Intelligentguess

Analysis of Market Indices

Have an alternate thought process ? Would be glad to hear about it

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The purpose of this note is not to force down any complex technical analysis / direction views. The simple visuals - allows you to conclude.

The study deliberately uses the Indian BSE-30 index versus the SP 500 ( the Indian NSE-50 was too much in line)

Visual I

In May 2004 the markets dropped (”crash” in Indian markets). ( BSE dropped from 6500 area to 4200 area while SP-500 had dropped from 1160 to 1065). Post the market drop - we can clearly see the SP-500 lending ( leading ? ) direction when the markets turned around.

Visual II ( since July 2006 )

Since July 2006 - both the Sensex and the SP-500 have been tracking each other.

Visual III ( S & P 500 movements since 1997 )

Conclude

• Pretty clear  that S&P 500 leads BSE-30 on market turns / direction
• In a rising market S&P  500 has too many resistances - and could rise slower than BSE-30
• However in a market thats falling  - S&P 500 would fall harder and longer initially - compared to BSE-30
• A lateral thinking solution for the short/ medium term- without having a view/bias towards the direction of market  - could be - “BUY” BSE ( or Nifty- NSE) and “Sell” S&P 500. ( i.e make a spread trade using one markets momentum against another)

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