For context, I highlighted the critical junctures of this subtle battle of control.
Are we heading towards the biggest market demolition in history? Let's get to a logical conclusion.
Markets have been aggressive in the past couple of weeks making it a bit difficult to catch intra-day swings. Meanwhile, VIX continues to slide lower to its 2020 lows. As per the pattern picked out in the BANKNIFTY chart we can clearly say that markets never crash without a warning. There's always enough time to figure out what is going on until the bigger move takes place.
How would you want to approach this situation from a trading perspective? If you break it down into a lower time frame NIFTY and BANKNIFTY have been quite bullish and have been taking fresh highs. While most people can't time the market it's better to trade the current situation rather than holding on to a view that may or may not happen. You don't want to be the jerk calling out for a crash every single day and losing out on the larger trend.
Having an alternative view is good. What's the worst that could happen? Your stop-loss gets hit and you reevaluate what you are looking at.
VIX has been forming quite a lot of gaps lately. This chart suggests remaining risk lower into filling the open gaps still, but the pattern is tightening and looks to come to a resolution at any moment between now and in the next week.
This smaller pattern suggests room for a VIX breakout into the low to high.
The longer-term structures continue building for a much larger move still to come in the future.
It’s all part and parcel of a market that continues to live off.
The main message: New highs or not, volatility, it’s coming. At least for a while.
While markets remain disconnected from the economy at 103.2% market cap to GDP. Market Cap to GDP ratio is definitely a veritable method of gauging whether the stock markets are overpriced or not. However, we need to be a little more careful of the absolute numbers in an economy like India which is still making the big shift towards a more organized mode. Higher Market Cap / GDP may not be a real worry for India.
The Indian economy stands on the cusp of a growth revival. That will mean that the GDP will continue to grow even as the market cap consolidates around these levels. That itself will be an automatic deflator for this ratio.
The success and applicability of the Market cap to GDP ratio is higher when the market cap reflects a much larger share of economic activity in the country. That is why the Market Cap / GDP ratio is much above 100 in advanced countries like the US, UK, and Singapore where more of business comes under the formal sector.
In the so-called smooth market, functioning the S&P500 has had 14 gaps in the last 16 trading days. A correction seems quite near. The rise of crypto is also an expression of the societal collapse of trust in the monetary control of central banks and their credibility with the public.
Overstretched MACD, how long can this hold? The broader market is barely moving intra-day and the occasional dips are ferociously saved and bought followed by hours of tight range chop action.
With most market gains entirely driven by overnight gap ups.
Excess liquidity continues...
How can one take a hedge against inflation?
A business that brings a rare product or service to the marketplace can certainly be the biggest inflation hedge one can look forward to. For example, if there are more Manufacturing companies today than ever before in the short term maybe you might see a sort of pause or mild declines in growth momentum but over the long run if the company is offering something unique, powerful, and rare you will eventually see an extraordinary amount of growth.
Rupee fluctuations might occur but the original value will most likely never fade away. Sitting on the sideline and going the way you were going a few years ago won't be the same anymore.
Times are changing and how you adapt and take advantage of it will certainly matter.