SentimentMood

Describing passive and active sentiment trading opportunities in Indian Equities for short-term investing. Updated Weekly using Quantamental Investing®.

QVGS SentimentMood

The Sentiment Cycle is described by the SentimentMood Indicator is constructed using Quantitative and Technical inputs and is computed every week for short-term trading. The SentimentMood Indicator classifies Indices and Stocks into 7 Phases at a point in time:

Mood (Score)
Extreme Greed (3)
Greed (2)
Bullish (1)
Neutral (0)
Bearish (-1)
Fear (-2)
Extreme Fear (-3)

Extreme or dominant moods of Greed or Fear typically result in a reversal as a correction or a relief rally, respectively. Correspondingly, trading positions can be taken to play short or long moves.

  1. Classifying which mood of the Sentiment Cycle does the Broad market (represented by NSE500) fall in at a point in time to describe the state index trading, W-o-W.
  2. Classifying what percentage of individual stocks fall into each mood of the Sentiment Cycle to describe the state of active trading, W-o-W.
Passive Sentiment Outlook

NIFTY 500 Index

The QVGS SentimentMood Indicator is updated weekly. Last Updated: 17-06-2022

COMMENTARY

The sentiment turns Bearish (-1) as the NSE 500 hits 52 week-lows this week. The last week’s move which sought to arrest the upward rally has now developed into a full bearish move. The trend still remains negative over the medium term.

While the index hits lows, extreme emotions of Fear (-2) or Extreme Fear (-3) have still not been realized. This implies further lower levels on the index are possible before any relief rally kicks in. These moves are in tandem with the global moves on various broad-based & specialized indices.

From a trader’s perspective, shorts have been profitable. They can continue to hold their shorts to get more profits out of the move. However, short positions should be hedged to lock in some profits from the recent move since the index has already swung past the mean level.

INTERPRETATION NOTES

The SentimentMood is an Oscillating indicator that can be used to sell Extreme Greed (+3) and buy Extreme Fear (-3). The sentiment is never to be used alone and needs the context of the trend to be acted upon. In an Up Trend, Extreme Fear can be bought into and in a Down Trend, Extreme Greed can be shorted.

The SentimentMood indicator represents the trader’s outlook of the market as a whole in the near future.

Active Sentiment Outlook

NSE500 Stocks

The QVGS SentimentMood Indicator is updated weekly. Last Updated: 17-06-2022

COMMENTARY:

The percentage of stocks in the extreme emotional state of Fear (-2) and Extreme Fear (-3) grow from a mere 2.80% to a significant 13.38% this week. This shift is in tandem with the NSE500 index’s move.

However, the extreme emotions are still way below the 50% level to consider the possibility of a reversal. This implies, that there is more potential downside possible in stocks before a relief rally can be expected with better certainty.

Shorts in stocks from the previous week can be continued to be held. At the same time, such shorts can be hedged to lock in profits while more profit is sought by traders.

INTERPRETATION NOTES:

The percentage of stocks of the NSE500 index exhibiting extreme emotional phases indicates the sentiment exhibited by the overall actively traded universe. This sentiment may be diverse from the sentiment exhibited by the Indices and represent actual trading positions and views in the short term.

When the bulk of the stocks exhibits a specific extreme emotion, there is a high likelihood of reversal.

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