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Market Sentiment
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Author Market Sentiment
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Post: #1   PostPosted: Mon Jun 11, 2012 12:18 pm    Post subject: Market Sentiment Reply with quote

Thanks to those who have sent me emails asking me to post the sentiment charts. I will try and post regular updates here in this topic.

NSE Options Sentiment

This is a modified weighted put/call ratio chart. Two charts are posted below.

The chart with "signal bands" is a chart with faster moving standard deviation bands around the moving mean of this indicator. This is done to get bias signals. Example : The indicator goes below the bottom center band after it has been to the top extreme is a bullish bias signal. The indicator going above the top center band after it has been to the bottom extreme is a bearish bias signal.

The chart with "extreme bands" is a chart with static standard deviation bands around the moving mean of this indicator. This chart is used to check if the market is showing clear extreme sentiment.

NSE Long-Term Sentiment

The third chart is the long term sentiment chart based on market breadth. I will post more info on it when we get major signals from it.

As always, these charts just give idea about market sentiment. Please confirm with price direction to complete your analysis.

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Post: #2   PostPosted: Sun Jun 17, 2012 10:30 am    Post subject: Reply with quote

Trend bias continues to be UP as per options sentiment. It looks like we have one more push up before we see a pullback in the upmove or a reversal. I will be looking for options sentiment to get more extreme before the pullback/reversal starts.

Intermediate Term Trend Bias signal (based on the options sentiment signal bands chart)

Last Trend Bias signal : UP
Signal Date : 06.06.2012 (market close)

Long Term Trend Bias (based on long term sentiment chart) : DOWN. Long term sentiment needs to rise above zero to signal a sustainable long term up move. We are still not there yet.

NOTE :
Sentiment needs to be combined with price action to complete the analysis.

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Post: #3   PostPosted: Tue Jun 19, 2012 11:01 am    Post subject: Reply with quote

On anandrathi12's request in sbox, here is the updated options sentiment chart. I will post long term sentiment charts every weekend as things change slow on it. Options sentiment - I will post whenever there is any significant change or change of bias.
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Post: #4   PostPosted: Sat Jun 23, 2012 6:37 pm    Post subject: Reply with quote

I feel there is some more upside left in this move up before we see a significant down move. NSE options sentiment is not indicating an extreme yet which is why I am expecting one more push up. If instead we get a decline from here then it will be a good buy-on-the-dip kind of down move which could later take options sentiment to its extreme and create a more significant top and then a significant decline could start.

Intermediate Term Bias : UP (signal date : 06.06.2012)
Long Term Bias : DOWN

NSE long term sentiment is indicating strength but we need to see a move above 0 to see a sustained long term up move. Until then the long term bias is down.

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prafullkathe
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Post: #5   PostPosted: Sun Jun 24, 2012 12:55 pm    Post subject: market sentiment Reply with quote

where we can get sentment charts(third chart you posted) for long term & intermidate term OR how to calculate it for long & short term
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Post: #6   PostPosted: Mon Jun 25, 2012 10:13 am    Post subject: Re: market sentiment Reply with quote

prafullkathe wrote:
where we can get sentment charts(third chart you posted) for long term & intermidate term OR how to calculate it for long & short term


I am building/maintaining the long-term sentiment chart in Excel at the moment and posting it here every weekend. I need to do some programming to make it automated (available on the website). I will do it at a later date. Currently, please check here every weekend. The long-term chart anyway does not change much daily so one needs to check only once a week. If there is any significant change during the week, I will post an updated chart.

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Post: #7   PostPosted: Sat Jun 30, 2012 9:31 pm    Post subject: Reply with quote

Finally another push up that I was talking about. I still don't see the greed in options that is clearly visible at a significant top. We still need to see extreme sentiment in options. Until then the intermediate direction of prices is clearly up.

Long term sentiment moving up fast indicating broad market support for this up move, I will be watching this keenly once it approaches 0%. If it moves and stays above 0% then my long term bias will change to bullish.

Current Intermediate Bias Signal : BULLISH (on 06.06.2012 market close, based on options sentiment)

Current Longterm Bias : BEARISH (based on long term sentiment)

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Post: #8   PostPosted: Mon Jul 02, 2012 9:56 pm    Post subject: Reply with quote

I asked for greed and got to see some today. Options sentiment is starting to do something that has made me sit up and notice. The sentiment has moved significantly nearer to the extreme bands. We are still not there yet but it would be worthwhile to tighten stops on the long positions or hedge them or whatever one wants to do if one wants to protect profits.

The sentiment chart does this most of the time - it goes to an extreme, reverses and then breaks the opposite side's center signal band to trigger a bias change. When it hits extreme, that is usually a good time to make sure profits are protected.

The extreme on options sentiment is not here yet but we are close. Even after extreme is hit the market can go on in the same direction like it happened during the Jan-Feb rally when market went on for around 20 more days after extreme was it. But, well, that trend was something....this one is not that impressive so I would not count on trend extending.

In any case, that is why signal bands are there. These bands give good trend bias change signals most of the time (only two whipsaws since Jan 2011). So I will still only get cautious when we hit an extreme and take action only when I get a signal.

