Nifty: Gann projection level and PE ratio alert!

Nifty has touched the unprecedented levels and the valuations have reached sky rocket. The PE ratio of index has crossed back above 28 levels!

For us charts convey lot of information. In the past we have seen how markets behave when PE ratio crossed above 28 mark. It was in the year 2000 and later 2008. The euphoria has been on a rise but deliverable volumes are low. Many are still stuck in Midcap and Smallcap stocks and are waiting for them to recover.

We use advanced technical tools like Elliott wave, Neo wave, Time cycles and much more. Look at the below chart published in the latest monthly research report – The Financial Waves monthly update

Nifty Gann projection levels:

Nifty Gann projection

Nifty PE ratio:

Nifty PE ratio

Below is the part of research picked up from “The Financial waves monthly update”

Euphoria – Mania returns to equity markets –

Nifty had a strong rise in the month of July and prices moved from the lows of 10604 to 11366 thereby making new life time highs. During this period we can also see Sensex and Bank Nifty also touching new highs. The reason why we are addressing this move as euphoria or a mania is by looking at the trailing 12 months Price to Earnings ratio.

Price to Earnings ratio at historic levels – If you look at Figure 5 we are showing over past two decades the levels of PE which result into catastrophic reversals. The correction which ensued when PE ratio was so much stretched was a rush to catch back again with the mean value. To maintain the mean value we need to see deviation in the opposite direction. So everytime prices crossed above 2 standard deviation of mean PE value we can see it going towards negative 2 standard deviation over subsequent months or years. This way the average PE had been maintained around the zone of 18 – 19.

Also, everytime such historic valuations are reached there will be enough logical reasoning to explain why it is justified. Even during IT boom of 2000 there was justification that the economy is now going through a historic change which was never before witnessed and so re-rating of PE is inevitable. But what was inevitable was the sharp reversal and deep correction post that. This time as well majority of the fundamentalist who are already invested in the markets are now justifying why the current levels of PE value is fair. Trust me this has been ongoing for centuries and is no different. If you can simply open the charts of global markets with long enough history and search the news when the valuations were highly expensive you will find similar reasoning because there is no other way to explain the mania.

If you have been following the monthly research over past months we have identified such mania in Bitcoin and everyone saw how quickly the entire optimism turned into catastrophe. We are not trying to catch a top here but the risk which is now increasing with each passing day is simply not worth the fresh investments and we have history of data available to back this up.

Gann projection level:As shown in figure 4 Nifty has now broken above the level of ……. which was acting as stiff resistance earlier. This level will now act as a very important support on downside. The next projection level as per Gann is at 11503. So for any reversal confirmation we need to see decisive break below …….. levels and unless that happen it is best to avoid catching a top in this euphoria.

Neo wave plausible scenarios: (refer the monthly research report)

 The above shows the important levels that one has keep a watch and why the valuations are at extreme levels. These tools are not for short term timing but it is important to pay heed when they reach the extreme zone!

So, what is next for Nifty, sectors that will outperform, commodity index and much more?

Get access to “The Financial Waves monthly update” and see yourself all the major indices at a glance with most objective reasoning in this euphoric scenario. Also for limited time you can now subscribe to “The Financial Waves short term update” and get monthly update along with it. Subscribe NOW here

Nifty: Hurst’s Time cycles and its pressure on markets with PE ratio!

Time cycles is an independent study in Technical analysis which if applied prudently can help to pin point turn to the day or probably to the hour.

We combined Advanced Technical analysis concepts like Advanced Elliott wave, Neo wave and Hurst’s Time cycles with Gann projections to derive high probable trade setups and the path markets can follow.

Now look at the below chart of Nifty which was published in our Monthly research report on 6th June 2017:

Nifty Gann projections and Time cycles chart (data as per 6th June 2017)

Happened so far

Nifty PE ratio

Following is part of the research from Monthly research report

Time cycles: In figure 5, we have shown Time projections along with Gann price projection. As per Time cycles prices have entered into the topping zone again and is now ……. days old within the 55 days cycle. Therefore the pressure can start building up on downside after few days as per cycle analysis. However, we know time is a dynamic element and prices can stay at elevated levels………… So break below …….. will be 1st level of negative confirmation…

Indian Equity markets valuations: At times it is important to look at certain parameters which provide information about how expensive the current market is.  Price to Earnings ratio (P/E ratio) is widely used fundamental parameter to evaluate the current price with respect to earnings of that asset. We can see in Figure 6 the PE ratio of Nifty. For us PE ratio can be classified as technical parameter as well. Any PE reading will make sense only when it is compared against its average of past decade. We can clearly see that for Nifty the PE average had been at 19 against which Nifty is currently trading at the PE of 25. Also we can see that important tops are formed when Nifty PE crosses above the 2 standard deviation from the average. We can clearly see that the top of 2008, late 2010 was formed when PE ratio crossed above 25 mark. It is not very often to see Nifty PE entering into such zone and when it happens it is time to stay alert and avoid fresh investments unless the earnings catches up with the prices. Even for Earnings to improve prices should stay where they are for a few quarters so that the PE ratio can come down. This means that there should be atleast time correction if not much of price to improve this fundamental parameter. Let us look at the PE ratios of other few important sectors and see if this euphoria is more prominent in those indices.

