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Tuesday, November 30, 2010

Update for 30th November 2010

  Nifty Futures Face Resistance at 5865 !

In the update for 29th November, we had stated that in the absence of any fresh negative news and the if the Ireland bailout announcement is made as expected, these factors may pave the way for another retest of the 5860 level by the Nifty futures. It was also stated that in case of any fresh break out of adverse news, especially about any market manipulation with the bank borrowings, the downtrend continue for the time being. By Monday morning, there were not much new negative news and the Asian markets were trading mostly flat to positive. The SGX Nifty contracts were indicating a positive open too. As such, the Nifty futures opened some 28 points higher from the last traded price at 5800. This open was at the midpoint of the previously indicated reference levels of 5820 and 5775. The futures immediately traded to the 5820 area and from there, it tried to test the previous day's last traded price as well as the lower reference level of 5775. 

Nifty Futures - Intra-day Chart   


Monday, November 29, 2010

Update for 29th November 2010

  Will the Market Hold on to the Support of 100 DMA ?

The Indian stock market is in an intermediate term downtrend. This is a fact because many popular stocks were already  declining even before the start of the present downtrend. The pace and magnitude of the selling and the bunched explosion of negative news were beyond the expectations of most investors. We had indicated in the post dated 13th November that the market may get support at the 100 DMA at around the 5750 levels,  even though we were unaware of any reasons for the continuation of the down trend  at that  time. However, it was stated that the downtrend may continue for some unknown reasons. Last Friday's sell off in the first half even seemed to indicate that there are no reason for the stocks to trend upwards. However, any uptrend can  be confirmed only when the market starts to form higher lows and higher highs in the first step and then, the low stays. 
 

Nifty Futures - Intra-day Chart  


Friday's  intra-day chart of Nifty futures is marked with the important reference levels indicated in the post dated 26th November, 2010. Nifty futures opened between the 5820 and 5860 reference points. The initial test upwards ended just above the 5860 level and the sell off from there, traded through the 5820 level to

Sunday, November 28, 2010

Speculative Bubbles


  Why Asset Price Booms are Bad ?


The Indian stock market investors are supposed to be enjoying one of the best stock rallies for the past two and a half years. The current stock rally had it's origins in the month of  March 2008. The major market indices, S&P CNX Nifty and BSE  Sensex recorded new all time closing highs in the first half of November 2010. However, a cursory look at the stock charts of some popular shares from the Nifty index selected randomly show a very different picture. It is seen that these darlings of the 2008 boom have not done anything in the recent rally to justify the investor's faith in them. Let's examine the charts of  these randomly selected  Nifty companies to see whether any similar patterns can be seen. The period of these charts starts from July 2007 and ends  as on 26th November 2010 covering the peak of  the previous boom and the recovery so far.


RCOM - Weekly Chart July 2007 - Nov 2010



Friday, November 26, 2010

Update for 26th November 2010

 Scam and the Derivative Expiry Lead to Another Sell Off !!!


In the last update for the just ended trading day, based on the then positive overseas cues and the option open interest positions, we had indicated that Nifty future may try to trade towards the 5900 strike and close near or around that strike. However, it was not to be. The November series Nifty futures expired exactly a strike lower at 5800, even though it seemed till 3.00 PM that the expiry could be at the higher indicated strike at 5900.  

Now a few words on the just concluded derivative expiry. It is so difficult  to believe that the market is not managed on the derivative expiry after observing the strange movements which starts at 3.00 PM and which literally forced the Nifty index to close exactly at a round option strike price. In a normal market situation how much probability is there that the half an hour average of an index ends up within less than 0.25 paise of a round option strike at 5800 ? And that too after the index falling 20 points below the round figure and then rising exactly 40 points to end up at 20 points higher than the strike at 5820. This author drops off the subject with a comment : '"Yeah, strange things happen !!! " 

Nifty Futures - Intra-day Line Chart  


Thursday, November 25, 2010

Update for 25th November 2010

Another Scam and Another Sell Off !!!

In the last update it was written that the below normal Put Call Ratio ( PCR ), new call writing and overnight losses in the western market may hinder the Nifty futures' second great escape before the expiry on Thursday. It was also indicated to traders that the reference levels for intra-day real time technical analysis of Nifty futures are at 6000, 5965, 5940, 5875, 5860 and 5820. 


