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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 !!!

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