Thursday, September 23, 2010

Update on The Ultimate Momentum Signal - 24th Sept. 2010

    Profit Booking Continues ... !!!

This blog had been stating that  signs of profit booking is being shown by the market  for the past two trading day's and it may continue.  For the second day in the running, Nifty futures opened higher and recorded the day's highs in the first minute of trading.  However, on Thursday, the futures went to  the negative territory immediately after the opening. It just hovered between 5960 and 5980 for most of the morning session. An attempt to recover  in the middle of the day could raise it to the previous day's last traded price. Therefore, more sellers emerged and the resultant slide was arrested at just 10 points below the previous day's low.  ( This blog has been repeatedly making a statement that a ten point break of any reference point in the Nifty futures do not confirm a real break ). The futures recovered from the lows and closed inside the morning session's range at 5967.  The next direction of the market remains unpredictable. Therefore, it may spend some more time in a flat to negative consolidation. 

Thursday's market action still reveals signs of profit booking. The open interest in the two front month Nifty futures contracts fell by 7.67 lakhs ( 0.767 million ) as on Thursday. However, the rate of liquidation seems to have slowed down in comparison to the  two previous trading days. The trading volume was also subdued.         

Nifty Futures - Daily Chart

Nifty future has closed outside the narrow regression channel for the first time in sixteen trading days confirming either a pause, consolidation or correction.
The historical PE multiple of Nifty index is still above the 25 mark. The historical price earning ( PE Ratio ), price to book value ( PB Ratio ) and dividend yield ( DY Ratio ) of the Nifty Index rare at 25.16, 3.84 and 1.03 as on 23rd September 2010. Readers may please note that the periods in which the Nifty index traded above a historical PE Ratio 25 are very limited and both such periods were the blow out stages of earlier bull markets. ( More information and analysis on Nifty historical valuation is available from the "Nifty Fundas" page of this blog. ) The following table shows the latest data related  to Nifty historical valuations as seen from the NSE, India website. 
Nifty Index - PE, PB and DY Ratios

Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as at the close of the trading on  23rd  September, 2010 is given below : 

Nifty futures and Nifty index have both closed with the upward Momentum Signal values of + 80.  However, BSE Sensex closed with a Momentum Signal value of  +100  for the thirteenth consecutive trading day.

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   24th September, 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 trading stop for long positions under the Ultimate Momentum Signal system  remains at   5920 ( i.e. 6048 minus 2.1 % of 6048 ). Traders may raise the trading stop to 97.9 % of the new high, if and when the market makes such new highs. Any further correction may lead to the exit of the long position.

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