This seems to be a season of scams. And it seems that there is no lack of negative news for the market to sell off day by day. On Tuesday, it was the Korean war clouds. And on Wednesday, it was a turn of corruption and alleged loan scams. There were some unconfirmed news reports over the weekend about some shortages in some of the older annuity schemes of LIC and of some kind of investigation on against investment professionals of LIC. However, it was never felt that the issue might lead to a sudden sell-off of the financials as happened on Wednesday.

Irrespective of the news, a trader following the earlier reference levels could have traded  very profitably on Wednesday. The intra-day market action of Nifty futures is captured by the following chart with the earlier mentioned reference levels.

Nifty Futures - Intra-day Line Chart  


Wednesday, November 24, 2010

Update for 24th November 2010

Great Escape II, But Will it Last ?


It is said that no trader can control the market and therefore, what a trader can do in preparation of  trading is to decide about what he will do as when market undergoes through or acts in accordance with the various anticipated scenarios. Here is an example which would have  turned in very good profits in Tuesday's trading. Sell Nifty futures if futures falls below the 5940 reference point and stays there. The reader might be curious why this is brought up now. Some selective quotes from the previous update will solve the problem. And here are the quotes :

"In spite of the recovery and a close above the major support of 5940, the fact remains that the market is still in a down trend and the latest close is still in the bear territory. Even though the European markets were trading positively when the Indian markets closed, the western financial stocks and commodities were losing in the overnight trade on the back of increasing fears about the sovereign debt problem and the bail out of the Ireland economy. Therefore, another retest of the support below and even a resumption of the downtrend itself can not be ruled out as of now." "Therefore, traders may watch the market action near and just above the highs of Monday's candle as well as at the support level at 5940 - 5950 on Tuesday, depending upon the market conditions to gain insights on trading." 

The first quote was given as the background information. The second quote was about the two anticipated scenarios of strength and weakness. However the required trade action was not included for want of real time  knowledge of the available market conditions. Let's sum it up ! " Let the market do it's thing ! We are prepared to do our thing ! "

Nifty Futures - Intra-day Line Chart 


Tuesday, November 23, 2010

Update for 23rd November 2010

Nifty Future Escapes Unhurt for the Time Being !!!


Last Friday, Nifty futures closed at a two month low below the support level of 5940. Even though this blog had pointed out that the sudden break of the support and a resultant sell off was of unknown origin and was related to the then evolving fluid situation on the political front,  it was still doubtful  to make a firm call about the immediate market direction. Hence it was pointed out that traders may observe the market action between the 5940 and 5950 levels of the Nifty futures to get a better idea of the market direction. It was also stated that if the Nifty future sustains above this resistance area, it may test the 6090 - 6000 minor resistance very easily.

Some readers might be curious why the past intra-day action is described almost regularly in the posts. The only reason behind these descriptions are the fact that these kinds of analysis is a great help in learning the process of real time analysis of market action.  

Nifty Futures - Intra-day Line Chart


Sunday, November 21, 2010

Update for 22nd November 2010

Nifty Futures' 5940 Support Broken At Last

Last Thursday, Nifty futures pierced the almost two month old support at 5940 by some 15 points and rallied 120 points. Since the bounce was from a major support it was expected that it may extend to some more time, even though the resumption of the downtrend was not all ruled out. As such it was indicated that Nifty futures may test at least the immediate resistance at 6080 - 6090 levels. However this expectation was belied by the market action on Friday. Now, let's examine this episode for any key takeaways or lessons. The first point to be considered is that it is always better to trade in the direction of the dominant trend which at this time is downward. The second lesson is that even if we enter in to a counter trend trade, it should be managed with very tight stop losses and any profit should be protected either by part booking or by hedging. The third lesson is that only the most nimble traders should enter in to a counter trend trade and the position limit should either be lower or to be reduced after entering in to the trade.  The fourth general lesson is that all supports and resistances will break after being utilised or misutilised many times. 

The so called subtle gaps ( so called because this author is not aware of any other name for the said incident in the technical analysis literature )  have been explained on various posts on this blog. At the cost of repetition, here is the explanation once more !  Generally speaking, major indices like Nifty, Sensex and it's derivatives like Nifty futures reaches the last traded price or/and the adjusted closing price of a day on the following day. Now if the last traded price or the closing price is not reached on the following day, it leaves a so called subtle gap. These subtle gaps are not very common in the Indian context. Experience shows that such subtle gaps occurring at or near the rally highs have indicated imminent weakness and corrections.

