"India Indicator" Better Than "Buffett Indicator"

JC Parets
February 16, 2021

If you're ignoring the Indian Stock Market, I think you're doing yourself a huge disservice.

Even if you never plan on trading stocks in India at any point in your life, it doesn't matter. There's amazing information coming from there.

For example, take a look at that relative strength in Indian Bank stocks before US Stocks, and Stocks in general, rallied throughout 2019. That was an epic rally, if you recall.

The Indian Banks had already been telling us that it was coming!

Then Fast forward to Q1 2020 when US Financials made new highs along with European Banks. But Indian Bank stocks were already warning otherwise, for months before stocks finally crashed.

And now Indian Banks are making new all-time highs. What does that suggest for US and European Bank stocks?

Do you want to fight that trend?

I don't.

Now, with that Indian leadership theme in mind, how about what's going on in NIFTY ENERGY. Look at this breakout from a multi-year base:

When you zoom in on the daily timeframe, the base really stands out:

Now think about what Oil is doing. New recovery highs across the board.

And as our friends at Strategas put it,

Brent Oil most "overbought" in 17-years (that's a good thing)."

There will be a lot of people complaining about high energy costs at some point in the future. And then there will be people celebrating those high energy costs because of how much money they made all the way up.

I'd rather be the second kind.

Folks, they're buying energy stocks and banks. Can you think of 2 worse groups of stocks?

This is what is called "Risk Appetite"

See: Is it Time For The Laggards To Shine? for Energy Charts & New Trade Ideas

Meanwhile, it seems to me that journalists and permabears are much more interested in “Warren Buffett's favorite valuation metric” than Warren Buffett is...

Here's what Charlie Munger had to say about it:

Just because Warren thought something 20 years ago, doesn’t mean it’s a law of nature (Total Market Cap / GDP).....there’s no automatic correlation between those 2 figures..."

Can we move on?

 

 

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