Staying out IS an option

A couple of days back, I had commented on the negative divergences developing on the Nasdaq and had written that the index might test MA(20). Well, here is how the chart looks after yesterday's action.

Right at MA(20). The last few times the index touched MA(20), it bounced right back. What's going to happen this time? Well, the answer is simple. Wait and watch! Simple, right? But implementing it is pretty hard. One of the hardest things in being a trader is to develop the ability to sit there and do nothing. Being a short term trader, sometimes one feels simply obliged to take a position but in order to be a successful trader, one must master the ability to just sit back patiently until the right high probability opportunity comes. And right now, I feel the market demands just that - sit back and watch.

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Take care and good luck!

Negative divergences in NASDAQ

With NASDAQ just missing out on a seventh consecutive up week and testing the important 3200 level last week, it seems like a good time to step back and take a look at where we are from the bigger picture point of view. By this, I mean the weekly chart.

The importance of the 3200 level can be seen from the above chart as it is the level of previous highs. What struck me most when I saw the above chart, was the negative MACD divergence i.e. MACD is making lower highs while the index is making newer highs. On further inspection, it was discovered that a negative divergence has also been developing in the NASDAQ McClellan Oscillator over the last few months.

Does this mean you should go ahead and short the index? Well, not exactly. The divergence has been developing for a long time now but the market has been grinding upwards. Go with the flow but keep tight stops in place as a pullback to MA(20) cannot be ruled out.

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Take care and good luck!

Best Tax Saving Mutual Funds 2012

With the time for investing in tax saving instruments upon us, I thought it would be interesting to look at the best tax saving mutual funds or ELSS funds for 2012. Ideally, one should make these investments throughout the year by means of SIP or STP and not as a lump sum amount at the end of the year. Following are the list of top ELSS funds for 2012, along with their last one year returns as on January 2, 2013.

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Principal Tax Savings	48.60%
Reliance Tax Saver	47.19%
DSPBR Tax Saver	42.02%
HSBC Tax Saver	41.46%
ICICI Prudential Tax Plan	38.42%

So far, so good. All these funds have done an amazing job in the past one year. So, its easy to choose the best funds to invest in, right? If only investing were that easy.

Principal Tax Savings Fund, the top performing fund of 2012 with an annual return of 48.60%, is actually one of the worst performing tax saving funds in the last five years, with an annualized return of -7.27%! Its ranked 27 out of 29 funds for the five year time period. 

While choosing funds, it is important that one looks at the larger time frame, which should ideally be encompassing one complete investing cycle. You want your fund not only to be making the most of good times but also to be solid in defense. Keeping this point in mind, here are the top five tax saving mutual funds of last five years along with their five year annualized return.

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Canara Robeco Tax Saver Regular	6.59%
Franklin India Taxshield	4.31%
L&T Tax Advantage	3.74%
ICICI Prudential Tax Plan	3.67%
HDFC Tax Saver	3.62%

If you have any questions regarding mutual funds or want you mutual fund portfolios analyzed, feel free to mail me at positiontrader @ ymail.com (no gaps).

Take care and good luck!

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