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Sat, 27th May 2017

Anirudh Sethi Report

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Archives of “stock exchange” Tag

Probability in Trading

The indulgence of probability

Probability in day trading is an extremely flexible and equally subjective authority. It is one such aspect that provides for a comprehensive room in terms of making decisions and analysing the potential effects of the decision as well. It can be envisioned as a semi-mechanical process which is based on an automated system comprising of various probabilities that depict two possible results at the end of it all.

Application of the laws of probability to determine market curve

The laws of probability are majorly applied to the stock market arena in speculating the growth curve. One of the most common examples is the influence of present growth on a stock. For instance the laws of probability in stock market confers to the fact that a stock is expected to underperform following an adverse growth session since major players tend to reap in the benefits without further risk involvement.

The substantial loss is incurred since major proportions of the people seemingly think alike and want to either cash out with the profits they have made or simply by virtue of the fear of losing money. Either way the scenario is completely structured owing to the presumptuous thinking of the common people and the misguiding statistical analysis with probability at its core.

It is therefore easily understandable that probability plays a comprehensive role at the crux of shaping the stock market manoeuvres. Probability in day trading is completely speculative yet self-induced as well. In an easier and subtle language it can be envisioned as a pseudo element that helps to shape the movements. It is significantly a common entity that is extensively present at the back of the mind in each trader.  

Probability based trading

Overnight US Market :Dow closed -41 points

S&P down -0.19%. Dow down -0.19%. Nasdaq down -0.02%

The US major stock indices are ending the session with small declines.
  • S&P was down -0.19% or -4.57 points to 2384.20. The high for the day reached 2393.68. The low for the day reached 2382.36.
  • Nasdaq was down -1.332 points or -0.02% to 6047.60. The high today reached 6074.03. The low reached 6040.707
  • The Dow fell by -40.82 points or -0.19% to 20940.51. The high today reached 20987.76. The low extended to 20926.75.
For the week, the major indices benefited from the gains from Brexit and modest follow through during the week.
  • The Nasdaq was the big winner for the week, rising by 2.32%
  • The S&P rose by 1.91%
  • The Dow rose by 1.51%.
Today is also the last day of the calendar month, and stocks are ending with gains (thanks in part, to the gains this week).
  • The Nasdaq rose by 2.30% this month
  • The S&P rose by 0.91%.
  • The Dow rose by 1.34%.
For the year (just for giggles):
  • The Nasdaq is leading the way with a 12.34% gain
  • The S&P is up 6.49% and
  • The Dow is up 5.96%.
Overall, investors in equities cannot be disappointed with the overall performance of the equity markets with 1/3 of the calendar year complete. What will the next 1/3 bring?
As posted earlier, the earnings calendar is chock-a-block with big time names that have helped propel the overall market higher including Facebook, Tesla, and Apple.

India : P-NOTE INVTS HIT 4-MONTH HIGH OF RS 1.78L-CR IN MAR

Investments in domestic capital markets via participatory notes (P-notes) have surprisingly surged to 4-month high of Rs 1.78 lakh crore at the end of March despite stringent norms put in place by Sebi to curb inflow of illicit funds. P-notes are issued by registered Foreign Portfolio Investors to overseas investors who wish to be a part of the Indian stock markets without registering themselves directly. They however need to go through a proper due diligence process.

According to Sebi data, total value of P-note investments in Indian markets – equity, debt and derivatives -increased to 1,78,437 crore at March-end, from Rs 1,70,191 crore at the end of February. Prior to that, the total investment value through P-notes stood at Rs 1.75 lakh crore in January-end and Rs 1.57 lakh crore in December-end. In March, investments through the route had touched the highest level since November, when the cumulative value of such investments stood at Rs 1,79,648 crore.    

Overnight US Market : Down day for the major US stock indices. S&P closes below the 50 day MA

S&P, Nasdaq and Dow.

The major US stock indices are all closing lower. Moreover the S&P index is closing below it’s 50 day MA for the first time since the 8th of November. The 50 day MA comes in at 2350.92. Yesterday, the price fell below that MA line (it also fell below on March 27th) but recovered by the close.   Today, was not so lucky as the price is not only closing below the MA line, but also closing nearer the low.
  • The Nasdaq is closing down -30.612 points or -0.52%
  • The Dow industrial average is closing down -59.44 points or -0.29%
For your guide the 50 day MA comes in 5828.43. The index settled at 5826.16 today.

Citi: Central Banks “Took Over” Markets In 2009; In December The “Unwind” Begins

Citigroup’s crack trio of credit analysts, Matt King, Stephen Antczak, and Hans Lorenzen, best known for their relentless, Austrian, at times “Zero Hedge-esque” attacks on the Fed, and persistent accusations central banks distort markets, all summarized best in the following Citi chart…

… have come out of hibernation, to dicuss what comes next for various asset classes in the context of the upcoming paradigm shift in central bank posture.

In a note released by the group’s credit team on March 27, Lorenzen writes that credit’s “infatuation with equities is coming to an end.”

 What do credit traders look at when they mark their books? Well, these days it is fair to say that they have more than one eye on the equity market.

Understandable: after all, as the FOMC Minutes revealed last week, even the Fed now openly admits its policy is directly in response to stock prices.

As the credit economist points out, “statistically, over the last couple of years both markets have been influencing (“Granger causing”) each other. But considering the relative size, depth and liquidity of (not to mention the resources dedicated to) the equity market, we’d argue that more often than not, the asset class taking the passenger seat is credit. Yet the relationship was not always so cosy.  Over the long run, the correlation in recent years is actually unusual. In the two decades before the Great Financial Crisis, three-month correlations between US credit returns and the S&P 500 returns tended to oscillate sharply and only barely managed to stay positive over the long run (Figure 3).”