Nifty Futures - Daily Chart 


Nifty Fundamentals Revisited

The Market isn't Galloping Away, Why ? 

Indian stock market seems to be in the threshold of a correction after going through a strong rally. This rally   raised the stock prices to very expensive levels on the back of  the relentless FII buying helped by the cheap overseas money and a rising Rupee. On a point to point basis, both the major stock indices, Nifty and BSE Sensex have not been able to surpass their intraday highs of January, 2008 in the recent rally. This post attempts  to take a look at the reasons for the non-performance of the stock market  in the entire past three years from the point of view of the trailing fundamental valuations. 

Indian Stock Indices - All Time Highs


The above table shows the all time highs of Nifty futures, Nifty Index and BSE Sensex during the period. The table shows that new closing highs were achieved during the recent rally. Now, let's make a comparison of the trailing fundamental valuations of the S&P CNX Nifty Index at these market tops.

Nifty Index - Trailing Valuation Comparison 

Friday, November 19, 2010

Update on The Ultimate Momentum Signal - 19th Nov. 2010

Nifty Futures Rebound From Support at 5940 - 5950 !!! 


Just as this blogger had written in the last post titled "Nifty Futures Approaching Support at 5940 - 5950" , Nifty futures rebounded from the support area on Thursday. The Asian markets were trading with positive bias as indiacted in the previous post when the trading opened in the Indian markets on Thursday. However, a bout of selling which came about in the banking stocks on the back of some doubts about the exposure to micro finance and real estate sectors lead to the Nifty futures' fall to the previously indicated support area. Depending on the entry point, the sell signals indicated at  6084 and again reiterated at 6134 levels have lead to maximum favourable excursions ( read possible profits ) of 169 and 209 points. Even if the positions were covered at the earlier widely known support at 5940, it would have yielded to net profits of  140 and 190 points.  Even if a trader would have strictly followed the system rules and set up the trading stop at 5049, against the short in Nifty futures,  even then  it would have earned handsome profits. And if a long position was established at the support at 5940  expecting the bounce as indicated in the previous post, it also would have gained another 100 points on Thursday itself.

 

Thursday, November 18, 2010

Update on The Ultimate Momentum Signal - 18th Nov. 2010

Nifty Futures Approaching Support at 5940 - 5950 !!!

The last post was titled ' The Rebound is On !' expecting a small rally and at least, a test of the next resistances at 6175 because of the sharp fall happened in the Nifty Futures in a short  time of just two days. Even though the rebound started a bit earlier than expected, it's demise was also equally early.  

Last Tuesday, Nifty futures opened flat at 6128 and almost immediately sold off by around 30 points to record an intraday  low of  6100. Since the Nifty future was still in the recovery mode, this sell off was bought by traders initially. However, the rally from the 6100 area only barely touched  the previous day's last traded price at 6134.

Nifty Futures - Intraday Line Chart 

Original Picture Source : NSE India 

Tuesday, November 16, 2010

Update on The Ultimate Momentum Signal - 16th Nov. 2010

The Rebound is On !!!

In the last post, it was mentioned that the fall has already traveled a long distance and as such, traders may look out for a rebound from the lower supports. Even though the lower supports mentioned were at the 5940 to 6000 levels, it seems that, Nifty future has already started the rebound from the higher support levels  between the 6050 - 6090 levels. Now let's see how this reversal could have been identified in the intraday time frame.  

The chart below is a snapshot of the intraday chart of the Nifty future and the underlying index available to the public from the NSE, India website. The chart shows the trading of the morning session till 12.00 Noon. The dark brown line indicates the Nifty futures and the orange line represents the Nifty index. As the chart shows, Nifty futures opened flat and sold off almost

Nifty Futures - Intraday Line Chart

Original Picture Source : NSE India 

Sunday, November 14, 2010

Update on The Ultimate Momentum Signal - 15th Nov. 2010

Is This an Intermediate Term Correction ?

