The Ratio of the Sensex to NSE MIDCAP 100 is pushing at the extremes. The pink and yellow lines are a break point. On a long term basis these levels are in bubble territory and highest on record, but there is no sign of stopping. That said at such level it is hard to keep sounding the alarm bell on caution. Not something people like to hear especially if stocks are randomly going up 10% everyday. The markets cause a self feeding behaviour that causes these levels of optimism. The closest to this enthusiasm goes back to the Harshad Mehta boom. Though not in terms of the IPO market but yes in terms of the will of the masses to participate irrespective.
The A/D ratios are also still diverging. Yes if the market keeps going these will pick up but they have not yet done so. The 20day ratio is clearly made a lower top and declined in the last 8 days.
Adam Smith Associates offers trade &commodity finance related services & solutions to its domestic and international clients. Views expressed in this article are purely of the author – Mr Rohit Srivastava – a leading technical analyst. Visit www.adamsmith.tv for services offered by Adam Smith Associates Pvt Ltd