Tuesday, August 23, 2011

Update for 23rd August 2011

Finally Some Recovery ! 

Here is another bare minimum update of the Momentum Signal trading system.

   Nifty Futures Daily Chart 

 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 17.68, 2.89 and 1.55 respectively as on 22nd August 2011.  ( More information and a long term analysis on Nifty historical valuation are available from the "Nifty Fundas" page ).

Monday, August 22, 2011

Update for 22nd August 2011

A Late Edition of Momentum Signal 

This late edition of Momentum Signal is limited to just the bare minimum due to some personal emergency. Please bear with the author for such a short weekly edition.

        Nifty Futures Daily Chart 

 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 17.49, 2.86 and 1.57 respectively as on 19th August 2011.  ( More information and a long term analysis on Nifty historical valuation are available from the "Nifty Fundas" page ).

Friday, August 19, 2011

Update for 19th August 2011

Another Gap Down !

This blog had repeated time and again that Nifty valuations were stretched, and now, it seems that market is in the process of clipping the same. As the market has been pricey for a very long stretch of time and most market participants became used to the higher valuations, the present correction may appear to be very deep. However, it remains to be said that the trailing valuations have just fallen to the long term averages now. It is a very simple matter that the long term averages are supposed to be somewhere in the middle of the valuation ranges and therefore, at least for half the period used to calculate the averages, the index valuation have remained below the long term averages. Therefore, there is no such near limit at which the fall may get arrested. But, it is a fact that market has become comparatively safer for long term investors for they can buy at somewhat reasonable prices from now on and this itself may provide a bit of margin of safety and long term upside.     

 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 17.85, 2.92 and ( 00 )* respectively as on 17th August 2011.  ( More information and a long term analysis on Nifty historical valuation are available from the "Nifty Fundas" page ). * Please note that the latest D/Y is not updated due to some technical problems with the source NSE website. 

                                                                                     Nifty Futures Daily Chart 

Thursday, August 18, 2011

Update for 18th August 2011

Bleeding Continues !

After the formation of an inside day candle yesterday, the down trend has started again. Market is in the process of testing the panic low, as indicated in the previous post. The immediate short term direction of the index may depend up on the said test.  

Nifty Futures Daily Chart 

Wednesday, August 17, 2011

Update for 17th August 2011

Blue Chips Hold, But Mid & Small Caps Slide Continues !

As is expected after a deep fall, the international stock indices bounced back, and now, it seems that the process of testing the resistances are over. The next leg, naturally is a test of the panic lows. Since the Indian stock markets were already in a long drawn down trend, the losses were of lesser magnitude over here. And hence the smaller bounce. The bounce failed at the previous low cum resistance at the 5175 - 5225 level and thereafter, the Nifty index is in the process of finding value by testing the lower support. The 4950 - 5000 area being the panic low extends short term support for the time being. If the support holds, Nifty may again test the resistance area. Barring any major triggers, Nifty index may spend some time trading between the 5000 - 5175 area before the next leg of any directional movement. Meanwhile, some of lesser quality stocks may continue to slide.  

Nifty Futures Daily Chart 

 Nifty Trailing Fundamentals  

Though, the major indices closed at a fourteen month low as on yesterday, the trailing valuation ratios of the Nifty index are just reaching the long term averages right now, as the trailing ratios were   hovering at significantly higher levels of recently indicating over valuation.

Tuesday, August 16, 2011

Update for 16th August 2011

The Slide Continues !

Due to certain personal matters of unavoidable nature, this post is late and consists of only the basic charts and system update.  

Nifty Futures Daily Chart 

S&P CNX Nifty Index - Weekly Chart

Friday, August 12, 2011

Update for 12th August 2011

An Inside Day Candle !

Yesterday's trading lead to the formation of an inside day candle in the daily charts. Astute traders may note that an inside day candle near the Bollinger Band, and that too after a significant move in any security may, sometimes, indicate a short term reversal. Please read this old post which dealt with the subject of inside candles for more information. However, as matter of abundant caution, it is also stated that these patterns are not foolproof and sometimes these fail too. In case of a reversal triggering, anywhere near the middle average becomes the first target. And in case of the reversal continuing further, the other Bollinger band becomes the next target. Above all, if the pattern fails after triggering a reversal trade, it may indicate the continuation of the previous trend. The daily chart of Nifty Futures given below shows a shaded area as an example of a recent reversal from the Bollinger Band after the formation of two inside day candles. (  Please click on the chart enlarge and examine the previous low. )   However, the short term resistances detailed in the previous post may still act against such a short term reversal, if triggered. 

Nifty Futures - Daily Chart 

Thursday, August 11, 2011

Update for 11th August 2011

The 5175 - 5225 Resistance Acting Tough ?

It seems that the lower boundary of the gap which almost coincides with the top end of the previous low cum support area of 5175 - 5225 is acting as a strong resistance as of now. Failure to clear the resistance will lead to a test of the lows in the ensuing days. 

Nifty Futures - Daily Chart 

Wednesday, August 10, 2011

Update for 10th August 2011

High Volatility to Continue !

It seems that the high volatility in the market may take some more time to subside. The following chart of India VIX shows the explosion of implied volatility seen in the Nifty Options.

