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Tuesday, October 26, 2010

Update on The Ultimate Momentum Signal - 26th Oct. 2010

  Another Test of the Resistances Ahead ???
 
Nifty futures opened some 30 points higher at 6120 on Monday. The opening range was between 6130 and 6111, of which the latter became the day's low. The rally from the low saw the Nifty futures piecing the 6150 - 6152 highs of the previous two trading days. However, the breakout above the two day highs stalled at 6180, which almost coincided with the top end of immediate resistance zone indicated in the previous post between 6150 and 6175. The Nifty futures spent significant time trading above the 6150 mark in the morning session but later started to trade lower and tested the open at 6120 two or three times. The test of 6120 seemed to be a simple test of the lower end of the range as part of the expected choppy trade and no significant selling pressure was seen as such. Therefore,  Nifty futures recovered from the 6120 level and finally closed at 6137.


Nifty Futures - Daily Chart


Monday's trading has again lead to a candle with a tail on top indicating resistance at 6175 level. However, as already stated there was not much selling pressure seen when the Nifty futures tested the lower ranges today.  The only other emerging market which appeared to be correcting in tandem with the Indian stock market, the Taiwanese market has rallied as on Monday to test the recent high. Most of the major international markets barring the Japanese one are all in medium term uptrend and are very near to their 2010 year highs. It is also reported that emerging market funds collected a staggering 4.7 billion US Dollars in last week. Therefore, the source of cheap money  seems to be continuing without any hindrance, aided by the expected Fed action of further monetary expansion. Any further buying spree by the FIIs could trigger a short covering rally which may retest the higher resistances. Traders may again lookout for the market action around the 6175 levels for understanding the market direction. A breakout above this level may see Nifty futures testing the 5230 to 5250 levels initially as stated already in the previous two posts.  In case the futures trades below the Monday's low, it may get immediate support between 6050 to 6080 levels.


 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 intraday high of Nifty future is 6336 and that of the Nifty index is 6357. The highest closing prices of futures and the index were at 6288 and 6289 respectively.
 
Nifty Fundas
 
The trailing PE multiple of the Nifty index have again started hover above the 25 mark. The 25 PE mark  can almost  be termed as the starting point of the bubble territory.
 
 
The above table shows the latest data related  to Nifty trailing valuation, sourced from the NSE, India website.  The historical  trailing price earning ( PE Ratio ), price to book value ( PB Ratio ) and dividend yield ( DY Ratio ) of the Nifty Index  were at 25.2, 3.84 and 1.03 as on 25th 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 the 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 ).

Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as at the close of the trading on  25th October, 2010 is given below :


 The Momentum Signal has again indicated neutral values for the Monday's close values.



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  26th October, 2010, are given in the following table. All readers are requested to take note that the table below is just a ready reckoner for the next day's Momentum Signal values and are in no way any targets for the Nifty futures or indices shown therein.
 
 
  Please click on the table to enlarge. For more info on the above table,  please click here.

All readers are requested to read the Risk Factors, Risk Analysis, Position Limits and FAQs pages of this blog to have a reasonable understanding of the system. Please do post your suggestions and comments on how this blog can be made more useful.
 
Cheers and Prosperous Investing and Trading !!!

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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.

1 comment:

Nifty direct said...

This is really very nice updates and very useful and valuable for me i appreciate it.
Thanks for sharing.
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