Wednesday, October 13, 2010

Update on The Ultimate Momentum Signal - 13th Oct. 2010

   A Day of Losses, But Nifty Futures Still  Inside the Trading Range !!!

As indicated in the last two posts of this blog, Nifty futures kept itself mostly inside the trading range between 6093 and 6175 on Tuesday too. On the back of losses in the Asian markets on Tuesday morning,  the futures opened lower at 6150 and immediately started to trade lower. It easily broke through  the Monday's and last Thursday's low of 6134 in the morning session itself. For most of the trading day, Nifty future was confined to the lower end of the earlier indicated range of 6093 - 6175. Except for a very brief period when the futures broke through the 6093 support and recorded a low of 6083, trading was confined to the narrow range between 6090 and 6134 on Tuesday. Generally speaking, any break in the Nifty futures amounting  to10 to 12 points at any important reference point ( read support or resistance )  is not a confirmed signal for a breakout or break down.  Even after the release of a lower than expected IIP data and a 10point break of the  6093 support, the futures recovered from the lows to close at 6113 for the day.

Nifty Futures - Daily Chart   

As the Nifty future is still trading inside the earlier indicated trading range, traders may read the previous posts to get direction to analyse the next days market movement. As posted earlier, traders may check how the market is trading at the important reference points of 6083, 6093, 6134, 6165, 6175 and 6193 to get a better understanding of the trading direction. 

The Ultimate Momentum signal has indicated a sell as on Tuesday by a signal value of -50.  However, this sell signal will be confirmed only when the futures trades below the near support at 6090 and stays below the level..

 All Time Highs

Many readers who might not have access to the historical charts might be interested in knowing the all time highs of the Indian stock market indices. The above table shows the all time highs of Nifty futures (then current month ), S&P Nifty and BSE Sensex and the dates on which the highs were recorded. The all time high of Nifty future is 6336 and that of the Nifty index is 6357. The all time high of BSE Sensex is at 21207. The recent highs were just 2 % off from the all time highs.

Nifty Fundas

The above table shows the latest data related  to Nifty trailing valuation, sourced from the NSE, India website.  The trailing PE multiple of Nifty index is quoting above an expensive 25 mark. The historical  trailing price earning ( PE Ratio ), price to book value ( PB Ratio ) and dividend yield ( DY Ratio ) of the Nifty Index  were at 25.32, 3.83 and 1.03 as on 12th October 2010. Readers may please note that the periods in which the Nifty index traded above a historical PE Ratio of 25 were limited to just  two occasions in the years 2000 and 2007-08. And both such periods coincided with highs just before the burst of the then bull markets. ( More information and analysis on Nifty historical valuation is available from the "Nifty Fundas" page of this blog ).

This information is being provided for the benefit of long term investors only. For traders, they can enjoy the rally till it lasts. It may be noted that markets can remain overvalued and overbought for significant periods  which can be much beyond our expectations.

Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as at the close of the trading on   12th October, 2010 is given below :

 Nifty future and the two major indices, Nifty and Sensex closed with an Ultimate Momentum Signal value of -50 indicating a sell on Tuesday.

Projected Momentum Signal Close Values

The projected levels Momentum Signal values applicable to various ranges of closing values of the current month Nifty Futures, Nifty Index and the BSE Sensex,  as at the close of next trading day, ie. as on  13th October, 2010, are given in the following table.

   Please click on the table to enlarge. For more info on the above table,  please click here.
Readers of this blog may please take note of the Risk Factors described on this blog and especially the risk factor No 4, which may be applicable to the present sell signal.

Please do post your suggestions and comments on how this blog can be made more useful.
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

© 2010, All rights reserved.

Disclaimer: No research, information or content contained herein or in the accompanied spreadsheet shall be construed as advice and is offered for information and educational purposes only. We shall not be responsible and disclaim any liability for any loss, liability, damage (whether direct or consequential) or expense of any nature whatsoever which may be suffered by the user or any third party as a result of or which may be attributable, directly or indirectly, to the use of or reliance on any information or service provided. All files/information is provided 'as is' with no warranty or guarantee as to its reliability or accuracy.

No comments: