State of the Market|Reading the Psychology of the market

Every morning you wake up thinking - what happened overnight and how it is going to impact Indian stock market. Well, here’s a quick way you can review what happened overnight in less than 5 minutes.

All you have to do is - quick glance of nine indicators and you are ready for the trading day. These are the nine must see charts every morning.

S&P 500

The S&P 500 is one of the most followed/traded equity indices in the world. It is an index of 500 stocks - popular benchmark for overall stock market. It is market value weighted index, unlike Dow Jones which is price weighted. It means each stock’s weightage is based on market value of the companies and not the price of individual stock.

For chart, click here - http://stockcharts.com/charts/gallery.html?$SPX

US CBoE VIX

Also Known as Fear index. The VIX tells us the market’s expectation of 30-day volatility. It is constructed based on implied volatilities of various S&P 500 index options. It is a forward looking indicator and a measure of market risk. VIX values less than 25-30 are considered ok, but any value above that is considered as big warning sign. Remember, during Lehman collapse - it shot upto 80.

For chart, click here - http://stockcharts.com/charts/gallery.html?$VIX

USD Index

It is a measure of the value of US dollar against a basket of currencies: Euro, Japanese Yen, British Pound, Canadian Dollar, Swedish Krone and Swiss Franc. The index was started in 1973. In last couple of years - dollar has become an important lead indicator of Global capital flows and risk aversion.

For chart, click here - http://stockcharts.com/charts/gallery.html?$USD

CRB Index

CRB stands for Commodity Research Bureau. It is also known as commodity index. The index was designed to tack the directional movement of prices in overall commodities. Since, most of the commodities are priced in dollars, they move in opposite direction to Dollar. CRB index is also a play on strength of Global growth; and remains at center of inflation watch.

For chart, click here - http://stockcharts.com/charts/gallery.html?$crb

Crude Oil and Gold

Crude Oil and Gold have been two most watched and traded commodities in last five years. It pays to track their movement; as they tend to be volatile and make sharp moves

For Crude chart, click here - http://stockcharts.com/charts/gallery.html?$WTIC

Gold chart - click here - http://stockcharts.com/charts/gallery.html?$Gold

BDI Index

Baltic Dry Index - measures the state of shipping industry. It is one of the best indicators of Global trade and economic growth. I have covered this index many times before in State of the market. I consider this index to be very important as it is non speculative in nature; and is based on true economic activity.

For chart, click here - http://stockcharts.com/charts/gallery.html?$bdi

Chinese stock market

It’s not only the US stock market that matters now-a-days. China is becoming big with every passing day; and occupies big mindshare of global investors. Hence it becomes an important index to watch purely from sentiment perspective.

The best index to watch in China - SSE Composite. The SSE composite is made up of all the A-shares and B shares that trade on the Shanghai stock exchange - and gives a broad view of the overall chinese stock market.

For chart, click here - http://stockcharts.com/charts/gallery.html?$SSEC

Impact on India: SGX Nifty

SGX Nifty gives the best view on how Nifty will open early morning based on all global cues; and key domestic data released after market hours. It prepares a trader on how he/she should position for the market.

For quote, click here -

http://www.sgx.com/wps/portal/marketplace/mp-en/prices_indices_statistics/derivatives/delayed_prices/infe

I hope this article will help you get ready for a trading day in a much better fashion. Do share your feedback and input.

Disclaimer - The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers