Sunday, April 18, 2010

Update on The Ultimate Momentum Signal - 19th April, 2010

 Are Equity Markets Poised for an Intermediate Downtrend...?

Although the Ultimate Momentum Signal had indicated a sell on 13th April, 2010, this blogger had expressed some apprehensions about the sell signal for the reason that none of the major world indices were showing any weakness at that time. Now it seems that other markets may join the downtrend...!
  • During the weekend the Chinese central bank raised the down payment ratios for all property loans to cool down the property market.
  • US jobless claims rose unexpectedly.
  • The US SEC pressed civil fraud charges on the Wall Street's 'gold plated' bank Goldman Sachs, in connection with an underwriting of semi synthetic CDOs consisting of dubious mortgages.
  • Following the above news, equities and commodities sold off on last Friday.
  • Some analysts are opining that China is having an asset price bubble and it may burst affecting India too.  
  • The Nifty index is reversing from an area where it reached the top end of historical valuations as on 6th and 7th April, 2010.  (Click here to check out the post dated 6th April.)
  • The RBI monetary policy on 20th April may contain some interest rate hikes as inflation is almost at the double digits figure.
  • However, the futures have closed lower for the past four trading days and it may still  show some tendency for intraday spikes as happened on the last trading day.
 Nifty Futures - Daily Chart

The resistance still remains at the previous levels indicated earlier at 5305 to 5310 range.

  Nifty Futures - Daily Moving Averages Chart

In case  the present sell off remains persistent, the futures may get supports at the range between 5085 to 5100 where the 50 and 100 day moving averages placed. The lower support may be around the 200 DMA placed at 4880 to 4900 range. 

US S&P 500 - Daily Chart and CBOE VIX

As seen from the chart of the S&P 500, it has not broken out from the upward moving regression channel. The spike in CBOE VIX ( Volatility Index ) following the Goldman Sachs news can be seen from the lower panel of the above chart. The start of an intermediate downtrend is yet to be confirmed in the US markets.

The Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as on the close of  16h April 2010, is given below.

The Momentum Signal remained in the sell territory with  values of -100 and  -50 for the the futures and the index respectively. The lower value for the futures may be accounted by the loss  of premium by the futures.

Projected Momentum Signal Close Values

The projected levels of closing values corresponding to momentum shift / neutrality / continuation as on the close of trading on 19th April, 2010 are given in the table below. The table also include the projected closing values of BSE Sensex corresponding to momentum shift / neutrality / continuation.

Please click on the table to enlarge. For more info on the above table,  please click here.

The triggers for the end of the downtrend have remained almost static and are placed at the resistance level indicated earlier at 5305. The values required for the resumption of the uptrend have moved significantly upwards.

As the futures have closed lower for the past four trading days and  it may still  show some tendency for intraday spikes in the next two trading days as happened on the last trading day .

Cheers and Prosperous Investing and Trading !!! 

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