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Post: #9   PostPosted: Tue Jul 03, 2012 10:26 am    Post subject: Reply with quote

ST sir thanks for the timely update...


Quote:

The sentiment chart does this most of the time - it goes to an extreme, reverses and then breaks the opposite side's center signal band to trigger a bias change. When it hits extreme, that is usually a good time to make sure profits are protected.


Sir can u please make the above statement more clear by markings in charts...

Thanks..

Anand
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Post: #10   PostPosted: Tue Jul 03, 2012 11:48 am    Post subject: Reply with quote

anandrathi12 wrote:
ST sir thanks for the timely update...


Quote:

The sentiment chart does this most of the time - it goes to an extreme, reverses and then breaks the opposite side's center signal band to trigger a bias change. When it hits extreme, that is usually a good time to make sure profits are protected.


Sir can u please make the above statement more clear by markings in charts...

Thanks..

Anand


Options Sentiment Extremes

Options sentiment extremes are pre-condition for actual trend bias change signals. See attached "extreme bands" chart for details.

The "extreme bands" chart shows this clearly. If the options sentiment moves above the TOP center band I call it bearish extreme where too many puts are being bought compared to calls. This is bullish in a contrary sense. Once this happens the bullish signal itself is not far away.

If options sentiment moves below the BOTTOM center band I call it bullish extreme where too many calls are being bought compared to puts. This is bearish in a contrary sense. The bearish signal usually will follow soon.

Options Sentiment Signals

See "Signal Bands" chart for details.

Once the above "extreme" condition is met, I wait for the signals as described below.

Bullish signal : After a bearish extreme is seen on the extreme bands chart I wait for the sentiment to fall below the BOTTOM center band on signal band chart (see signal bands chart for example). This is the bullish signal.

Bearish Signal : After a bullish extreme is seen on the extreme bands chart I wait for the sentiment to rise above the TOP center band on signal bands chart (see chart for example).

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Post: #11   PostPosted: Tue Jul 03, 2012 12:04 pm    Post subject: Reply with quote

Thanks ST For the clear explanation. Helps newbies in their bit of understanding
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Post: #12   PostPosted: Wed Jul 04, 2012 9:39 pm    Post subject: Reply with quote

Longterm sentiment has moved above 0 (on 03.07.2012) which bodes well for the probable long term uptrend, provided it stays above 0.

Intermediate term sentiment is fast moving to overbought levels. Options sentiment is yet to hit bullish extreme. So up move still going on but we are nearer to a near term top which could be just a pullback in uptrend if we are to see uptrend continuing (as longterm sentiment is now bullish).

Let us see...for now tighten stops but let long positions run.

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Post: #13   PostPosted: Sat Jul 07, 2012 8:53 pm    Post subject: Reply with quote

We are yet to see extreme on options sentiment. Long term sentiment shooting up strongly above 0. These are encouraging signs for the uptrend. If we get a pullback with an extreme on options sentiment, it could be a pullback in uptrend. I am hoping the upcoming pullback would not pull long term sentiment below 0. Hopefully this week will give us more clues. Until then tighten stops and continue to ride the trend up.

Current Intermediate Term Bias : BULLISH (since 06.06.2012)

Current Long Term Bias :
BULLISH (since 03.07.2012)

*** Intermediate term bias is based on options sentiment. Long term bias is based on long term sentiment ***

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Post: #14   PostPosted: Tue Jul 10, 2012 6:31 pm    Post subject: Reply with quote

SwingTrader wrote:
We are yet to see extreme on options sentiment. Long term sentiment shooting up strongly above 0. These are encouraging signs for the uptrend. If we get a pullback with an extreme on options sentiment, it could be a pullback in uptrend. I am hoping the upcoming pullback would not pull long term sentiment below 0. Hopefully this week will give us more clues. Until then tighten stops and continue to ride the trend up.

Current Intermediate Term Bias : BULLISH (since 06.06.2012)

Current Long Term Bias :
BULLISH (since 03.07.2012)

*** Intermediate term bias is based on options sentiment. Long term bias is based on long term sentiment ***


hi...........sir

its working.............. Laughing Laughing Laughing Laughing

thx
anand
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Post: #15   PostPosted: Sat Jul 14, 2012 10:19 pm    Post subject: Reply with quote

No change in bias yet, we are still bullish in the intermediate & long term. I am watching the options sentiment closely, sentiment closing above the top center band will trigger a change of intermediate term bias to bearish. We are not there yet. If it happens, I will post a quick update when it happens.

Extreme has not been reached on the bullish side yet so I am still skeptical, I am not bearish yet. But if we do get a change of bias signal, I will close my ongoing bullish trade and initiate a bearish trade. I keep taking the buy/sell signals on the options sentiment chart for position trading. The trades I take are limited risk / limited reward options trades like vertical spreads. If I am too bullish or too bearish then I take limited risk / unlimited reward synthetic call or put (NF fut hedged with put/call). Whatever the case, no open risk trades for me. I will take a trade only if the max possible loss for it is known before I initiate the trade and that max loss is within my permissible limits based on the size of my current account equity.

Current Intermediate Term Bias : BULLISH (since 06.06.2012)

Current Long Term Bias : BULLISH (since 03.07.2012)

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