## Monday, March 26, 2012

### The Market Barometer

Here's a look at the 50 index stocks and how are they placed from their averages. 28 stocks are above 200, 24 are above 50, 22 are above 50 and 200.

This can be converted into a rating scale which will immediately tell us the state of the market. It goes like this - Give 2 points to a stock if it is above 200, give 1 point if it is above 50, give -2 if it is below 200 and give -1 if it is below 50.

28 stocks are above 200 so we get 28*2 = 56

24 are above 50 so we get 24*1 = 24

22 are below 200 so we get 22*(-2) = -44

26 are below 50 so we get 26*(-1) = -26

Now, we add up all the points to arrive at a single figure, so

56+24-44-26

= 10

Take a look below

If all the 50 stocks are above 200 and also above 50 then we get a reading of +150. Similarly, if all the 50 stocks are below 200 and 50 then we get a reading of -150. These are the extremes of the market.

Currently, the reading is +10, so we are just around the neutral zone. Further, if say the reading is between +25 and +50 then we can call it mildly bullish and so on.

The advantage is that you just need to look at one number which will immediately tell us the state of the market.

VK said...

Hi Proff SS :

Fantastic bit of analysis of the index to understand the state of the market. Thanks :)

Regards

Vinod

Yusuf said...

Excellent !! Simple way of reading the state of the market.

"ss" Sunil Saranjame said...

Thanks, VK and Yusuf.

jonak said...

intelligent post....thanks...got plenty to learn from you

"ss" Sunil Saranjame said...

Thanks Jonak,

Actually, this was posted maybe last year but I cleaned out all the old posts and the other day one person requested me to post it again.

Thank you Jonak, have a good day,

Yusuf said...

Sunil sir,

from where did you fetch the data for 50 and 200 DMA ?

"ss" Sunil Saranjame said...

I'm using an EOD software called Spider.

http://spidersoftwareindia.com/

The data is then exported into Excel.

Yusuf said...

Thanks :)

Maybe you should do a post sometime about the tools you use for trading, data analysis etc.

Regards,
Yusuf

"ss" Sunil Saranjame said...

ok, Yusuf, will think about it.

Simple tools and strategies are the best!

K J S Arora said...

Sunilji your barometer is an intelligent construct and a practicable way to take positions and trade.Thankyou for your inputs and the pains you take to guide your fellow traders.

"ss" Sunil Saranjame said...

Thank you Aroraji, always welcome.

I like to construct various indicators like this which help us gain an insight.

Good day,

Raghu R Bhat said...

Dear SS - Can it be adapted to intraday - so that we can figure changes in market mood intrady - looking at AD intraday helps somewhat - but it is noisy.
rb

"ss" Sunil Saranjame said...

Technically, it is possible - feed live prices of Nifty 50 stocks into an Excel sheet, and you will get a live barometer reading.

But I don't think it's worth the effort.

anil said...

Hi Sunil,

You are doing a wonderful job of giving something different from normal technical analysis studies. I appreciate your work.

Anil Palan

anil said...

Hi Sunil

Appreciate your work on "The Market Barometer" which is quite different from normal technical analysis and gives better understanding of the market.

Anil Palan

"ss" Sunil Saranjame said...

Thank you, Anil.