December Conference Call: 5 Key Takeaways
1. "The winner over the past 4-5 months has certainly been the stock market, as bonds and gold have been selling off."
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When we perform our intermarket analysis we select the asset class that will outperform the rest and focus our energies on the strongest player. Over the past several months the stock market has been charging forward while Bonds and gold continued to underperform.
2. "What we want to look at is the percentage of stocks that are above their 200-DMA and we're getting extreme readings, extremely high readings! While we could see some consolidation in some of these stocks that have been leading the market higher when you go back in time these strong breadth thrusts are characteristic of early-stage bull markets. Characteristics of the beginning of cyclical bull markets, not evidence of exhaustion."
The extreme readings in the percentage of Nifty 500 stocks above their 200-DMA alludes to the market-wide participation that we are witnessing in the current scenario. While there may be a pause or consolidation, this extreme reading is not a sign of a risk-off market environment.
3. "The Small-caps are the ones that still have some way to go. If we're above 6,500 I like them long, most certainly, with a target up near 7,850."
Market rallies becomes stronger with greater participation from different segments of stocks. With the small-caps registering their gains and holding above the crucial level of 6,500, we may see this leg of the rally move higher towards 7,850.
4. "Here's Nifty IT on a relative basis retesting those 2014 highs. So as long as we're above those, I would expect IT to outperform. If they break below 1.67, it doesn't mean IT can't go any higher, it most certainly can. I just wouldn't expect it to outperform."
IT has been one of the strongest sectors in the market rally but it took a breather at higher levels. The IT index relative to Nifty 100 has taken support from the level of 1.67, which will be crucial to track in terms of the outperformance that we can expect from this sector going forward.
5. "We want to be long Nifty Energy, aggressively long in that space if we're above these former highs from last year."
While the Energy sector has been a weak name in the global market, its index broke above its crucial resistance of 16,700 in India. We want to look for buying opportunities in this space if these levels hold up.
We hope this gave you some perspective on the topics we're focused on in the current environment. There are clear trends across various asset classes that we want to continue taking advantage of.
If you missed this 100+-slide presentation, you can watch the recording and view our Trade Ideas Page for a summation of the ideas discussed.
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