QUANT SYSTEM TRADE UPDATE - 13.02.24

From the desk of Capt.D.Ganesh Raja                                                                       

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.

Dear Friends,

I had stated that there were some divergences seen in market performance and key indicators, few of which we will look into now.

The 10 year GS index had a stupendous run but it is in consolidation mode now. The rule of alternation indicates that there could be a possibility of deeper zig-zag correction. Having said that, for now there is no sell indication in this index.

USD-INR has been rock steady, compared to many of the international currencies. RBI has been managing currency fluctuation admirably, even compared to advanced economies.

The HSBC India Manufacturing PMI was revised slightly lower to 56.5 in January 2024 from a flash reading of 56.9 but was notably higher than December's figure of 54.9. It was the strongest growth in the factory sector since last September, as both output and new orders expanded the most in four months while new export orders increased further. Also, buying activity was robust, rising at the fastest rate in four months and considerably above its long-run average. Consolidation at the upper variance limit give a comforting future picture.

Business Confidence in India increased to 135.40 points in the fourth quarter of 2023 from 132.50 points in the third quarter of 2023. This is below the peak but the structure of this chart is what gives so much confidence and we might see a impulse wave in this economic indicator. With general elections a just a few months away, probably this might indicate the continuation of the present Government. It is widely expected but the debate is on winning how many seats.

Total passenger vehicle sales in India increased by 3.2% from a year earlier to 242,920 in December 2023, slowing from a 4.3% rise in the previous month, Automobile Manufacturers (SIAM) data showed. The latest result excluded Tata Motors, BMW, Mercedes, JLR & Volvo data. Sales of passenger vehicles in the country are expected to continue to grow this year, supported by various schemes of India's government, Vinod Aggarwal, President SIAM said. However , a closer look at this chart indicates that we might see some softening demand.

Gross Direct Tax collections for FY 2023-24 upto 10th February, 2024 are at Rs. 18.38 lakh crore, higher by 17.30% over gross collections for corresponding period of preceding year.

Residential Property Prices in India increased 5.15 percent in June of 2023 over the same month in the previous year. The long-term chart indicates a rounding bottom and which indicates firmer prices going ahead for the long term. I have allocated mine in anticipation of this and hopefully would reap the rewards.

As far as Indian markets are concerned the proprietary indicators are showing a profit taking scenario and also sector churning. The easy part of the bull run maybe behind us unless proven otherwise. VIX indicator has rallied  to 15.8 from record lows and proprietary indications are indicating this might continue going ahead. So basically for a forward looking one month period is indicating this level of volatility.

Sector specific action will come into play and still careful analysis has to be made before making bets.

Now let us pay attention to US markets. America’s publicly traded companies are flashing a key sign of economic uncertainty -- they’ve been hoarding cash. US corporations, however, are clinging to their money -- they increased their cash on hand through the first half of last year by 13 per cent to $2.35 trillion from $2.08 trillion at the end of 2022. Firms also cut back on share buybacks,

Analysts at Sevens Report Research said in their latest note that they see four core drivers for the market, and the "bullish mantra is still intact."  "Stay focused on the four bullish factors fueling this rally: Solid growth, a turning-dovish Fed, falling inflation, growing earnings," they added. "Again, until one of those are disproven (and they will be at some point, they always are) then momentum can carry this market higher."

A bullish January barometer supports 5000+ for the S&P 500 in 2024, according to the latest Bank of America research note on Thursday.

Analysts at the firm claim that an up January for SPX is a bullish signal, and the 2024 January barometer suggests the SPX will be between 5260 and 5400 into year-end.

"The month of January is a reasonably good predictor of the year based on S&P 500 data going back to 1928," said the investment bank.

The US economy added 353K jobs in January 2024, compared to an upwardly revised 333K in December, and way above market forecasts of 180K. It is the biggest rise in employment in a year, signalling the labour market remains tight. 

Average hourly earnings for all employees on US private nonfarm payrolls increased by 4.5% year-on-year in January 2024, up from 4.4% in the prior month and above market forecasts of a 4.1% rise. It was the biggest increase in annual average hourly earnings since September 2023. There is a lot of scope for upward revision in this as per variance charts, which could again propel consumption spending.

CBOE VIX is at 12.93, which is pretty stable.

Market breadth was narrow for most of 2023, with the 24% gain in the S&P 500 driven primarily by the so-called Magnificent Seven, a group of heavyweights that includes Meta Platforms, Apple Inc. and Amazon.

At the same time, some strategists believe a longer-term look shows that more stocks actually have participated in the rally. More than half of the 100-plus sub-industries in the S&P 500 are up by 20% or more since the current bull market began in October 2022. Technology and communications services are the only ones to have outperformed the broader index, however.

Gross Fixed Capital Formation in the United States increased to 3998.49 USD Billion in the fourth quarter of 2023 from 3981.30 USD Billion in the third quarter of 2023. Gross Fixed Capital Formation in the United States averaged 2705.98 USD Billion from 1995 until 2023, reaching an all-time high of 3998.49 USD Billion in the fourth quarter of 2023 and a record low of 1215.60 USD Billion in the second quarter of 1995. The trend seems very strong here and this only augur well for the US economy.

US consumer inflation expectations for the year ahead fell for a third consecutive month to 3% in December 2023, the lowest level since January 2021, from 3.4% in November. It is below the long term mean level and has room for further downside.

Putting all this together the probability of a rate cut by Federal reserve is remote. Of course heated debate will occupy much of media attention every time prior Fed meet.

Even European markets are shrugging off inflation concerns and higher energy prices, attempting to trend.

I will have a closer look at various macro indicators and also time cycle analysis, which are all part of Quant system to see what it is indicating.

For now the following stocks gave given system exit : Karur Vysya Bank ( 68.43% returns since 21.05.23) & Lemon Tree Hotels (36.01% returns since 05.08.23)

Refer to MOCK PORTFOLIO sheet for all system triggers till date.

RETURNS TILL DATE SINCE 04.07.20 : 139.37% (AS OF TUESDAY 13.02.24 CLOSING)

LEVERAGE FOR EXISTING MOCK PORTFOLIO TRIGGERS: 1.40

SYSTEM EXIT DELEVERAGE: 0.25

LEVERAGE FOR NEW MOCK PORTFOLIO TRIGGERS: NA

TOTAL LEVERAGE: 1.40

ASSET ALLOCATION PROFIT POTENTIAL FOR NEW PORTFOLIO TRIGGERS : NA

TIME PERIOD OF TRADES RECOMMENDED : 15 DAYS TO 3

MONTHS.

MOCK PORTFOLIO.pdf

Download PDF • 615KB