The out of the blue sell off encountered by the Indian stock market in the last two trading days of the past week has already taken out all the gains which came in the Diwali week. It seems that a lower than expected IIP number and some poor quarterly results have added fuel to the fire. Now the important question before the traders and the investors is that whether this sudden sell off is a precursor to an intermediate term correction. 

Last Friday, Nifty futures opened slightly below the previous trading day's range and  a morning's intraday  low of 6185 was established. This low was just above the 6175 support as shown in the daily charts of the Nifty futures. The recovery from this low went above the initial highs of the day and reached 6241 before noon. However, the recovery to the previous day's last traded price seems to have been used by the market participants as a selling opportunity. The market slowly went in to a slide from this high on the back of  the losses in the international markets. The lesser than expected  IIP data seemed to be adding to the woes of the market. As the trading progressed, the selling accelerated with high volumes and Nifty future recorded it's low of 6074 in  the last minutes of Friday. The last trade was at 6084.


  Nifty Futures - Daily Chart     


Saturday, November 13, 2010

Nifty Heavies Revisited !


The Nifty Heavy Weights with the Best Momentum !!!

After an amazing rally to the stratospheric levels in the Diwali week, it seems that an out of the blue correction has set in, in the stock markets. It seems that equity markets all over the world are going in to the correction mode together. In case you were waiting for a correction to enter in to the stock market, the question is whether you have a stock shopping list ready ! Notwithstanding the fact that stocks  are still over priced, this analysis of the ten most important Nifty heavy weight stocks takes a look at these stocks on the basis of the recent momentum. The assumption behind this limited analysis is that the immediate momentum is liable to be persistent and on any recovery of the market, these momentum stocks will lead the rally.



Nifty and It's Heavy Weights

The top ten members of the S&P Nifty index, their weights in the index, closing prices and various daily moving averages are given in the table below. The corresponding close and the moving averages of the S&P Nifty index are also given in the table.


The last column of the above table shows the percentage value at which the last close of each stock and the index is being quoted in comparison with their respective 200 day simple moving averages ( 200 DMA ), as a simple measure of  the recent  momentum. Three other moving averages ( 20, 50 & 100 DMAs ) are also made available in the table for a better understanding of the recent momentum. Three stocks, viz. ICICI Bank, SBI and TCS were still quoting more than 20 % above their 200 DMAs as on 12th Nov. 2010 and thereby indicating the highest momentum in the sample. No wonder banking stocks were the leaders of the current upsurge even though ICICI Bank was a late entrant. The next three stocks with the highest momentum are LT, HDFC and ITC. HDFC Bank, ONGC and Infosys follow the suit and the last place is secured by the laggard,  Reliance stock.   

Now let us also checkout the charts of Nifty Index and these heavy weights for an even better understanding of the recent price action. ( Hey, it is said that a picture is  better than a  thousand words ! ).  All the charts include a regression channel showing the latest or previous general direction of the price action.  The lower panel of all these charts are showing the various DMAs. 

Thursday, November 11, 2010

Update on The Ultimate Momentum Signal - 12th Nov. 2010

A Day of Losses and What to Expect Now ???

Even though it was mentioned in the last post that the chance of a breakout above or below the inside day candle remains more or less equal, it was specifically said that (a) the subtle gap might act as a precursor to some weakness ahead, (b) inside day candles can be traded by entering trades at the break of both the high and the low of the candles, (c) traders may exercise caution about a break below the low of the inside day candle, as it may trap those who were expecting a breakout above 5350 level and (d) long positions need be protected  by an intraday system stop at 6216. ( High 6349 minus 2.1 % of 6349 = 6216 ).

Now, let's check out what happened in Thursday's  trade. Nifty futures opened flat on Thursday and the initial range  was of  just 20 points. The high of the day was at 6321 and the initial low was at 6300. Trading remained directionless till around 12.00 noon. However, unable to make any progress upwards, the futures broke through the low of the inside day candle to record lows between 6275 and 6280. All recoveries from these lows were unable to progress beyond 6298 level, just three points inside the previous day's candle. The failure to progress upwards attracted further selling and later on selling accelerated. Nifty futures even broke through the intraday  protective stop placed at 6216. (  High 6349 minus 2.1 % of 6349 = 6216 ).  The day's low was at 6209. Nifty futures recovered later on to close at 6237.

