The Market is Talking to You. Are You Listening?

Jun 17, 2020

Vijay Bhambwani, Editor, Fast Profits Daily

Today's video is about the kind of work that I put out on Equitymaster's Telegram channel, free of cost.

My late evening posts which talk about market statistics, are very useful for traders.

In today's video, I'll use the example of what happened on Friday, 12 June, to show you how you could have made fast profits.

When the market 'talks' in its language of numbers, all you need to do is listen to what it's saying. It's the key to successful trading.

Watch the video and let me know your thoughts. I love to hear from you.

Hi, this is Vijay Bhambwani and I am still recording videos from my residence. I hope you're keeping a finger on the pulse of the market, you're watching the markets keenly and deciphering the signals that the market is sending out at all times.

I do fervently hope that you have joined Equitymaster's Telegram channel with the handle Equitymaster official. Today's video is actually about the kind of work that I put out there, the kind of posts that I put out there, especially the late evening posts, which talk about the market statistics.

It also touches upon a burning question that I am sure must be touching every trader's mind and mindset about whether the kind of meltdown that we saw on Friday, the 12th of June 2020, was in any way predictable. Was the market dropping any kind of hint that this would happen and if it has any kind of a system or a pattern that you and I, as retail traders, learn to read the message of the markets?

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The answer to all these questions I'm happy to tell you is an emphatic yes. Yes, the markets do drop broad hints. They don't give you a laser precise, come and shoot me kind of a signal, but they drop you enough bread crumbs for you to follow. You see, on the Equitymaster Telegram channel, I put out three posts, the first one being the turnover.

If it all on a rising market, the turnover is higher, which means the buyers are actually keen and therefore participating in the market wholeheartedly. If on the other hand, turnover is increasing on a day that the market is down that means that the selling pressure is actually stepping up.

In the run up to the decline on Friday, 12th of June, I noticed that rallies were on poor volumes and the declines were on higher volumes. The open interest build up, which is the number of transactions that are open in the derivative space but not yet squared up, was rising every time the markets fell and when they rose, the open interest was either rising very, very insignificantly or even contracting.

That tells me that the insiders and remember, as long as there are money markets, there will always be people in the know, insiders, these guys, if we were to track their money trail and believe me, the best part about digital markets, computerised markets is that every trade leaves its footprints the sands of financial markets because all the numbers are there in the open, high, low, close, in the snap quote window of your trading terminal. So these guys, the insiders, have left enough trails for us to do a forensic audit or a post-mortem of the numbers and say that yes, these declines are predictable.

The other post that I put out is the basis. Now the basis might sound very complicated but let me cut out the jargon and tell you what the basis is. The basis simply means that difference between the spot and the future. Since the last couple of weeks, both the Nifty and the Bank Nifty was showing the futures to be quoting below the spot price, which means the basis was invited.

What the old timers would call undha badla or backwardation. If the Nifty was rising, which it was sporadically of an on, why was the basis inverted? It means the insiders knew that there was a fall coming and on rallies they were hammering the markets.

The third post that I put out there is the top 20 counters in all categories. Highly, volatile counters, the gainers, the losers, stocks where open interest is going up, stocks where the volumes are higher. I noticed that the Nifty and the Bank Nifty were always present in the most volatile counters which is not normal nor is it healthy.

This told me that there was an acute amount of nervousness in the market which is not conducive to a sustained bull run. Which is why there was a very sudden, very sharp and very pronounced deep decline on Friday. So had you basically followed the Equitymaster channel on telegram, you'd have seen in the run up to the decline how the statistical data was basically dropping bread crumbs, hints, broader kind of messages to you that the market was walking on a slippery slope.

You know, just as birds talk, as a matter of fact chirp, human beings talk, other animals talk, the markets also talk. The point is that the language of the market is in numbers, is in statistics. If we were to get a little more statistically savvy or mathematically savvy, we would be able to hear or decide the message of the market.

So do remember my friends that markets talk. Ask yourself the question, are you listening? And if you are not, who do blame other than yourself? I do hope that you're joining Equitymaster's Telegram channel and you're gonna be reading my posts every evening. I look forward to seeing you there.

Before I sign off from this video, let me remind you to click like on this video. In the comments section, do let me know what you think of this video and what else you would want me to record in my next video.

Do not forget to recommend my video to family and friends to help me spread the cult of knowledge based investments. With that, I say goodbye till we meet again in my next video. Do take very good care of yourself, your health, your trades and your investments.

Thank you for watching.

Stay safe!

Warm regards,

Vijay L Bhambwani
Vijay L Bhambwani
Editor, Fast Profits Daily
Equitymaster Agora Research Private Limited (Research Analyst)

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