The markets are on a roller coaster and so are investors!
The Nifty is making a series of lower bottoms which is not at all encouraging! Every rally is getting sold into!
Despite the fact that the S&P 500, Dow Jones Industrial Average, DAX, etc are marking new all-time highs while emerging markets are faltering!
Have a look at the MSCI Emerging Markets ETF…
Emerging markets were touted to outperform developed markets over the coming years as EEM was coming out of a 13-year base. But that has not materialized so far yet!
Well, the main culprit is again, $$$!
If you can see in the above chart that EEM is inversely correlated to DXY. Any strength in DXY is bad for emerging markets including India.
Now, the question is whether this is a normal correction in EEM or a fakeout?
For that we’ll have to look at what DXY is doing!
DXY took support near the 89.2 mark in January and has since bounced back up to the demand line which becomes a significant resistance.
At the first look, this appears to be a counter-rally in the bearish trend in DXY. If that’s true, then the DXY should turn around from here to 89.2 or so. If DXY is above 91.92, we’re in for serious trouble!
And the same is reflected in the chart of Nifty.
During the week Nifty broke through the previous week’s low at 14350 and made a fresh low at 14264 but managed to close the week just above the all-important 14433.7 level.
Follow-through below 14264 and a weekly close below 14433.7 will open the doors towards 13600 just to begin with. If we’re able to pose a strong follow-through above 14878.4, we are looking at 15430 for starters.
Here’s what I think…
With the central banks around the world have kept the liquidity tap open and has not indicated any kind of reversal in the stance, this rally in DXY looks to be short-lived and the bullish trend in equities should continue in my humble opinion.
But you know that thing about opinions!
They are just that, opinions!
And while trading, opinions don’t matter, rules do!
I hope you’ve got your set of rules! If not, do check out my Hybrid Strategy Ebook!
PERFORMANCE REVIEW OF THE HYBRID PORTFOLIO:
Here’s the real-time snapshot of the actual 10 stock model portfolio established based on the DYR Hybrid Strategy. The Hybrid Strategy is the combination of Dual Momentum Monthly Rotational Strategy and Mean Reversion Long/Short strategies applied together.
The Nifty has corrected more than a thousand points since the ATH, while the Hybrid Model Portfolio is just down by 2.26% from all-time equity highs.
The portfolio equity stands at Rs. 22,31073.15 (19,94,115.25 + 236957.9). Overall, the Hybrid Model Portfolio return stands solid at 56.01% since inception on 30/06/2020.
Let me show you how my Hybrid Approach could be very lucrative for you!
Hybrid Approach helps us to take advantage of both Momentum & Mean Reversion characteristics of stocks.
What I simply do is establish a core position of 10 stocks based on Dual Momentum Monthly Rotational Strategy and Scale-in and out of core positions based on my Mean Reversion Strategies so as to reduce our net costs and thus reduce risk.
Let’s take an example of one of my core positions, ADANIENT.
I had purchased ADANIENT on 2nd November 2020 at 340. I have reduced the net cost of ADANIENT to Rs. 258 by scaling in & out of it based on my Mean Reversion Strategies. Now the stock is almost 4x from my net cost!
The same goes for many other stocks!
Here are the trades for your reference…
That’s the power of Momentum coupled with Mean Reversion!
The best of both worlds!
Have a great weekend!