India VIX - Daily Chart  

Nifty Futures - Daily Chart 

Tuesday, August 9, 2011

Update for 9th August 2011

Panic & Chaos Continue !

This edition of The Ultimate Momentum Signal post consists of just the basic minimum updates. Please see the previous post for more market commentaries.

Nifty Futures Daily Chart       

Monday, August 8, 2011

Update for 8th August 2011

It's Chaos Out There !

  • Finally, major stock market indices have decisively broken out of their eighteen month old upward moving trading channel. Sadly, they have broken downwards. 
  • The just broken channel had a height of 650 points approximately.
  • Now the question is, will the market revisit the lower boundary of another support line to be drawn some 650 points below the just broken channel.
  • As stock markets all over the world have been shaken and started a significant down move simultaneously, such a possibility is not out of the realms as of now.
  • As such, next major medium term support for the Nifty is at around the 4700 to 4800 levels. However, readers may please take note that this is not a trade recommendation and is provided as a medium term plausible scenario. Even if the scenario works out  as expected, it might happen only after some time and that too, after some recoveries. It is also possible that, by that time, the support might move upwards merely because of  passage of time.  
  • In the meanwhile, the lower boundary of the just broken old trading channel and the forward slanting supply line will act as the resistances against any up moves.
  • Even after the continuous fall for the past eight months or so Nifty index is just reaching the long term trailing valuation averages by now. This author was regularly pointing out the fact that the index is retaining premium valuations, in spite of the low growth scenario. ( Please see the regular updates of trailing fundamentals of Nifty index and the long term analysis report thereof. )        

S&P CNX Nifty Index - Weekly Chart 

Nifty Futures Daily Chart       

Friday, August 5, 2011

Update for 5th August 2011

The Tsunami is Here !

Yesterday, it felt like the market is in the process of testing the resistances around candle of two days back. But the test failed at the first gate, ie. at the low of the reference candle. What happened afterwards was beyond anybody's guess. Now, at the time of writing this post, Nifty Future is hanging on to the last known support of 5175 - 5200 area. As the financial markets have entered an era of extreme volatility, technical predictions would be of not much help. Yet, it seems that a break of the support at 5175 - 5200 may lead to a swing even to a low of 4800 levels. However,  it remains to be reiterated that markets never travel in straight lines and even if it reaches the predicted levels, it might be after much back and forth movements.  It is also notable that sharp falls are associated with sharp recoveries, as the increased level of volatility acts both the ways.

Nifty Futures Daily Chart       

Thursday, August 4, 2011

Update for 4th August 2011

A Test of Resistance is On ?

After the gap down open on yesterday, Nifty futures didn't suffer much damage.  Volumes at the lower end seemed to be low and it lead to a short term reversal. The market action also lead to the formation of an inverted hammer kind of candle in the daily charts. Though the technical position has not changed much, it seems that the market is in the process of testing the resistances above. The immediate outlook for the market depends on the outcome of this test. Day before yesterday's low, close, high etc can become the important reference points on this test. 

Nifty Futures Daily Chart   


Wednesday, August 3, 2011

Update for 3rd August 2011

The Drift has Started Again ?  

It seems that the drift has started again on the back of the triggers provided by the international markets. The immediate support for the market is in the area between 5350 - 5400. The next lower support is around the previous double bottom at around the 5175 - 5200 area. As the downtrend has been continuing for a long time by now, sudden steep falls are not expected and hence the author is forced to use the word drift in the title of this update. Market may drift for some more time and in the meanwhile may respond to short term triggers, both negative and positive. Therefore, trading light and part booking of profits, if any, seems to be best solution to overcome the drifting markets.

Nifty Futures Daily Chart 

Tuesday, August 2, 2011

Update for 2nd August 2011

Same Old Story Continues !  

I had indicated in the yesterday's post that failure to clear the 5550 -5560 level may see the Nifty futures testing the lows. It was also said that in the absence of any triggers, some back and forth trading may be expected. The kind of trading seen today morning also proves that this scenario is playing out so far. The reasons for this kind of trading are the following. ( a ) The medium term trend is still neutral to down due to the rising interest rates and inflation and the consequent slowing growth and profitability, ( b ) In spite of the aforesaid reasons warranting lower stock prices, the best of Indian stocks are still retaining somewhat premium valuations on the expectations of long term growth while most other stocks are still on a correction path, and ( c ) These diametrically opposite factors have lead to the sideways kind of trading and a breakout in either direction is beyond anybody's call right now.  

Nifty Futures Daily Chart 

Monday, August 1, 2011

Update for 1st August 2011

Back in the Old Trading Range ?  

As indicated in the previous post that a short reversal might be in the making, Nifty future is testing the 5550 level today morning. Failure to clear the 5550 - 5560 level may still lead to a test of the lows. However, closes between the 50 DMA ( 5525 ) and the 100 DMA ( 5590 ) will indicate continuation of the trading range. As the Nifty futures are placed between important trend lines and various Moving Averages, some kind of two way trading will continue in the absence of  any triggers. Therefore, all trend following systems, including the Momentum Signal will continue to whipsaw.

Nifty Futures - Moving Averages Chart

Nifty Futures Daily Chart