Thursday, December 2, 2010

Update for 2nd December 2010

  December too Starts with a Bang !  

We stated in the last post that a test of the 5940 area by the Nifty future was expected, since the market  is bouncing from the 100 DMA and it had already tested the breakout point of 5865. It was also stated that closes above the 5940 level will indicate trend reversal as it will lead to the Nifty futures going back to  the previous trading range. Now both these conditions have been met and it can be considered that the present downtrend has finished. Or put in other words, it has become a buy on decline market. 
Nifty Futures - Intra-day Chart   

Even though the SGX Nifty contracts were trading with some minor losses at the time of market opening, Nifty futures opened exactly flat at 5990 on Wednesday. Nifty futures' daily low of 5875 was recorded in the very beginning and immediately afterwards, the rally to the 5940 area started. Nifty contracts reached the 5940 resistance within an hour of opening and the market spent some significant trading time around this level. When the European markets too opened with increasing gains, the rally regained strength. The high of the day was at 5991. The last trade was at 5982. As the market had started moving upwards, Wednesday's trading was orderly and without much intraday volatility. Now, the first point of support for the Nifty futures is at the previous resistance at 5940. Any immediate correction even below this level can be considered as a buying opportunity unless any unknown negative news surfaces or the international markets too go for a fall. The immediate resistances above the market are at the 6030 and  6090 levels. These levels are marked in the daily chart shown below.. 

 Nifty Futures - Daily Chart   

The European and US markets have made more  gains overnight after the close of the Indian market. Therefore, we may expect a positive open on Thursday morning. 

Nifty Option  Scene  

The December series Nifty options Put Call Ratio ( PCR ) increased slightly to 1.30 on Wednesday. Significant additions to the Put open interest were seen at the 5800 and 5900 strikes.  The additions to Call open interest were seen from the 6100 and  higher strikes.

Nifty Trailing Fundamentals           

The historical  trailing Price Earnings Ratio  ( PE Ratio ), Price to Book Value ( PB Ratio ) and Dividend Yield ( DY Ratio ) of the Nifty Index  were at 23.78,  3.76 and  1.05 as on  1st December 2010. Readers may please note that the periods in which the trailing PE Ratio of  the Nifty index persistently  stayed above the 25 mark  were limited to just  two occasions in the years 2000 and 2007-08. And both these periods coincided with the highs or bubble periods 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 ). 
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 :
Nifty future and BSE Sensex closed with corresponding Momentum SIgnal values of +50, triggering  fresh buy signals. However,  the S&P Nifty index could attain only a neutral value of '0'. However, buy signals may be confirmed in all the three by the end of Thursday's trading even if the closes will be somewhat lower.
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 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 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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