Overnight US Market : Broader market up. Dow down.

S&P up +0.11%. Nasdaq up +0.38%

The major US stock indices are ending the session mixed with the broader markets up, while the more specialized Dow Industrial Average down.
  • S&P index is ending the day up 2.56 points or +0.11%
  • Nasdaq composite index is ending the day up 22.40 points or 0.38%
  • Dow Industrial Average is down -42.18 points or-0.20%
The Dow has been down 9 of the last 10 trading days. For the year it is still up 4.54% while the S&P is up 5.46% and the Nasdaq is up 9.56%.

Norway’s oil fund up 6.9% in 2016

The world’s largest sovereign wealth fund overcame sluggish markets at the start of last year to deliver a return of 6.9 per cent in 2016.

Norway’s $905bn oil fund was boosted by strong stock markets in the second half of the year with equity investments returning 8.7 per cent. Fixed income returned 4.3 per cent in 2016.

Yngve Slyngstad, chief executive of Norges Bank Investment Management, the manager of the fund, said:

The fund had 62.5 per cent of assets invested in equities at the end of the year but is expected this spring to be given permission to increase that to 70 per cent. Fixed income assets accounted for 34.3 per cent and real estate 3.2 per cent.

Dividends in Japan double from financial-crisis low

Japan’s publicly traded companies continue to return more profit to shareholders, with dividends headed toward a record 11.8 trillion yen ($104 billion) for fiscal 2016.

Payouts are on track to rise for a seventh straight year, climbing 7% from fiscal 2015 and doubling from the fiscal 2009 low in the wake of the global financial crisis. More than 600, or roughly 30%, of the companies with March book-closings plan to resume or increase dividends, as overall corporate profit looks set to reach a new high this fiscal year. Figures are based on Nikkei calculations of distributed and planned payouts.

 KDDI boosted its projected full-year payout earlier this month to 85 yen per share, up 15 yen from a year earlier and 5 yen more than previously planned. The mobile carrier is expected to report a record profit on the strength of increased data revenue.

The recovery in the resource market has put trading houses and related companies in a position to raise dividends as well. Mitsubishi Corp. had reported its first-ever net loss in fiscal 2015, hit by impairment charges from resource concessions. But with earnings rebounding sharply, the company plans to hike the full-year payout to 70 yen per share — up 20 yen from the prior year and equal to the previous high.

Advantest is among those boosting its payout ratio, or the portion of profit distributed as dividends. The manufacturer of chip-testing equipment is lifting the minimum ratio to 30% from 20% on a consolidated basis.

“We need to raise shareholder returns in order to retain long-term investors,” President Yoshiaki Yoshida said.

Tokyo Seimitsu, which produces chipmaking equipment, will increase its payout ratio and raise dividends even though net profit is projected to decline.

Retail investors directly hold just under 20% of listed companies’ shares, based on surveys by the Tokyo Stock Exchange and others. This means roughly 2 trillion yen will flow into pocketbooks, helping to underpin consumer spending.

Increased dividends help improve capital efficiency, a factor that can lead share prices higher.

“The ability of Japanese companies to sustain generous shareholder returns will influence the direction of Japan’s stock market,” said Kengo Nishiyama of Nomura Securities.

Global stock barometer a whisker away from record peak

Global large-and-mid capitalisation stocks have climbed to within easy striking distance of setting a new all-time high for the first time in almost two years, led by a strong performance by US equities.

The MSCI all-world index, which tracks companies in 46 countries that account for 85 per cent of the investable equities market, closed on Monday at 441.14, just 0.35 per cent away from the all-time high it struck in May 2015.

The gauge has climbed by 23.5 per cent over the past 12 months, partly reflecting a sharp rebound from a fall at the start of last year.

Equity bourses around the world have been lifted by a brightening outlook for the world economy, along with a recovery in the price of oil.

World Bank economists reckon global growth will accelerate from 2.3 per cent in 2016, to 2.7 per cent this year, and 2.9 per cent the next year. The optimism has come as central banks in Europe and Asia have loosened monetary policy in a bid to spur faster growth.

In the US, the Federal Reserve has pledged to only “gradually” tighten policy. Some economists have also marked-up their estimates for the rate of expansion for the world’s biggest developed economy on expectations that Donald Trump and a Republican Congress will roll-out business-friendly policies.

SEBI asks brokers to liquidate all futures and options positions of Vijay Mallya

Markets regulator Sebi has directed brokers to square off all existing open positions in the equity derivatives segment they hold for Vijay Mallya and the six former officials of United Spirits who were banned from the market last week.

The fresh directive by the capital market regulator has been made through an e-mail to stock exchanges yesterday.

“The trading members are advised to square off existing open positions in the futures and options segment, if any, for the persons/entities mentioned in the above order and also ensure that no fresh positions are created for the said persons/entities,” an NSE circular said quoting the Sebi directive.

However, the regulator has not given them a time-line to do so.

Sebi had last week through an interim order, barred Mallya and six former officials of USL from entering the market, after the CBI charge-sheeted them in a money laundering case involving a loan IDBI Bank.

The CBI also charge-sheeted and arrested eight IDBI Bank officials, including its former chairman Yogesh Aggrawal in the case for their role in bypassing lending norms to extend Mallya Rs 950 crore loan in 2010.