Sunday, May 9, 2010

Update on The Ultimate Momentum Signal - 10th May, 2010

  Reliance Stock Rescues Nifty From Reaching The 200 DMA ... !

Even though, the Wall Street had a free fall and  recovery on Thursday night, the Asian markets were trading with reasonable losses when the markets opened for trading on last Friday. Therefore, there was no panic !. The markets opened with a loss of 80 points and traded flat for the day and finally closed at 5032 near the day's high. A positive close by the Reliance stock, induced by the favourable judgement in the gas case, helped the market from reaching the 200 DMA at 4950. The market  has  fallen on all days last week. Therefore, it may try to recover some of the losses in the next few trading days unless anything happens in the international markets. However, the trend still remains down.

Nifty Futures - Daily Chart   

The futures may trade between the 200 and 100 day moving averages for some time before moving in either direction. The Momentum Signal trailing stops are at 5080 ( 2.1 % above low ) and 5100 ( 2.5 % above low ).

World Markets

The European markets closed with steep losses on last Friday. All major European market indices have closed below their 200 day moving averages last week. Hongkong and the Chinese markets are also trading below their 200 day moving averages. The US market indices are trading above their 200 DMAs but below the 100 DMAs.

US S&P 500 Index - Daily Chart & CBOE VIX Index

This combined chart gives the best example for the hike in the so called fear index, the CBOE VIX  in association with a market fall. The VIX index shows the implied volatilty of S&P 500 options. As you can see from the chart, when the market went for a free fall, the VIX exploded. This means that when the markets fall down the option prices also rise disproportionately. Readers may note that NSE has licensed the VIX for use in India, and the NSE VIX is called 'India VIX'. They have even plans to start derivative trading on the India VIX index. Therefore, the above chart is one of the best educational sources for anyone who wants to understand options volatility before enduring to trade India VIX if and when introduced.

At the time of writing this post ( 1 PM, IST ), reports from Europe indicated that EU finance ministers will be meeting on Sunday to thrash out the Greece rescue plan before the Asian market opened for Monday's trade. All traders may look for international cues for  further direction of the markets. 

The Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as on the close of  7th May 2010, is given below.

The Momentum Signal has closed in the sell territory for the eighth day. 

Projected Momentum Signal Close Values

The projected levels of closing values corresponding to the momentum shift / neutrality / continuation as on the close of trading on 10th May, 2010 are given in the table below. The table also include the projected closing values of BSE Sensex corresponding to the momentum shift / neutrality / continuation signals.
 You can click on the table to enlarge. For more info on the above table,  please click here.

The closing values for the continuation of the downtrend have decreased for the -50 signal as well as the  -100 signal. The closing values required for the resumption of an uptrend are far away at present.
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Cheers and Prosperous Investing and Trading!!!   

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