December 23, 2018

Comparison of correction in US and Indian markets

There is a strong tendency in Indian retail traders and the media to track US markets and attempt to trade local markets depending on how US markets closed.

My experience is all this is a waste of time and each market has its own internals and any correlation (if it appears) is just randomness.

For lack of anything to do, today I am comparing NIFTY 500 index with the S&P 500 index on daily and weekly charts. In addition, I will be looking at RSI to get a sense of where markets are placed.

NIFTY 500 daily charts:
- correction started in SEP before US markets
- the correction was substantial
- markets reached oversold state in 2nd week of OCT and recovered smartly
- since then Indian markets are at best, mildly bullish

- low formed in this correction has not been broken so far

S&P 500 daily charts:
- correction started after Indian markets started correcting
- this index started correcting in Oct and reached oversold state very fast
- a bounce led to only sideways movement
- since then, the markets have broken their NOV lows and reached oversold state again.
- some very key supports were broken in Nov... these supports will now provide resistance in any rally

NIFTY 500 weekly charts:
- trend is clearly down
- index has broken and closed below first quarter and then given a small rally
- RSI shows index topping around 50
- if true, retest of recent lows is highly likely

S&P 500 weekly charts:
- index has decisively broken  the support formed in 2018
- index lost 7% in one week
- index is now entering oversold region
- no rally is expected

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