting my investing/position trading sentiment indicator. I use this chart (I have been using it since early 2008) to do serious long-term accumumation & liquidation of stocks and also for position trading the intermediate moves.

Kindly don't ask me more about this indicator but I do promise to post updates on it when I see key points / trend changes etc. I am posting this just to give my point of view on the state of the current market. I may be wrong so please take your own decision Very Happy

Explanation of the chart :

The blue line is the long-term sentiment indicator and the red line is intermediate term sentiment indicator. Both are used for overall analysis of the current state of the market.

Blue line above zero means there is a long-term uptrend going on and if the blue line is below zero it means there is a long-term downtrend going on.

In an uptrend or downtrend the red line will indicate intermediate moves that can be position traded. I mainly look for climax of bearish moves in uptrends and climax of bullish moves in downtrends to initiate trades for the next 2-3 months (or as long as they allow me to stay in the trades). In the chart I have indicated these bearish & bullish climaxes in both uptrend & downtrend.

For change of trend I look at two things. One is clear cut - blue line going above/below zero. But to get a jump start on change of trend I check this : in a downtrend if the red line goes above 80% then there is a good chance of a significant upmove that can result in a change of trend. The blue line going above zero will finally confirm this. Vice versa for change to downtrend (red line must go below -80%, blue line will confirm later which is the final confirmation).

Examples of change of trend :

2009 change to uptrend was clear, early indication was given, later I got final confirmation.

Nov-Dec 2010 change to dowtrend - no early signal was given both signals were simultaneous.

Apr 2011 - there was a fake change to uptrend early signal but no confirmation by blue line. This was clearly a fake as it was too early in the down move and market had not got really oversold.

CURRENT STATE OF THE MARKET :

The way I use this chart....I would still like to see really oversold condition like the one we had in end of 2008 - early 2009. The long-term sentiment has really not climaxed to the downside....I would ideally like to see it fall below -80% and then give change of trend signals. This would make me really bullish. Until then I am still bearish. Of course, if the blue line moves above zero then no ifs & buts, it will be uptrend confirmation. This down move gave excellent shorting opportunities in Apr, end Jul & end Oct, I have indicated these on the chart.

NOTE : This chart and the above discussion applies to long-term investing & position trading only. I use stocks for long-term and futures & options (NF only) combinations for position trading signals.

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amitkbaid1008
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Post: #2   PostPosted: Tue Nov 22, 2011 10:18 pm    Post subject: Reply with quote

Excellent Indicator ST Sir

But where I can get this Indicator in iCharts?
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SwingTrader
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Post: #3   PostPosted: Mon Dec 19, 2011 10:40 am    Post subject: Long Term Sentiment Chart as of 16.12.2011 Reply with quote

Updated NSE long-term market sentiment chart (as of 16.12.2011)

Sentiment needs to fall below -80%, like it did during 2008 end, for me to begin long term accumulation. Confirmation of bull market will be only when the blue line - main sentiment indicator - moves above 0% which is long way off at the moment.

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vinay28
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Post: #4   PostPosted: Mon Dec 19, 2011 11:27 am    Post subject: Reply with quote

Thanks ST for a prompt response. Precisely what I wanted to see. Do you know when it dropped below -80% before oct '08?
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lambuhere1
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Post: #5   PostPosted: Mon Dec 19, 2011 11:43 am    Post subject: Reply with quote

Never knew we could factor in sentiment in graphical format.

Kudos to you
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SwingTrader
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Post: #6   PostPosted: Thu Jan 12, 2012 9:17 am    Post subject: Reply with quote

vinay28 wrote:
Thanks ST for a prompt response. Precisely what I wanted to see. Do you know when it dropped below -80% before oct '08?


Vinay,

Somehow missed your message. The long term market sentiment went below -80% during the Jun 2008 down move. It stayed down until early 2009. This is why I feel we have a climax move down left before a significant bull move up. Of course, the pattern will not be same this time, it never is, but I would feel much more confident buying into a bullish move if we see a climax move before the bottom. If we don't get a climax move but long term sentiment moves above zero then I go into buying mode as I do every time but then I will be more cautious as the move up may not be strong.

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Post: #7   PostPosted: Thu Jan 12, 2012 9:26 am    Post subject: NSE Long Term Market Sentiment as of 11.01.2012 Reply with quote

Chart attached.
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vinay28
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Post: #8   PostPosted: Thu Jan 12, 2012 9:34 am    Post subject: Reply with quote

many thanks for the update, ST! Would it be possible to plot nifty on this? It will help us postulate % rise/fall in long term setiment for every 100 point rise/fall in nifty. Would be an interesting exercise I guess.
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ajayhkaul
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Post: #9   PostPosted: Thu Jan 12, 2012 10:14 am    Post subject: Reply with quote

ST this is mastermind stuff !

Is it ok with you if this content is also posted under Market Mastermind?
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SwingTrader
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Post: #10   PostPosted: Thu Jan 12, 2012 10:18 am    Post subject: Reply with quote

AJAYHKAUL wrote:
ST this is mastermind stuff !

Is it ok with you if this content is also posted under Market Mastermind?


Ajay,

Sure...no issues. You have great topic going there....keep it up!!!!

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ajayhkaul
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Post: #11   PostPosted: Thu Jan 12, 2012 11:43 am    Post subject: Reply with quote

Thanks ST
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ajayhkaul
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Post: #12   PostPosted: Thu Jan 12, 2012 12:37 pm    Post subject: Reply with quote

We look forward to more such valuable insights from your knowledge base ST.
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Vinodz
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Post: #13   PostPosted: Thu Jan 12, 2012 3:59 pm    Post subject: NSE-Market-Sentiment chart Reply with quote

NSE-Market-Sentiment chart

Good chart SwingTrader
how where can we see this updated daily

Thanks
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codered
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Post: #14   PostPosted: Thu Jan 12, 2012 5:12 pm    Post subject: Reply with quote

Ajayji, I don't have much experience in Equity Market but what one of the Expert of this form says,"Let us play the numbers" and its true as because its all PRESENT AND NOT PAST, Technical Indicator can trend only PAST.

Yes you can say so that evenly it sets a stage but can anyone tell when there will be wind or snowfall at a particular given time.
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ajayhkaul
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Post: #15   PostPosted: Thu Jan 12, 2012 6:43 pm    Post subject: Reply with quote

codered wrote:
Ajayji, I don't have much experience in Equity Market but what one of the Expert of this form says,"Let us play the numbers" and its true as because its all PRESENT AND NOT PAST, Technical Indicator can trend only PAST.

Yes you can say so that evenly it sets a stage but can anyone tell when there will be wind or snowfall at a particular given time.


codered pls read the explanation given by ST again. It is not the holy grail but it helps us read the market sentiment as it develops over medium to long term.

Market comprises of all of us together and human beings are quite predictable AT THE EXTREMES ie when fear or greed strikes. Notice that ST uses the extremes to take positions.

At other times there is lots of noise or confusion.

I can see this on the chart.

Since money is at stake , it is in our psyche to hold a belief based on past behaviour so as to feel bold enough to trade or stay away.( one wouldnt go to work if he didnt believe he would get paid at the end of the month. How does he decide? Well he was paid last month wasnt he? Though there is no guarantee he will be paid this month too...this is just to draw an analogy. Same applies to daily life actions)

This is another tool in your hand ... a technical tool at that.

As someone said ...

technical indicators are like the lamp post for the drunkard ... for support not for illumination.

If you feel comfortable, just use it for supporting your belief about the market.

Use it or lose it! Laughing
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