The above research only shows Nifty valuations. In the actual research report –The Financial Waves short term update you can see the valuation parameters on Bank Nifty and Midcap indices as well that are at never seen before levels. Not only that there is very detailed explanation on Neo wave analysis along with preferred scenario from medium term perspective with outlook on Global markets, EURUSD, stock pick of the month and much more. Subscribe NOW and see yourself detailed analysis on Nifty and how precisely markets are moving!

Register for the Most Advanced training on Technical analysis – Advanced Elliott wave, Neo wave combined with Hurst’s Time cycles and Gann cycle analysis. These techniques will equip you with tools that can help in increasing the trading or investment accuracy. Also get insights into lot of practical charts with applied studies and get access to free research reports post training. This can be one of the best investments, Limited seats – Enrol Now 

Webinar: Nifty's current valuation justified? Technical Analysis perspective

Ashish kyal,CMT talks about Nifty,Bank Nifty,Nifty Midcap Index valuations showing Price to Earning charts of these indices and comparing with the historical Earnings, He strongly suggestiong that the markets are over heated! He has explained a fundamental parameter using Technical tool.A very different perspective of looking at markets.

Plot Your Own Technical and Fundamental Charts

To help our readers with the tools that we use have integrated Charting functionalities on our website - wavesstrategy.com. This module also makes it easy for someone to mark Elliott wave counts with tools available on the left side. Trader's Forum will provide opportunity to share across your findings and markings directly with other users on the website. So keep exploring here- http://www.wavesstrategy.com/charts/

Nifty valuation Price to Earnings Ratio using technical analysis!

How to look at fundamental parameter like Price to Earnings Ratio (PE ratio) from technical analysis perspective?

Indian Equity Markets (Nifty) has continued to move in range from last few weeks. Markets were waiting for GST to pass out from many months which is finally cleared by Rajyasabha recently.

Many were expecting sharp rally post GST clearance however markets have been moving in range with important support intact on downside. Nifty is making new highs but not able to sustain the gains and reversing towards the short term pivot support levels. This is one of the examples that trading or investing based on news or events is dangerous and hence understanding market behavior applying various parameters is must. Below we have shown chart of Nifty and Price to Earnings ratio to see the valuations at current levels.  Apart from  this, we have also shown long term, medium term chart of Nifty with applied advanced concept of technical analysis which is shown in original report “The Financial Waves Monthly Update”.

Price to Earnings ratio chart

(Part of research taken from the monthly research report)

“Understanding the valuations: We take a step forward by looking at Price to Earnings ratio with a different perspective. In Figure 4 you can see comparison of Nifty with that of Price to Earnings chart. Nifty current PE stands close to 24. Previously, in March 2015 when Nifty touched all time high of 9119 the PE ratio was exactly at this level. Now when markets are at still lower levels from there the PE has already touched 2015 highs. This clearly suggests deterioration in the Earnings over the year. Also we would look at the overbought zone of the PE chart. The major tops formed in the year 2008, 2010, 2015 showed extreme PE readings and we have again approached at the same level.

We would refrain from using PE chart to call market tops as the irrational exuberance can last longer than anyone’s expectations. Nevertheless, this does provide perspective to the overall Elliott wave counts and pattern under development.” Detailed counts shown in actual research report.

The above is the part of research only. To know the pattern under formation on Nifty with advanced Elliott wave perspective, subscribe to “The Financial Waves Monthly Update” and for more information visit Pricing Page

Intermarket Analysis and Long Term Forecast!

The Financial Waves Monthly update is now published!

See Relative Comparison of different sectors post August 2013, Understand the GDP and PE Ratio with Sensex. Baltic Dry Index, Gold/Silver ratio future path, TVS Motors long term outlook andEURUSD. 

Our Financial Waves Monthly Report July 2014 Issue tried to cover long term analysis on the above points making our paid subscribers ready for the movement upcoming in markets

Below is the gist of our report which is sent to our paid subscribers

Relative Comparison of different sectors in rally started from August 2013

Below we have shown how different sectors have performed since the rally started from August 2013. In last 1 month participation of various sectors has changed. The rally post 7th July 2014 has been very different in terms of sector participation.

