Opening Bell 18.08.2014

Your world at 9am

world equity markets 2014-08-18

Equities

Major
DAX(DEU) -1.44%
CAC(FRA) -0.74%
UKX(GBR) +0.06%
NKY(JPN) +0.07%
SPX(USA) -0.01%
MINTs
JCI(IDN) +0.18%
INMEX(MEX) -0.34%
NGSEINDX(NGA) -0.89%
XU030(TUR) -1.30%
BRICS
IBOV(BRA) +2.12%
SHCOMP(CHN) +0.27%
NIFTY(IND) +0.67%
INDEXCF(RUS) +0.73%
TOP40(ZAF) +0.42%

Commodities

Energy
Brent Crude Oil -0.63%
Ethanol -0.32%
Heating Oil -0.41%
Natural Gas -0.98%
RBOB Gasoline -0.41%
WTI Crude Oil -0.47%
Metals
Copper +0.00%
Gold 100oz -0.24%
Palladium -0.04%
Platinum -0.06%
Silver 5000oz +0.00%

Currencies

USDEUR:+0.03% USDJPY:-0.08%

MINTs
USDIDR(IDN) +0.07%
USDMXN(MEX) -0.17%
USDNGN(NGA) -0.03%
USDTRY(TUR) +0.05%
BRICS
USDBRL(BRA) -0.29%
USDCNY(CHN) -0.01%
USDINR(IND) -0.74%
USDRUB(RUS) +0.69%
USDZAR(ZAF) -0.07%
Agricultural
Cattle +0.84%
Cocoa +0.19%
Coffee (Arabica) +2.25%
Coffee (Robusta) +0.41%
Corn +0.21%
Cotton -0.16%
Feeder Cattle +1.21%
Lean Hogs -0.94%
Lumber +0.06%
Orange Juice +0.14%
Soybean Meal +0.03%
Soybeans +0.39%
Sugar #11 +0.19%
Wheat -1.22%
White Sugar -0.05%

Credit Indices

Index Change
Markit CDX EM +0.39%
Markit CDX NA HY +0.38%
Markit CDX NA IG -3.45%
Markit CDX NA IG HVOL -4.40%
Markit iTraxx Asia ex-Japan IG -2.61%
Markit iTraxx Australia -1.43%
Markit iTraxx Europe -2.02%
Markit iTraxx Europe Crossover -11.14%
Markit iTraxx Japan -1.55%
Markit iTraxx SovX Western Europe -3.03%
Markit LCDX (Loan CDS) +0.06%
Markit MCDX (Municipal CDS) -2.07%
Credit spreads continued to contract on Friday and NKY is flat this morning. Will Putin play spoilsport?

Must Reads

A sample of 2,000 companies (excluding banks) that declared results during the first quarter of FY15 reported 43.3% growth in net profit, the highest in at least nine quarters. Net sales grew 12.7%. (ET, #economy)

CBI has registered a preliminary inquiry to probe into an alleged Rs 1,700 crore land deal between Tata Realty and Unitech in 2007 to purportedly fund the latter’s telecom project. (DNA, #scam)

Rajan: NREGA spiked rural wages only 10%, rest is from MSPs (MC, #inflation)

The best 15 minutes you can spend today (and a solid case for legalizing pot):

Options Daily 2014.08.18

Nifty OI

nifty.puts.calls.AUG.2014-08-13.2014-08-14

BankNifty OI

bank-nifty.puts.calls.AUG.2014-08-13.2014-08-14

Anomalous Option Trades

A sudden increase or decrease in open interest can signify informed buying/selling that you can potentially profit from. Option traders tend to ‘lead the pack’ and their actions can be used to gain insight into the consensus opinion of traders. This scan lists option trades that were one standard deviation away from the average over the last 20-days. Note that this scan maybe too noisy around expiry.

You can download the data here.

Check out our Option Strategy Studio. One more reason to open a demat account with us.

Two Relative Strength Index (RSI) Strategies that Do Not Work

Definition from StockCharts:

RSI oscillates between zero and 100. Traditionally, and according to Wilder, RSI is considered overbought when above 70 and oversold when below 30.

A naive implementation of it would be exit when RSI > 70. Lets see how it worked out vs. a simple buy-and-hold.

CNX 100-RSI-returns-2010

A simple B&H strategy was miles ahead of one that exited the market whenever RSI indicated “overbought.”

How about being long only when the index is an uptrend (> 200-day SMA) and RSI is not ‘overbought’ (< 70)?

CNX 100-RSIxSMA-returns-2010

Using RSI was a net negative – it under-performed both a buy-and-hold and a SMA-200 strategy.

Would it work on other indices?

NIFTY: NO

CNX NIFTY-RSI-returns-2010

CNX NIFTY-RSIxSMA-returns-2010

CNX BANK: NO

CNX BANK-RSI-returns-2010

CNX BANK-RSIxSMA-returns-2010

Conclusion

The naive RSI strategies described above are money losers. The gains are nowhere near enough to compensate for the losses. A simple buy-and-hold strategy ends up outperforming the RSI.

Weekly Recap: The 2% Mindset

world.2014-08-08.2014-08-14

The Nifty ended the week +2.95% (+3.79% in USD terms.)

