The Big Fight

The Ratio of the Sensex to NSE MIDCAP 100 is pushing at the extremes. The pink and yellow lines are a break point. On a long term basis these levels are in bubble territory and highest on record, but there is no sign of stopping. That said at such level it is hard to keep sounding the alarm bell on caution. Not something people like to hear especially if stocks are randomly going up 10% everyday. The markets cause a self feeding behaviour that causes these levels of optimism. The closest to this enthusiasm goes back to the Harshad Mehta boom. Though not in terms of the IPO market but yes in terms of the will of the masses to participate irrespective.

 

The A/D ratios are also still diverging. Yes if the market keeps going these will pick up but they have not yet done so. The 20day ratio is clearly made a lower top and declined in the last 8 days.

 

 

Adam Smith Associates offers trade &commodity finance related services & solutions to its domestic and international clients. Views expressed in this article are purely of the author РMr Rohit Srivastava Рa leading technical analyst. Visit www.adamsmith.tv for services offered by Adam Smith Associates Pvt Ltd

 

VIX Volatility Index

The US VIX has been in the news in the last few days. So right after the India VIX made its lowest reading on record, the US VIX has dipped to a low that touches the trendline of the low in 1993 to the low in 2006. In the long term history of the VIX these low points did not mark major market tops. At the same time it maybe noted that the US VIX rises higher much before such an event. So volatility was already rising into the 2007 S&P top before it happened.

On the other hand shorter term lows in the VIX have been associated with near term market corrections and therefore we may still pay attention to it. The recent low is also on the trendline of the lows of the last two years. So a rise in near term volatility from here when it happens would give us a near term correction is all we can say with this.

Adam Smith Associates offers trade & commodity finance related services & solutions to its domestic & international clients.

Views expressed in this article are purely of the author – Mr Rohit Srivastava – a leading technical analyst.

Visit www.adamsmith.tv for services offered by Adam Smith Associates Pvt. Ltd.