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Tuesday, August 10, 2010

Update on The Ultimate Momentum Signal - 10th Aug. 2010

 Nifty Futures - Another Test of the Highs ... !!!

Monday's trading started slightly in the positive territory. Barring a minor probe of the previous day's lows which resulted in to a failure, the Nifty futures rallied the whole trading day to test the previous highs. The futures recorded  a marginally new high of 5089 and closed near the highs at 5479. This is a new two and half year  closing high for the markets. The Momentum Signal has also indicated the new momentum by retuning a positive value as on Monday.

Nifty Futures  - Daily Chart


The Nifty future seems to have found a new minor support at the 5425 to 5430 levels. The Nifty future is still trading in the year long channel and the top end of the channel may still show some overhead resistance to the slow and grinding upward march. The historical PE ratio of the Nifty index has reached 23 times as on the close of 9th August, 2010. 

Presence of  abundant liquidity in the international markets is running the present day rally in the Indian markets. Even though it is highly futile to call any high for a trading market, it remains to be safe to state that historical index PE ratios north of 23 has not been sustainable in the Indian markets. The last three occasions when the PE ratios went too far above the 23 levels were all associated with the burst bubbles of 1992, 2000 and 2008.  In the years 2000 and 2008, Nifty PE ratios topped at the 28 levels whereas in the year 1992, the Sensex PE ratio, reportedly rose to north of the 45 times levels. Incidentally, the Chinese market too reportedly reached the stratospheric PE ratio of 47 in the year 2007 before the bursting of the bubble.   

World Markets

The major European stock indices closed with gains of 1.5 to 1.7 per cents on Monday, compensating their losses of last Friday. The US markets were trading slightly in the positive territory in anticipation of the FOMC statement of the Federal Reserve to be released on Tuesday.
Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as at the close of the trading on  9th August, 2010 is given below :
 
 
After a pause for a day in the neutral area, the Nifty index has regained the positive Momentum Signal values. 

Projected Momentum Signal Close Values

The projected levels Momentum Signal values applicable to various ranges of closing values of the Nifty Futures, Nifty Index and the BSE Sensex,  as at the close of next trading day, ie. as on  10th August, 2010, are given in the following table. 
 
 
Please click on the table to enlarge. For more info on the above table,  please click here.   

The following quotes are from the previous posts and are being repeated here as matter of caution :

"Readers of this blog may please note the following  'Risk Factor' which is being  repeated almost daily these days. The markets are trading in small ranges at the top end of a slow climb and for all practical purposes the trading is range bound. Range bound markets are not suitable for the  profitable trading of the Momentum Signal system."
 
"As the Momentum Signal is primarily a trend following system, it may indicate whipsaw signals in range bound markets. As such, all readers of this blog are requested to read the various pages describing the system and understand all the intricacies of trading the Momentum Signal and it's risk factors too. Please do write in your comments and suggestions."

Cheers and Prosperous Investing and Trading !!!

To access and/or download  the free online Position Limit Calculator click here.

To checkout the five year history of The Momentum Signal Spreadsheet click here
 

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1 comment:

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