A comparison of the yield between the two capital instruments, equity and debt, can be used to assess the risk-reward for investing. This tool has been a very important indicator to identify the bottom of the equity market. Whenever the earnings yield has crossed bond yields, healthy equity returns have followed.
In the last 20 years, this is the third instance where this has happened. Read on to know more…
Nonetheless on Friday the 13th
In mathematics, the Fibonacci numbers form a sequence called the Fibonacci sequence, such that each number is the sum of the two preceding ones, starting from 0 and 1. The beginning of the sequence is thus 0, 1, 1, 2, 3, 5, 8, 13, 21 …
Fibonacci numbers appear in nature often enough to prove that they reflect some naturally occurring patterns. They appear in biological settings, such as branching in trees, arrangement of leaves on a stem, the fruitlets of a pineapple, the flowering of artichoke, an uncurling fern, the arrangement of a pine cone and the family tree of honeybees.
The numbers can also be applied in modelling financial markets by using retracement ratios derived from the sequence. Fibonacci Retracement highlights levels which help us identify potential reversal area thus identifying potential entry point after a pullback.
Today’s sharp pullback of Nifty50 from critical retracement level shows the efficacy of the Fibonacci phenomena in our financial markets.