Update on The Ultimate Momentum Signal - 11th Nov. 2010

  A Low Volume Inside Day and What to Expect Now ???
Even though it was expected that the Nifty future is poised for a breakout above the 6350 level, nothing of any significance happened in Wednesday's trading. Nifty future opened lower at 6320 on Wednesday,  in tandem with the international cues and traded listlessly for the entire trading session. The trading  was also limited to a very narrow range of 37 points. The day's high of 6332 coincided with the previous day's morning session high. ( Please read the previous post for more details ). It also coincided with the previous day's adjusted close price of 6333. However, the Nifty futures failed to reach the previous day's last traded price in Wednesdays trading thereby leaving a subtle gap between these two. These kind of subtle gaps may indicate weakness ahead and have indicated reversals earlier. However, it seems that these kinds of subtle gaps have limited value for securities which trade in a trading range. The last trade of the day was at 6310. Since the day's candle ( ie. trading range ) was restricted to the previous day's range, it is called an inside day candle. Such candles indicate indecision by the market  and sometimes, traders trade them by initiating trades on both the ends of such candles.

Wednesday, November 10, 2010

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

 Will the Nifty Future Break the 6350 Resistance ???

In the last post it was mentioned that Nifty future may trade sideways and it may get support at the 6230 - 6250 levels. It was also mentioned that since the markets are trading deep in the bulls territory, buying on decline is advisable. On Tuesday, Nifty futures opened flat at 6297 and the day's then high of 6335 was established in the morning session. The futures stalled at this minor high and started to correct as is usual in any sideways market. The correction saw the enactment of a bout of profit booking and the futures recording a low of 6261, a three day low. This low incidentally was very near to the support of 6250.  The slow recovery  from the low of 6261 accelerated in the afternoon session causing the futures to break above the morning session's high of 6335 on the fourth attempt. The day's was high was at 6347 and the last last trade was at 6345. 

 Nifty Futures - Daily Chart


The chart above shows that the current month Nifty future has closed at the highest ever level as on Tuesday. However, the indices are yet to follow path of the derivative contract yet. ( A higher open on Wednesday can  solve this problem very easily ! ). The latest close which is very near the resistance may help the Nifty future to breakout above the 6350 levels on Wednesday on the back of follow up buying. Since the market has spent two plus days in the present range and the upward reversal is from the support of 6250 levels, a breakout seems plausible. However, the the possibility of the breakout certainly depends on the cues from the international markets on Wednesday  morning. As a matter of abundant caution traders may also consider the possibility of a breakout failure which may occur as described in the following sentence.  In case the futures opens higher above the resistance and sells off below the resistance and remains there, it may turnout to be a  failed breakout warranting further downside. Barring a breakout, the market may still trade sideways too.   

Indian Stock Markets - All Time Highs 


The table above shows the all time high values attained by the Indian stock markets. Even though the indices, Nifty and BSE Sensex are yet to record any intra-day new all time highs, Nifty futures and both the indices have recorded their highest closing rates as on today and on the Diwali day. 

 Nifty Fundas
 
The trailing PE multiple of the Nifty index has 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
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 25.55,  3.96 and  0.99 as on  9th November 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  9th  November, 2010 is given below :
The Momentum Signal has remained at the maximum possible value of +100 for the sixth consecutive day in respect of the Nifty futures.

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  10th November, 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 !!!

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, momentumsignal.blogspot.com 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. We do not recommend, promote, endorse or offer any guarantee whatsoever in respect of any services or products offered in the advertisements displayed on the site by google adsense.

Tuesday, November 9, 2010

Update on The Ultimate Momentum Signal - 9th Nov. 2010

Some More Sideways Trading ???

After the stupendous rally in the Diwali week, in which the Nifty futures reached the earlier indicated resistance zone of 6350,  it seems that the market may trade for some more time in the sideways mode before making the next big move. Nifty futures opened near the day's high of 6340 on Monday and immediately sold off to fill the gap between the bars of Diwali trading and last Thursday as indicated in the previous post. The European markets have also closed with minor losses on Monday. At the time of writing this post, the US markets were also trading  with minor losses on the basis of new fears over currency depreciation and the increasing  costs of the PIIGS's sovereign debts. However, the losses seemed to be very minor and do not appear to be capable of forcing an immediate reversal of the ongoing  bull rally.

