Wednesday, October 27, 2010

Update on The Ultimate Momentum Signal - 27th Oct. 2010

   Another Day of Choppy Trading !!! 

After considering the strength seen in the international markets, this blog had indicated  that a test of the higher resistance was possible. However, nothing of that sort happened in Tuesday's trading. By the time Nifty futures opened for trading the Asian markets were trading with mild losses. Consequently the Nifty futures opened at 6125 and immediately set the then high of 6139. It mostly traded inside the opening range of the previous  day between 6110 to 6130 till around 11.30 AM. It broke below the previous day's low of 6111 in the middle of the day to record a low of 6094 which almost coincided with the earlier indicated support range of 6083 - 6093 level. As is common in choppy markets, the recovery from this low helped Nifty futures to establish a new high for the day at 6141 at around 2.30 PM . However, the gains were not held at all and the futures revisited 6100 level within a short time. The last trade was at 6109. 

Nifty Futures - Daily Chart

The trading range seems to be confined to an area between 6050 and 6175 at present. The option open interest also indicates that the expiry settlement could be between 6000 and 6200. ( However, open interest positions are subject to change in accordance with any major changes to price. )  Traders may expect more of choppy and directionless trading till the market itself resolves the question of direction.

Even though Nifty futures traded below the previous day's low, a similar action was not seen in the chart of BSE Sensex. This could be attributed to the higher weightage of the market heavy weight Reliance stock in the Sensex. In fact the latest strength of the  market itself is due to the positive momentum seen in the Reliance stock.

BSE Sensex - Daily Chart

 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 been quoting above the 25 mark for some time. The 25 PE mark  can almost  be termed as the starting point of the bubble territory. However, Tuesday's PE multiple has just fallen below the 25 mark to 24.98.

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 24.98, 3.82 and 1.03 as on 26th 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  26th October, 2010 is given below :

Nifty futures and Nifty have closed with neutral Momentum Signal values for the third day.

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  27h 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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