Wednesday, December 29, 2010

Update for 29th December 2010

   More Sideways Trading or What Now ? 


Some Random Comments - It seems that some random market commentary is in order, as the market has not been doing anything  interesting at all now a days. Most markets become moribund at this of the year because of the holiday season and the reluctance of fund managers to trade in the low volume  holiday markets. Therefore, Indian markets are also undergoing this seasonal trading pattern at present. However, the strange thing about the present day market is the weakness or the lack of participation of a whole lot of index stocks from as many sectors to participate in the current rally or upswing which started from the 5750 levels on 10th December, 2010. By the end of Tuesday's trading, it seemed that only stocks from the IT and Pharma sectors were upholding the index at these levels. Another broad sector, the commodities sector, which exhibited some strength recently,  too seemed to be loosing the strength. Now the question is - which is the sector or stocks capable of rallying further from here ? A cursory glance at the charts of most index stocks do not present much hope for a rally in the new year, unless the FIIs come in droves to buy in to the markets again !


    Nifty Futures - Intra-day Chart     

        

Nifty futures traded between the reference levels of 6000 and 6030 for the whole trading day. There is nothing more to write home about Tuesday's trading.



Nifty Futures  - Daily Chart   




Nifty future has remained inside a narrow trading range between 5965 and 6065 for almost six trading days by now. Technical position of the market as a whole remained without any change at the end of Tuesday's trading.  A change in this state of affairs will come about only when the contract breaks out of this narrow range. Until then the previously indicated reference levels or supports and resistances will remain valid.  Here is a quote from the previous post which deals with the said reference levels. "In addition to the reference levels of 5860, 5900, 5940, 6000, 6030 and 6090 traders may carefully observe the market action around the 5965 - 5970 area, being the lower boundary of the past five day's trading range. Barring a sell off on the back of some unknown reasons, market seems to be poised for some more sideways trading, at least till the end of the year, because a lot of the bonuses of fund managers are  decided on the basis of the yearly profits."


Nifty Option Scene  

The Put Call Ratio ( PCR ) of  December series Nifty options increased slightly  to 1.56 times as on  Tuesday. The changes in the open interest ( OI ) positions were nominal. Some additions to December Call  OI were seen at the 6000 strike. Some additions to the  December Put OI were seen at the 5900 and 6000 strikes. The highest OI positions in the December Call options remain at the 6100 strike. The highest OI positions of Dec. Nifty puts are more or less evenly spread from the 5700 to 6000 strikes.  These OI positions might be indicating  a range bound market between 5900 and 6100 strikes. The increase in the Put Call ratio still favors a mild positive bias to the market in the short term or at the least, it precludes an immediate deep sell off before the current month expiry. The Option Pain chart of December Series Nifty options shown below also indicate a range bound market between the 5800 to 6100 strikes.  

 Option Pain Chart - December Series Nifty Options 
 
 
 
Nifty Trailing Fundamentals     
 
 


The trailing Price Earnings Ratio  ( PE Ratio ), Price to Book Value ( PB Ratio ) and Dividend Yield ( DY Ratio ) of the Nifty Index  were at 23.92,  3.78 and  1.04  respectively as on  28th 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 :


Both the major indices, S&P Nifty and BSE Sensex closed with neutral Momentum Signal values of +40 as on Tuesday. However, Nifty futures still managed to close with a momentum signal value of +100 on the back of increased premium over the underlying. 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  28th 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.

A lower close on Wednesday may indicate an exit of the existing long positions entered as per indications the Momentum Signal trading system as on 16th December, 2010.

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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