Understanding GDP Growth, PE Ratio with Sensex!

GDP Growth gauges the overall health of the economy whereas PE Ratio depicts whether stock market valuations are high or low. We have taken the data of both this important aspect to analyze with the perspective of technical analysis rather than Fundamental. It proves that stock market is the leading indicator.

Baltic Dry Index

To gauge the overall health of World Economy we have analyzed the Baltic Dry Index .This index is majorly looked as an assessment of whether the goods produced are transported across the globe or is just building up inventory.

Gold/Silver Ratio

For any investor or trader who deals in Gold and Silver, it is very important to look at Gold/ Silver ratio. This ratio provides important indication that which commodity will outperform orunderperform and one can form pair trading strategy as well.

TVS Motor Long Term Outlook

Indian Markets have gone through euphoric rise since August 2013. Midcap and Smallcap stocks have shown exponential pick up in prices. We have picked up TVS Motors and applied Elliott wave theory on the same to know the long term outlook of the stock. As per wave perspective, TVS Motor is set to move towards 500 by mid 2017!!

EURUSD

Dollar Index has showed some strength in last month. EURUSD currency pair has highestweightage in that index. Along with EURO, GBP and JPY has also showed weakness and depreciated against US Dollar. Overall wave counts and Time Cycle is suggesting that down move for EURUSD should start after few months which can result into developed equity markets reversal.

Don't wait…Just subscribe and get full insights on the markets. To subscribe visit http://www.wavesstrategy.com/index.php/store.html

Sensex at crucial juncture! Is this the start of next BULL TREND?

Bottom Line: Sensex again reached near the previous highs of 20700 made in September 2013. It is on the verge of long term trend changing level!!!

Indian markets have been moving up amidst all the negative news that has come out over past 2 months. The monthly chart clearly reflects this movement. A simple bar technique shows that prices have so far made higher highs and higher lows which is the basics of technical analysis and yet the most powerful technique to determine the direction of the trend.

In today’s morning research report “The Financial Waves Short term update” we have shown 4 different time frame charts – Monthly, Daily, 60 mins, 10 mins to determine the trend right from long term to medium term to short term and explained how at times it is imperative to see all the degrees whether you are an intraday trader or long term investor.

Here in this article we are showing just 1 chart of major index with wave counts purposely removed that are shown in actual report.

Sensex Monthly chart:

Wave Analysis:

In previous update we mentioned that, “Existing position should trail stop towards 5950 levels and if Nifty has a Gap up opening the same should be trailed towards 5980. In short, we continue to be…... A move above ……………. will form higher highs and higher lows even on the daily degree and Sensex will again be on the verge of an upside breakout!”

We have been bullish on Nifty as soon as it took out 5650 level. In 11^th September 2013 research we mentioned “We have seen a Gap up move as soon as this correction got complete and not only Nifty many of the stocks have shown inverse Head & Shoulder reversal pattern at the bottom. First target for this pattern is near 5850 – 5900 levels.”

Even on 4^th October 2013 we mentioned that “On one higher degree, the move up from 5400 to 6150 took approximately 10 days and so far prices have already consumed 9 days and has retraced only 50% of this up move. This concept suggests the medium term up trend that started from 5400 is still intact and a move above ………. will form a classical higher high and higher low formation even on daily scale.”

In today’s morning research before market opened we published the above shown monthly chart along with detailed explanation on daily, 60 mins and 10 mins degree.

Rotational rally:The strength we saw in Friday’s trading was led by Banking, IT and Capital Goods sector whereas high beta sectors took a break. This pattern again fitted very well with the overall ongoing rotational rally concept.

Sensex - Price to Earnings and Price to Book ratio:

Figure 2

From fundamental perspective, Price to Book ratio has arrived near 2003 levels and Price to Earnings ratio is also at the level of 2005. So by using these 2 simple parameters we are not seeing the current market as expensive for now but rather cheap on valuation. There is lot of other parameters apart from these 2 that goes for fundamental justification… The above chart is picked up from “The Financial Waves Monthly update”.

Conclusion: …….. we want our readers to be unbiased and look at this objectively rather than acting subconsciously and not accepting the probability of a possible ……… formation as well. We do not have preference of one scenario over other but we are close to getting that confirmation.Sensex has arrived very close to confirming the start of next BULL TREND but let us wait for the mentioned important level to be broken on upside for confirmation!

For various subscription options and more details about equity research report published on daily basis before market opens that has Sensex / Nifty as well as 3 different stocks with Applied Elliott waves visit the pricing page at http://wavesstrategy.com/index.php/store.html or contact us on +91 9920422202 / +91 28831358 or write to us at helpdesk@Wavesstrategy.com