Tuesday, December 21, 2010

Update for 22nd December 2010

     Nifty Future Closes Above 6000 !  

On Tuesday morning, most Asian markets were trading in the positive territory at the opening time of Indian stock markets. Nifty Futures opened higher at 5976 on the back of the positive momentum from it's Asian counterparts. It also recorded the day's low of 5970 at the opening itself. On the back of some new found strength seen in the banking stocks, Nifty future advanced to test the present swing high of 6000 in the first hour of trading. It succeeded in crossing the 6000 mark but further advances were not easily forthcoming. As such, it traded in a very narrow range of 20 points between the 6000 and 6020 marks for most of the trading day. The day's high was at 6022 and the close was at 6014.

   Nifty Futures - Intra-day Chart   

Nifty Futures  - Daily Chart

Following the path of the bigger cousin, the BSE Sensex,  Nifty future has also successfully closed beyond the falling trend line. However, the higher reference level of 6030 and the resistance offered by the post correction high of 6090 still remain as hurdles in the upward path of Nifty futures. In the absence of any unanticipated bad news, Nifty future is poised to make a test of the 6090 to 6100 resistance.  Traders may use the previously indicated reference levels of 5940, 6000, 6030 and 6090 for Wednesday's trading too.  

This scenario of a test of the previous swing high seems to be most plausible immediate outcome, because of the continuing Santa Claus rallies all around the world. However, the expectations about the great Indian growth story seems to have been moderated to some extent of recently, on the back of many questions about the emerging markets as a whole,  high inflation, higher deficits - both fiscal as well as trade related, corruption, lower than expected corporate  governance standards etc. Moreover, the emerging markets as a whole and especially India have been quoting at much higher valuations when  compared with the developed markets and the long period valuation averages of emerging markets themselves. Therefore, it seems that some moderation of the expected returns from the Indian stock market is perfectly in order.

Nifty Option Scene

The December series Nifty options Put Call Ratio ( PCR ) improved to 1.34 times on Tuesday. Significant additions to Nifty Put options open interest ( OI ) were seen at 5900 ( 1.4 million ), 6000 ( 0.8 million ) and 6100 (  0.4 million ) strikes. Addition to the Nifty Call option OI was seen at  the 6100 strike ( 1.3 million ). India VIX closed at 19.77 with a loss of 4.86 %.

Nifty Trailing Fundamentals

The trailing fundamental valuation of Nifty index increased on  Tuesday. The trailing Price Earnings Ratio  ( PE Ratio ), Price to Book Value ( PB Ratio ) and Dividend Yield ( DY Ratio ) of the Nifty Index  were at 23.95,  3.78 and  1.04 as on   21st December 2010. ( More information and a long term analysis on Nifty historical valuation are available from the "Nifty Fundas" page ).   
Latest Ultimate Momentum Signal

The updated Momentum Signal spreadsheet showing the latest signal values of the current month Nifty future and the Nifty index is given below :
Momentum Signal has closed higher with a value of +100 for the day. Readers may please take note that the Momentum Signal system has a tendency to indicate whipsaw trades in range bound markets. This fact has already been  pointed out in various previous posts as well as in the Risk Factors.  
Projected Momentum Signal Close Values

The projected levels of 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  22nd December, 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 the figures are not intended to be interpreted as 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.

Readers are requested to go through the Risk Factors, Risk Analysis, Position Limits and FAQs pages to gain a reasonable understanding of the trading system. Please do post your 
comments and suggestions on how new  posts can be made more useful.
Cheers and Prosperous Investing and Trading !!!

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