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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 !!!

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