Equities

Major
DAX(DEU) +0.92%
CAC(FRA) +0.64%
UKX(GBR) +1.85%
NKY(JPN) +3.65%
SPX(USA) +1.48%
MINTs
JCI(IDN) +1.88%
INMEX(MEX) +1.51%
NGSEINDX(NGA) -2.86%
XU030(TUR) -3.83%
BRICS
IBOV(BRA) +2.39%
SHCOMP(CHN) +1.47%
NIFTY(IND) +2.95%
INDEXCF(RUS) +5.27%
TOP40(ZAF) +1.21%

Commodities

Energy
Brent Crude Oil -1.13%
Ethanol +6.41%
Heating Oil -0.97%
Natural Gas -4.59%
RBOB Gasoline -1.68%
WTI Crude Oil -0.31%
Metals
Copper -2.21%
Gold 100oz -0.35%
Palladium +3.60%
Platinum -1.31%
Silver 5000oz -2.01%

Currencies

USDEUR:+0.07% USDJPY:+0.28%

MINTs
USDIDR(IDN) -0.86%
USDMXN(MEX) -1.25%
USDNGN(NGA) -0.36%
USDTRY(TUR) +1.02%
BRICS
USDBRL(BRA) -1.07%
USDCNY(CHN) -0.15%
USDINR(IND) -0.61%
USDRUB(RUS) +0.00%
USDZAR(ZAF) -0.62%
Agricultural
Cattle -1.08%
Cocoa +2.47%
Coffee (Arabica) +4.01%
Coffee (Robusta) +0.10%
Corn +3.91%
Cotton -0.81%
Feeder Cattle +1.05%
Lean Hogs -16.80%
Lumber +0.03%
Orange Juice +4.40%
Soybean Meal -2.39%
Soybeans -14.24%
Sugar #11 -1.30%
Wheat +0.82%
White Sugar -0.65%

Credit Indices

Index Change
Markit CDX EM +0.62%
Markit CDX NA HY +0.94%
Markit CDX NA IG -4.44%
Markit CDX NA IG HVOL -4.23%
Markit iTraxx Asia ex-Japan IG -5.10%
Markit iTraxx Australia -1.06%
Markit iTraxx Europe -3.07%
Markit iTraxx Europe Crossover -11.24%
Markit iTraxx Japan +1.25%
Markit iTraxx SovX Western Europe -1.44%
Markit LCDX (Loan CDS) -0.06%
Markit MCDX (Municipal CDS) -2.73%
It was definitely a “risk on” week that saw credit spreads narrow and almost all equity markets end in the green. However, Friday saw the US markets give up most of their gains on the news that Ukraine destroyed Russian military vehicles crossing border (Russia denied the report.) Something that the markets will be fixated on when they open on Monday.

Nifty Heatmap

CNX NIFTY.2014-08-08.2014-08-14

Index Returns

index performance.2014-08-08.2014-08-14

Sector Performance

sector performance.2014-08-08.2014-08-14

Advance Decline

advance.decline.line2.2014-08-08.2014-08-14

Market cap decile performance

Decile Mkt. Cap. Adv/Decl
1 (small) -4.44% 73/61
2 -4.14% 60/74
3 +0.07% 64/69
4 -0.04% 65/69
5 +0.03% 64/68
6 -0.93% 63/72
7 -0.34% 68/65
8 +0.13% 66/67
9 +0.67% 65/69
10 (mega) +2.85% 65/69
Large caps out-performance continued.

Top winners and losers

JSWSTEEL +10.32%
APOLLOHOSP +11.29%
TATAMOTORS +11.94%
RCOM -4.69%
BHEL -3.60%
HEROMOTOCO -3.13%
Tata Motors’ strategy of driving JLR mid/down market is working for now…

ETFs

NIFTYBEES +2.64%
BANKBEES +2.22%
INFRABEES +0.45%
JUNIORBEES -0.50%
GOLDBEES -0.76%
PSUBNKBEES -2.31%
PSU banks – when will the tide turn for them?

Investment Theme Performance

Flat, range-bound, large-cap market hasn’t been kind to investment strategies overweight midcaps…

Yield Curve

yield Curve.2014-08-08.2014-08-14

Bond Indices

Sub Index Change in YTM Total Return(%)
GSEC TB +0.21 +0.08%
GSEC SUB 1-3 -0.02 +0.32%
GSEC SUB 3-8 -0.29 +1.44%
GSEC SUB 8 -0.27 +1.95%
The curve’s inversion continued to steepen. Long bond yields continued to compress. With Rajan ruling out rate cuts anytime soon, is the bond market warning us of a slowdown in growth or is it projecting lower long-term inflation?

August Nifty OI

Both 7800 puts and 7900 calls were added.

nifty.puts.calls.AUG.2014-08-08.2014-08-14

August Bank Nifty OI

bank-nifty.puts.calls.AUG.2014-08-08.2014-08-14

Thought for the weekend

how the 2% think

Options Daily 2014.08.14

Nifty OI

nifty.puts.calls.AUG.2014-08-12.2014-08-13

Bank Nifty OI

bank-nifty.puts.calls.AUG.2014-08-12.2014-08-13

Anomalous Option Trades

A sudden increase or decrease in open interest can signify informed buying/selling that you can potentially profit from. Option traders tend to ‘lead the pack’ and their actions can be used to gain insight into the consensus opinion of traders. This scan lists option trades that were one standard deviation away from the average over the last 20-days. Note that this scan maybe too noisy around expiry.

You can download the data here.

Check out our Option Strategy Studio. One more reason to open a demat account with us.