Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning December 04

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	2642, 1.53%	Bullish	Bullish
Nifty	10122, -2.58%	Neutral **	Bearish
China Shanghai Index	3318, -1.08%	Bearish	Bearish
Gold	1282, -0.39%	Neutral	Neutral
WTIC Crude	58.36, -1.00%	Bearish	Bearish
Copper	3.09, -2.41%	Bearish	Bearish
Baltic Dry Index	1578, 9.20%	Bullish	Bullish
Euro	1.1896, -0.23%	Neutral	Neutral
Dollar/Yen	112.13, 0.55%	Bullish	Bullish
Dow Transports	10187, 5.89%	Bullish	Bullish
High Yield (ETF)	36.75, -0.20%	Neutral	Neutral
US 10 year Bond Yield	2.36%, 0.94%	Bearish	Bearish
Nyse Summation Index	487, 25.11%	Bullish	Neutral
US Vix	11.43, 18.45%	Bearish	Bearish
Skew	129	Neutral	Neutral
20 DMA, S and P 500	2597, Above	Bullish	Neutral
50 DMA, S and P 500	2568, Above	Bullish	Neutral
200 DMA, S and P 500	2454, Above	Bullish	Neutral
20 DMA, Nifty	10298, Below	Neutral	Bearish
50 DMA, Nifty	10183, Below	Neutral	Bearish
200 DMA, Nifty	9680, Above	Neutral	Bullish
India Vix	14.80, 9.49%	Neutral	Bearish
Dollar/Rupee	64.54, -0.01%	Neutral	Neutral
Overall	S & P 500	Nifty
Bullish Indications	8	5
Bearish Indications	5	9
Outlook	Bullish	Bearish
Observation	The S and P 500 made new highs and the Nifty broke down last week. Indicators are mixed. The market is topping. Time to tighten those stops.
On the Horizon	Australia – Retail sales, Rate decision, GDP, Japan – GDP, UK – PMI’s, Manufacturing production, U.S –Oil inventories, ISM PMI, Employment data, Canada – PMI, Rate decision, India – RBI rate decision
*Nifty	India’s Benchmark Stock Market Index
Raw Data	Courtesy Google finance, Stock charts, investing.com
**Neutral	Changes less than 0.5% are considered neutral

The S and P 500 made a new high and the Nifty broke down last week. Signals are mixed for the upcoming week. It is looking rather ominous for the Indian market given the under-performance. Quantitative tightening by the FED is yet to be priced in and sentiment indicators are back in complacency mode. The markets are still trading well over 3 standard deviations above their long term averages from which corrections usually result. The critical levels to watch are 2650 (up) and 2630 (down) on the S & P and 10200 (up) and 10000 (down) on the Nifty. A significant breach of the above levels could trigger the next big move in the above markets. You can check out last week’s report for a comparison. Love your thoughts and feedback.

Are Mutual Funds the Best Investment Vehicles? Think Again!

Mutual funds are very good investment avenues for the average investor. There is a popular belief that mutual funds are terrific investment vehicles because they potentially diversify risk away. A look at some of the best mutual funds in the recent past paints a rather interesting picture:

source: spotalpha.com

What is interesting in the above chart  is that the returns above closely track each other. Funds that take high risk deliver higher returns while funds that take lower risk deliver lower returns. Thus it appears that none of the funds are consistently generating excess returns relative to the risk they are taking.

So how do we solve this problem? Why not consider an optimized portfolio of stocks that can produce significantly superior returns for a given level of risk? Enter the portfolio optimizer tool from Spotalpha.  Set your maximum risk profile (say -10%). Identify stocks and keep optimizing till you find a portfolio that provides maximum performance within identified risk profile. Allocate to these stocks and comeback every 15 days or so to check if there are any new re-balancing suggestions to the allocation. You are now on the path to superior returns.

 An optimized portfolio of stocks like this one delivered +154% return at a lower draw down risk of -5%, when compared to the best mutual fund which delivered +28% return for a draw down risk of -10% on an annual basis:

Market Signals for the US stock market S and P 500 Index and Indian Stock Market Nifty Index for the Week beginning November 27

Indicator	Weekly Level / Change	Implication for S & P 500	Implication for Nifty*
S & P 500	2602, 0.91%	Bullish	Bullish
Nifty	10390, 1.03%	Neutral **	Bullish
China Shanghai Index	3354, -0.86%	Bearish	Bearish
Gold	1287, -0.71%	Bearish	Bearish
WTIC Crude	58.95, 3.95%	Bullish	Bullish
Copper	3.17, 3.33%	Bullish	Bullish
Baltic Dry Index	1445, 6.17%	Bullish	Bullish
Euro	1.1925, 1.12%	Bullish	Bullish
Dollar/Yen	111.51, -0.55%	Bearish	Bearish
Dow Transports	9620, 1.45%	Bullish	Bullish
High Yield (ETF)	36.99, 0.54%	Bullish	Bullish
US 10 year Bond Yield	2.34%, -0.59%	Bullish	Bullish
Nyse Summation Index	389, 26.20%	Bullish	Neutral
US Vix	9.65, -15.57%	Bullish	Bullish
Skew	131	Neutral	Neutral
20 DMA, S and P 500	2585, Above	Bullish	Neutral
50 DMA, S and P 500	2555, Above	Bullish	Neutral
200 DMA, S and P 500	2447, Above	Bullish	Neutral
20 DMA, Nifty	10324, Above	Neutral	Bullish
50 DMA, Nifty	10166, Above	Neutral	Bullish
200 DMA, Nifty	9642, Above	Neutral	Bullish
India Vix	13.51, -1.46%	Neutral	Bullish
Dollar/Rupee	64.55, -0.55%	Neutral	Bullish
Overall	S & P 500	Nifty
Bullish Indications	13	14
Bearish Indications	3	3
Outlook	Bullish	Bullish
Observation	The S and P 500 and the Nifty were up last week. Indicators are bullish. The market is topping. Time to tighten those stops.
On the Horizon	China – PMI, Euro zone – German employment data, German PMI, CPI, UK – PMI, U.S – New and pending home sales, Consumer confidence, Yellen speech, Oil inventories, GDP, ISM PMI, Canada – Poloz speech, Employment data, GDP
*Nifty	India’s Benchmark Stock Market Index
Raw Data	Courtesy Google finance, Stock charts, investing.com
**Neutral	Changes less than 0.5% are considered neutral

The S and P 500 made a new high and the Nifty was up last week. Signals are bullish for the upcoming week. Quantitative tightening by the FED is yet to be priced in and sentiment indicators are back in complacency mode. The markets are still trading well over 3 standard deviations above their long term averages from which corrections usually result. The critical levels to watch are 2610 (up) and 2590 (down) on the S & P and 10500 (up) and 10300 (down) on the Nifty. A significant breach of the above levels could trigger the next big move in the above markets. You can check out last week’s report for a comparison. Love your thoughts and feedback.