market momentum faltering ?

By the way the nxt Fibonacci target of an intermediate top from the lows of 8799 (after a fall from the peak of 12671) would be 14142.

Here's how :-

12671 - 8799 = 3872 * 1.38 = 5343.36
8799 + 5343.36 = 14142

Am I right? Of course 1-2% deviation can always occur.

Going much beyond that would entail a big Sensex PE re-rating Not impossible though given the excellent GDP nos The industrial growth figs also indicate we are in for a good robust 3rd qtr as well.

But if you notice some amount of re-rating has already taken place At the May peak Ssex PE was around 21.3 and currenty we are nearing 23 That's a 9% re-rating already factored in.

But some usual signs of a mkt peak is still absent; like a spurt in the mid & small cap indices, 'stupid money' (retail) gushing in while smart money starts receding, Advance-declines going thru the roof etc. Maybe they'll start unfolding in the coming days (some signs are already there).

I guess we're safe till the middle of next wk, buoyed by the 9.2% GDP nos But after that ......

Hi,
Kalyan,u can save the pic as bmp image in your pc then open in photo editor and save as jpeg image,it will compress the file size.Hope this helps.
Cheers
Amit.

Thanks for the suggestion Amit I don't have a photo editor (like Photoshop etc.) & use Windows 2000 but I do have Imaging Wil try using that.

Here it is finally View in Imaging or some photo editor of ur choice for clarity.

Still I'd like to know what u r getting on ur TA s/w One always has to be a bit circumspect about what's available free online.

Attached Images

Sensex 3 mths.jpg (56.3 KB, 22 views)

Notice in particular the 2 failure swings of the RSI i.e. prices moving to new highs but RSI failing to do so.

I would also look for a (intraday) breach (or what i call 'peep up') of the upper Bollinger Bands(20,2) in the coming days. This also happens before the climax of a strong Bull run.

13580 is the last swing low the next one is 13200. Any other levels to watch out for?

Any other thing/s to look out for Any suggestions from you guys would be most welcome.

Cheers
Kalyan.

Also note in the last three upswings the duration(time) as well as the price movements have progressively shortened with volumes remaining avg at best. This bears strong resemblance to the movements near the peak in the 2 yr Sensex chart posted by Agilent (although that's on a much higher time frame).

Another thing to watch out for is the level of leveraged positions in the mkt. I use the NSE F&O/ NSE CASH turnover ratio to get a fair approximation of this (any better way?) It seems anything above 4 is dangerous territory (it was nearer 5 before the May collapse). It had crossed 4 before the F&O expiry but has sobered with the unwinding (could account for that 172 pt gap-down correction) But then again can quickly climb up in the coming days.

Do i sound like a prophet of doom? Far from it. I like all other bulls would like Sensex to go to 15-16k but it's better to stay vigilant at these historically high levels, isn't it? (And I also don't want this nice bull cycle to exhaust itself too soon!)

Thanks
Kalyan.

Hi Kalyan

The observation about leveraged position is very interesing. Do you have Historical data of the NSE FNO/Cash turnover ratio. It would make a very interesting study.

Nice postings from you.. keep it up

warm regards

Karthik

Yes I agree ... your observations are food for thought .

Curious to know where u got that thumb rule figure of 4. In what range it is in overseas markets, incidentally ?

While on the topic of 15/16 K for sensex, how many of us rrecall that when sensex hit 8K, a member of SEBI predicted it wd reach 15K in a yr .... and most of us silently ridiculed him

Now it appears to be a possibility !

Strange thing is the underlying arithmetic of valuations. Sensex PE is still at 23 (am I right ?). Despite such a stupendous rise in the Sensex past 3 yrs ? If indeed it is only 23, and if annual EPS growth chugs along at say 15 % next few yrs, it is possible that markets continue growing at 15 % p.a. over the period .. of course with secondary corrections from time to time .. with the PE remaining unchanged (at 23) ! The prospects are scary, if fascinating !

Wonder if there is any watchdog cross checking on the Sensex PE, just to make sure there is no miscalculation, or goof up somewhere .... who knows !

AGILENT

Thanks Karthick & Agilent for your replies. I was beginning to get the impression that i was posting in wilderness!

About the leveraging ratio :-

Well it's just something i've been intuitively using and as such i can't vouchsafe for its accuracy nor whether this is the best method of doing it.
After the fall in May, a lot of blame was ascribed to the overleveraging in the mkts - in fact it was adjudged the single biggest culprit for the mkt crash by many experts So i thought if this can cause so much damage then i might as well keep a tab on the darned thing & be forewarned before it strikes again. I started using this ratio on the assumption that it would give me at least an approximate idea of the leveraging if not a fully accurate picture. I used an old stack of the Economic Times to get the figures in May before the fall & i've been tracking it the past 3 months.

I also reckoned that if a ratio of around 5 (before the May crash) is considered perilously high than anything above 4 may be considered the danger zone (4 times leveraging is high enough even going by common sense). In the last 3 mths the factor has remained below 4 and mkts have risen smoothly but i found a certain jitteriness creep in once it rose above 4 (borne by those gap ups & down as Agilent has pointed out and heightened volatility in general). But all this happened before F&O expiry so the correlation is hardly conclusive (which indicator is anyway?!) Will wait to see what happens in more 'normal' times.

The thumb rule of 4 is just that - a thumb rule. In May mkts seemed quite comfortable for quite sometime with the ratio well above 4. I just use it as a threshold, a warning sign that things might be coming to a head. I have no idea what the range is in overseas mkts. But i guess it'll be lower than Indian mkts coz in India virtually everybody is a trader! You'll find a lot more real investors in more mature mkts. (in fact they are the ones who are putting in the long term funds into our mkts now thru what we call FIIs).

(To be continued ...)