Nifty Midcap 100

The Nifty Midcap 100 has been witnessing a very clean rally recently after a long haul. So forget the deep correction in stocks we say in the last quarter, we are now picking up meaningfully from there. Wave 3 for the Nifty midcap points to 32977 next on this chart. Wave iii of 3 has already started today I think so the broad market will remain hot with activity.

Steel May make that turn

Even as Aluminium prices moved higher Steel prices kept falling over the last few months after China intervened. Now we do have a small turn so let's put it in perspective. There are different moving parts so we look at each

Iron ore prices were the weakest so the bump up is just very early

Steel futures or Steel rods show consolidation and an attempt at resuming a move higher that needs to be watched

HRC and Steel NCDEX has surpassed the previous high. I wonder if NCDEX prices are also affected by the rising USDINR given the landing price is in dollars.

BSE Auto

The BSE Auto index is steadily inching higher after taking support at the 40WEMA. The wave count suggests that a larger degree wave (3) has possibly started as the weekly momentum indicator has given bullish crossover after completed its pullback cycle. Now if wave (3) does the equality level of wave (1) then the upside level works out to 54230 which might look absurd at this point in time but that is what the chart is suggesting. Wave (3) is likely to have subdivisions as it unfolds and that would mean that we might see minor degree corrections in the BSE Auto index from time to time. On the way down, 20WMA and the 40WMA are currently pegged at 23227 and 22357 respectively and these key moving averages shall provide support in case of any correction/consolidation.

Indian Energy Exchange

We are trying to figure out the road map for this stock using Elliott waves. then we cannot fix upon one wave count and not be open to it changing course. This has started a new bull run and the growth trajectory is unknown. Having said that wave 5 started from the lower channel and 5=1 was at 780 odd. But wave 5 is showing that it may be subdivided into I-II-III where III=I is at 925. In other words, wave 3 did not extend but maybe wave 5 is doing so. Then we have a long way to go and the rising channel will lose its relevance. We cannot have all the answers but have to just let price information play out and keep mapping the advance till it completes. After 5 waves will it become 9 waves? There, the judgment of both the technical and fundamental picture also helps. We will ask these questions when this trend reverses.

Nifty Metals Index

The metal index remains on course

Daily Sentiment Index

What is the Daily Sentiment Index - How to Use it

The Daily Sentiment index [DSI] - 

Ever since I started to publish this indicator I get a question on How To every week so here goes

The DSI is published by trade-futures.com a European company that runs a daily survey of traders asking them a simple question, 'Are you bullish on the particular security?' The result is the Raw data in the first column below. They cover a wide range of global markets from currencies to commodities and equities including Bitcoin.

The survey gives a result of 0-100 on each security [shown as %Up meaning %Bullish]. So if we get a reading of 80 it means that 80% of traders are bullish on that security and the converse of that is 20% of traders are bearish on the security. They have done the job of qualifying the group of traders ideal for such a survey and it is wide enough to be reliable. Thus it is used by institutions as an input to their decision making and costs 1500$ a year for each security group.

Now we offer it to our subscribers daily for the US group of data.

How to read it?

Readings between 90-100 are where a particular market gets extremely overbought and 0-10 means it gets extremely oversold. A 9 day [9ma] or 15-day [15ma] moving average of the data may also be used for smooth readings. Ideally, we should see it plotted along with the underlying price to know how it behaved in the past.

How do I use it?

I of course combine sentiment with my Elliott wave counts. A high reading may be seen at the end of 3rd wave of an impulse but most often at the end of the 5th wave or at the end of an A-B-C correction. So if the DSI is 91 and wave 3 counts as complete I give it more importance for anticipating a wave 4 pullback. But if I get a 95% reading at the end of wave 5 it gives us confidence that wave 5 is indeed ending or in late stages and it is time to reduce positions and maybe change our position to the opposite side. Then wait for signals of a trend reversal. If an ending diagonal is forming in wave 5 we may get multiple extreme readings during the ending pattern before a reversal.

The table above shows a 90% reading under 'RAW' for Crude Light for 10-11-2021 which is the raw survey data. It means that we are entering the overbought region. But that may not be the end. Readings can go as high as 97. Rare to see even higher readings. But as we get higher watch the wave count. Does the daily chart show that we are ending a 5 wave rally? If not then wait for the waves to complete. But now you are on your toes

Example: If the market falls in wave 2 down and in A-B-C over several weeks and in wave C we get an ending diagonal pattern, then at the end of waves 'c' and 'e' of the ending diagonal [remember an ending pattern has waves abcde] we may get readings of 8% at the end of wave c and 7% at the end of wave 'e' and that means it is very oversold on both occasions as a sign that we are at the end of a trend.

What this example shows is that a low reading does not mean we cannot fall more. It can mean a short-term bounce after getting oversold [wave d up] and one final fall before the final bottom occurs. That is where wave theory helps us. The sentiment data is a confidence booster on our larger expectations that the market should reverse course because...."Everyone is bearish"

The word Everyone is important. A lot of people make judgments about what everyone is thinking based on the 5 friends they speak to or their colleagues at work. That is 5 out of millions of investors. That survey is a false signal. A survey has to be proper in its sample size and filtration to give good results. That is where DSI has become important as a tool in the hands of futures traders. It is a reliable survey of what everyone is thinking on a particular day in reaction to the price action and all the news flow.

I have discussed this indicator at key turning points in crude gold and the bond market to show its utility. You can use it too and it takes a while to get the hang of it. Look at the data regularly then you will know how it moves. Unfortunately, India is not covered yet as a market.

We are working on eventually making the charts of this data available along with the underlying security for better analysis and historical comparison in the coming months.

BSE Healthcare

The BSE and NSE Healthcare indices give different results because of the components. The BSE Healthcare index shows that we are still not ready for lift-off into wave III of 3 because the weekly momentum indicator remains in sell mode. On the daily chart, we may be in a falling channel for a wave 2 complex correction where the lower end is at 25333. 

BSE Power

5=1 achieved for the BSE power index and we can mark the rally as 5 waves from the point marked as 4, with 9 waves inside it. RSI near 84 put it together there is a good setup for this first impulse of this bull run to complete in favor of consolidation. But we do not have a trend reversal and we can also form an ending pattern at the end of wave 5. All said unless we price in more extensions for power stocks the best part of the move is done for now in the sector index.