Indian Stock Markets - All Time Highs 
  


The table above shows the all time high values attained by the Indian stock markets. Even though the indices, Nifty and BSE Sensex are yet to record any intra-day new all time highs, Nifty futures and both the indices have recorded their highest closing rates as on the Diwali day.    
 
 Nifty Futures - Daily Chart
 
 
The above chart of the current month Nifty futures shows the minor reversal from the top end of the resistance zone between 6325 and 6350 levels. The filling of the immediate gap has lead to the formation of an evening star kind of reversal pattern which is yet to be confirmed. The lower supports are at the 6230 to 6250 levels at present. Since the Nifty future is deep in the bull territory, it is advisable to buy on dips at the support levels.

 Nifty Fundas
 
The trailing PE multiple of the Nifty index has 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.  Even though the multiple quoted just below the 25 mark on some days recently,  PE multiple has again started to quote above the 25 mark.
 
 
 
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 25.43,  3.94 and 1.00 as on  8th November 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  8th  November, 2010 is given below :
 
 
The Momentum Signal has remained at the maximum possible value of +100 for the fifth consecutive day in respect of the Nifty futures.
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  9th November, 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 !!!

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, momentumsignal.blogspot.com 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. We do not recommend, promote or offer any guarantee whatsoever in respect of any services or products offered in the advertisements displayed by google on the site.

Sunday, November 7, 2010

Update on The Ultimate Momentum Signal - 8th Nov. 2010

    Will the Market Attain New All Time Highs  ?

It seems a long time has elapsed since the last update with some market commentaries. In the meanwhile, the US Fed unveiled the QE 2 ( It's neither Queen Elizabeth 2 nor the Queen Mary 2 cruise ship but Quantitative Easing 2 ) involving 600 billion US Dollars worth asset purchases. This has already given further impetus to the equity and asset rallies all around the globe.  Handsome gains  on Coal India listing have also added to the bullish fervor.  Paul Tudor Jones, a renowned hedge fund manager from the US, has commented that  the Fed easing is leading to a situation in which a big bubble in the emerging markets is in the making, just similar to the tech laden bubble which occurred after the Fed easing ensued just after the LTCM debacle. ( For readers who are not familiar with the LTCM debacle, suffice to say that LTCM was a hedge fund run by some Nobel prize winning economists whose highly leveraged relative value trades might have forced a  complete breakdown of the western financial markets. The Fed actively manged to contain the debacle by arranging a take over of the fund's leveraged positions by a consortium of money center banks. The Fed also cut the interest rates to help the situation which actually led to tech bubble in the 1999 - 2000 era ). Now, the story is not about the LTCM debacle but about possibility of another bubble in the emerging markets. The renowned fund manger opines further that India's Nifty index might be one of the leading emerging market indices which may gain more in the ensuing bubble. ( For more information economic bubbles click here ). The whole purpose of this discussion was just to point out that markets may not be logical at all times and are capable of reaching stratospheric levels occasionally.


Indian Stock Markets - All Time Highs 
  


The table above shows the all time high values attained by the Indian stock markets. Even though the indices, Nifty and BSE Sensex are yet to record any intra-day new all time highs, Nifty futures and both the indices have recorded their highest closing rates as on the Diwali day.   

Nifty Futures - Daily Chart


The present recovery is involved with many run away gaps indicating presence or beginning of a possible new chapter of bull frenzy. However, a breakout above the previous all time highs will be confirmed only when both Nifty and BSE Sensex closes above the previous intraday all time highs. Since the indices and Nifty future are trading deep in to the bull territory a deep reversal is not expected with in a very short period.  Barring a breakout to the blue sky areas in the new week, at best the market may trade horizontally with some possible  excursions to fill the immediate gaps in the new week  

Nifty Index - Weekly Chart


The weekly chart of the Nifty index above shows that the index has tentatively closed above the resistance line / target line of the earlier breakout above the previous year old upward moving trading channel. The position of the said resistance line almost coincides with the all time high values of the Nifty index giving some more importance to the resistance line. However, the earlier one month old, mostly flat, correction the Indian markets endured with during the month of October, significantly reduces the importance of this resistance area. As such new highs in the blue sky area and bubble creating market frenzy can not be discounted at all at present.


