QUANT SYSTEM TRADE RECOMMENDATION UPDATE - 23.03.23

DISCLAIMER

Please be informed that the author of this blog by Capt Ganesh Raja Dhanuskodi (Hereinafter called Capt Ganesh) is not a SEBI registered Research Analyst or Financial Advisor. Capt Ganesh writes this blog to express his views based of more than two decades of experience in capital markets and based on the Quant system which he has invented and he does not do this for “consideration” as per SEBI regulations, which means he does not receive economic benefit through it. Readers of this blog must seek advice from registered Investment Advisors / Research Analysts before taking any trading or investment decisions.

Capt Ganesh has been investing and trading actively since 2001, building trading models since 2013 and has invented an AI based intraday trading system, which has a pending patent approval.

From the desk of Capt.D.Ganesh Raja

Dear Friends,

Contrary to generally what I start with, today I am going to start with a discussion on Gold, since it has been hogging the limelight due to recent stellar run. Whenever any asset class moves in a short span of time it tends to attract the attention. Majority of the population is glued to the prices, so probably the phenomenon.

My discussion on Gold is not ill placed because in an extremely uncertain environment, it makes sense for anybody to have some allocation in Gold

The current rally in Gold prices in India, which began Sept 2022 is in the 8th month. The prices are in weekly uptrend channel but there is a possibility of profit booking softening prices till 58700 levels, however there is no trend reversal in weekly charts. From peak levels that will be a drop of 4.3%, which is quite significant for short term traders but a routine dip for investors holding for longer term. So, till the time there is a trend reversal the system will not give an exit.

Now let us look at international Gold prices and some of the underlying factors. From USD 258.55 in February 2001 Gold rallied to USD 1770.00 till August 2011, which translates into 584% returns. It corrected till 1219.75 till October 2018 and from there rallied till 1957.2 till August 2020. Since then it has been in flattish correction cum consolidation mode and one cannot rule out a move till USD 1720.0 levels.

I do not have Gold price charts in dollar terms hence unable to correctly run the system on it but will try to broadly explain the move. In rupee terms it is a different matter because exchange rate factors are involved. The rally we saw from October 2018 to August 2020 was the alpha wave followed by the corrective beta corrective wave, which is still in progress. If one runs fib grids, one will be able to see multiple resistance zones. So the impulse gamma wave in Gold in dollar terms hasn’t even begun, which is some time away.

Gold prices dropped to $1,980 on Friday, 21.03.23 falling after touching a 13-month high of $2,040 recently. This is attributed to a strong PMI data from major economies backed expectations for rate increases from central banks in May. Well, that is the perception.

As per Invesopedia, a prominent financial website, “Private sector activity in the United States, the Eurozone, and the UK beat consensus estimates and rose at the fastest pace in 11 months in April, pointing to resilience in the services sector despite elevated borrowing costs. At the same time, several Fed officials supported the need for further policy tightening to bring inflation down, with St. Louis Fed President James Bullard favoring a higher terminal rate of between 5.50% to 5.75%. Also, some ECB policymakers called for more rate hikes in upcoming meetings to tame the record-breaking core inflation. Higher interest rates raise the opportunity cost of holding non-interest-bearing assets, impacting demand for bullion.”

Central banks accumulated gold at the fastest pace on record in the first two months of 2023, according to a report by the World Gold Council’s (WGC) .Central banks collectively bought a net 125 tonnes of the metal, in January and February. This according to them is the highest amount for the year-to-date period since banks became net buyers in 2010.

Interesting part is, bulk of the buying is by BRICS countries. Is this towards currency re-alignment for mode of payment? I don’t want to indulge in guesswork, but time will tell what is playing out.

buyers as they seek to diversify away from the dollar.

Another valuable piece of information is that, after 10 months of continuous outflows, net inflows into gold-backed ETFs turned positive in March 2023. As of March 31, total gold holdings stood at 93.2 million ounces, according to Bloomberg.

USD/INR: Last close – 82.10. No clear trend emergence has been seen in this currency pair and hence leverage has been reduced to 0.5x and TRADE RECOMMENDATION LOG updated accordingly.

NASDAQ COMPOSITE: Last close – 1207.46. There is no system exit yet and also the bias is towards uptrend to continue for some time. In fact, in the international trading competition, I have bought call option in ETF representing this index. It is a risky strategy but decided to go ahead with it anyways.

Nifty and the stocks, in which signal was given by the system and recommended previously still remain valid, since there is no exit as of yet. A minor dip was seen in market and some of the stocks recommended during last week. We are entering into a futures expiry week this week so volatility can be expected. India VIX closed at 11.63 which is below the key support level of 11.90. Weather it will flare up from here with further market dip is anybody’s guess but system indications are towards a dip till 10.35 for a very brief period.

I also checked CBOE VIX od US markets which is at 17.17, which indicates a “normal market environment”, which indicates a low probabilistic scenario of a serious dip.

Refer to TRADE RECOMMENDATION LOG for details of the system-based recommendations and present status.

THERE ARE NO NEW TRADE RECOMMENDATIONS TO MAKE.

Returns till date: 77.75.95%

TRADE RECOMMENDATION LOG.pdf

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