Thursday, March 24, 2011

Update for 24th March 2011

 Warren Buffet Effect In Action ?

  • On Wednesday, the basic cues for the market were generally negative and at the best, the indications were towards a sideways market. Crude prices had moved up in the night. The market was poised to open slightly lower too !     
  • Nifty Futures opened slightly lower as expected on Wednesday. However, a small rally from the gap down open towards the highs of the previous day ( near the resistance at 4450 ) turned out to be a strong one to cross the resistance. Nifty futures closed near the highs of the day. Indian Rupee also rallied on Wednesday in tandem with the gains in the stock market.
  • May be the presence of the world's best stock picker and investor, Warren Buffet's presence in India might have helped. May be some of the perceived lack of trading interest and volumes near the 5350 area too helped. ( Please note that this scenario of market not breaking the 5350 support and a subsequent rally or a test of the resistances was also indicated in the previous posts. )
  • As this author had been writing for some times, most analysis and systems suitable for the trending markets are useless in the generally sideways kind of market being seen now a days.  As such, it is very difficult even to guess whether any follow up buying will be seen in the next few days or if or when a breakout may happen and it's direction.
  • Therefore, no further market commentaries are included in this post barring the usual charts etc.

  Nifty Futures - Intra-day Chart

Nifty Futures  - Daily Chart 

 Nifty Options Scene   

The March series Nifty Options Put Call ratio ( PCR ) increased to more normal level of 1.26 times on  Wednesday. ( In the Indian context lower PCR is generally associated with market falls and this is just the opposite of what many option textbooks suggest. ) The India VIX index crashed further by 5.80 % and closed at 20.97 on the back of the recovery in the market. The improvement in the PCR and India VIX are pointing towards a positive scenario for the markets.  Huge covering of Call options were seen at the strikes of 5400, 5500 and 5300.   The 5700, 5600 and 5500 strikes are having the highest level of March Nifty Call OI as on Wednesday.   The corresponding strikes for Put OI are 5400, 5300 and 5200.  Some huge Put writing was seen at the 5500 and 5400 strikes on Wednesday. 
The implied volatility of Nifty options as indicated by the India VIX has been hovering in the 20 plus mark for some time  even as the  market is generally trading range bound. It seems that the improvement in India VIX and the neutral nature of the markets has lead to a situation where the option writers are taking it as a field day for writing straddles and strangles. However, in case of any breakout happening in the market, especially towards the lower side, that might force the option writers running for cover. This might aggravate the condition of the market as seen on the last derivative expiry day. 

 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 20.99, 3.47 and  1.13 respectively as on  23rd March, 2011.  ( More information and a long term analysis on Nifty historical valuation are available from the "Nifty Fundas" page ). 

 Latest Ultimate Momentum Signal 
The Momentum Signal still ended up in the negative momentum area, in spite of the rally in the market.

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  24th March, 2011, 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.

Click on the table above for an enlarged view.

Readers are also requested to go through The Signal, Entries and Exits, Position Limits, Risk Factors, Risk Analysis,  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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