 Nifty Fundas
 
The trailing PE multiple of the Nifty index has 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.  Even though the multiple quoted just below the 25 mark on some days recently,  PE multiple has again started to quote above the 25 mark.
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 25.59,  3.97 and 0.99 as on  5th November 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  5th  November, 2010 is given below :
 The steep rally has lead to the maximum momentum values for both the tracked indices and Nifty futures. 
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  8th November, 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 !!!

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, momentumsignal.blogspot.com 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. We do not recommend, promote or offer any guarantee whatsoever in respect of any services or products offered in the advertisements displayed by google on the site.

Thursday, November 4, 2010

Update on The Ultimate Momentum Signal - 4th Nov. 2010

   Happy Diwali !!! 

momentumsignal.blogspot.com 
wishes all traders and readers a very happy Diwali 
and very a prosperous New Year !!!!

Since the author is travelling, this update will be limited to the essentials and no market commentary is being provided. The inconvenience to the readers is regretted.

Nifty Futures - Daily Chart


Nifty Fundas
 
The trailing PE multiple of the Nifty index has 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.  Even though the multiple quoted just below the 25 mark on some days recently,  PE multiple has again started to quote above the 25 mark.
 
 
 
 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 25.3,  3.85 and 1.01 as on  3rd November 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  3rd  November, 2010 is given below :
 
 

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  4th November, 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 !!!

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, momentumsignal.blogspot.com 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.

Wednesday, November 3, 2010

Update on The Ultimate Momentum Signal - 3rd Nov. 2010

    
  The 6175 Resistance is Still There !!!

Since the author is hard pressed for time, this update will be limited to the essentials and no market commentary is being provided. The inconvenience to the readers is regretted. In case the charts and pictures are not accessible on this page please click here.

Nifty Futures - Daily Chart




Nifty Fundas
 
The trailing PE multiple of the Nifty index has 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.  Even though the multiple quoted just below the 25 mark on some days recently,  PE multiple has again started to quote above the 25 mark.
 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 25.13,  3.85 and 1.02 as on 2nd November 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  2nd  November, 2010 is given below :




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  3rd November, 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 !!!

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, momentumsignal.blogspot.com 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.

Monday, November 1, 2010

Update on The Ultimate Momentum Signal - 2nd Nov. 2010

    November Starts with a Bang !!! 

The last post was titled ' Indices rebounds from support ' for two simple reasons. The first reason was the appearance of the  late rally seen on last Friday from the trend deciding intermediate level support. The second reason was the shape of the candlestick with a very long tail at the bottom which almost touched the support.  However, it was not clear whether the markets would rally further or retest the supports again. As the trading started for the new week on Monday, the Asian indices and SGX Nifty futures were trading with very good positive gains. Nifty futures opened at 6105 on Monday and moved upwards to test the widely known resistance at the 6175 levels. Monday's high was just 3 points away from the said resistance. The last trade was at 6156.

Nifty Futures - Daily Chart


The expected correction from near the all time highs might be turning out to be a flat one. As already stated in many previous posts, if the Nifty future is able to break the resistance at 6175 levels, it may test the resistance area between 6230 and 6250. The higher resistances are at levels between  6325 and 6350 which corresponds to the all time highs reached in January, 2008. Tuesday will see the policy action by the RBI. The RBI is expected to tighten the interest rates by another 25 basis points. Any higher levels of rate hikes might be considered as adverse by the market. The midweek will also see the US FOMC meeting and the  much expected Fed's quantitative easing monetary action. Any adverse reaction to the Fed action might lead to an upset to the current worldwide equity rally which is fueled by the cheap and easy money from the developed world.

Nifty Fundas
 
The trailing PE multiple of the Nifty index has 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.  Even though the multiple quoted just below the 25 mark on some days recently,  PE multiple has again started to quote above the 25 mark.
 
 
 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 25.12,  3.85 and 1.02 as on 1st November 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  1st  November, 2010 is given below :
 
 
The Momentum Signal in respect of Nifty future and the Sensex were at +50 levels indicating buy as on Monday. However, the signal value in respect of Nifty index was at +30 as on Monday. Readers of this blog are requested to understand that the Momentum Signal system is susceptible to more whipsaws when the market trades in ranges.

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  2nd November, 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 !!!

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, momentumsignal.blogspot.com 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.