ATH: Index Peaks But How Many Index Stocks Are Close to All Time Highs?

1 Comment » Written on March 14th, 2014 by
Categories: Nifty

While the Nifty is near its all time highs, it’s just an index of a bunch of stocks. How many of those are close to their all time highs?

We introduce the Capital Mind All Time High indicator (ATH) which maps this over time.

CAPM-ATH

These are the number of stocks within 5% of their all time highs. The indicator is built accounting for changes in the Nifty over time, so what you see is the set of stocks that form the Nifty at that date, which are within 5% of their all time highs.

Note: this is data of 12th March 2014.

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As you can see the number of stocks close to all time highs peaked at 27 in October 2007, but the number started to fall as the Nifty went higher and higher in Jan 2008, after which there was a massive crash.

Then, in 2010 we saw the indicator peak a couple weeks before the eventual high and the index retreated. Even here it was a low number of just 18 stocks that peaked this indicator.

And today we have just 5 stocks meeting this criterion. This indicates two things:

  • This might not be an eventual peak on the index, because other stocks might still go up and fuel the rally some more, only after which we will see “euphoria”.
  • The new high is not broad-based, only a few stocks that are “heavyweights” - that is, have big weightages on the index - have moved up and so has the index.

In a low-breadth situation, the index runs out of gas, especially if it has been running on the fuel of liquidity rather than a genuine interest in the fundamentals.

HT to @ap_pune for bringing this up on twitter.

Note: In Capital Mind Premium, we have a much more detailed article sent yesterday about this indicator and a couple other indicators we have built from the index data.

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About the Author:
http://www.capitalmind.in
The man behind Capital Mind. Deepak is a co-founder at MarketVision, a financial knowledge company. Deepak also provides data research and consulting services, and now lives in Bangalore. Connect with him at deepakshenoy@capitalmind.in.

One Response to “ATH: Index Peaks But How Many Index Stocks Are Close to All Time Highs?”

Are you predicting a crash in next 6-12 months!!!