As many of you already know, I do a lot of work on stock markets all over the world. It’s part of my weight-of-the-evidence approach, but it also gives me the opportunity to learn from investors and traders who come from completely different cultures and bring a unique perspective. How else can we learn if not by exposing ourselves to new things?
Recently I was going through my India Nifty workbook where I keep all of my notes on the India Indexes like the NIFTY50, NIFTY500, NIFTY100, NIFTY Mid-caps, etc. It’s a very similar workbook to the one I keep for the United States where I include the S&P500, DJIA, Russell2000, etc. I consider all of this to be the “top” of my top/down approach to equities. We start with the indexes, work our way down to the sectors and industry groups and ultimately to the individual stock level.
The NSE, or National Stocks Exchange of India, has this Index that they call the NIFTY NEXT 50. This index represents the next 50 companies that are not part of the NIFTY50, but still within the NIFTY100. What I noticed last week was that the NIFTY50 was hitting our upside objectives, while the NIFTY NEXT 50 was already in the process of exceeding our targets and beginning a new leg higher. I was getting signals from the NIFTY NEXT 50 that I wasn’t getting from the original NIFTY50.
While I wasn’t really that amazed at how helpful this was for me, because this is why we look at all the indexes, I was a little disappointed that we don’t have something similar in the United States. We have the Dow Jones Industrial Average with 30 stocks and we have the 20 stocks in the Dow Jones Transportation Average, but we don’t have what would theoretically be the next 30 (or 50 total) in line in an organized format.
With the beauty of a little math and some great technology, I just built my own. And it’s already becoming a helpful tool. In fact, I find it so helpful that I will be adding it to our group of Indexes this month. I will also be adding 2 additional workbooks to my Chartbook which include the Dow Industrials Next 30 stocks and the Dow Transports Next 20 stocks, giving us our very own USA Next 50 Index. [Read more…]