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Monday, May 10, 2010

Update on The Ultimate Momentum Signal - 11th May, 2010

 The Empires Strike Back ... !
 ( Or The Printing Presses Are Working Even Faster ... ! )


Quote from the last post :

"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 Shock and Awe

As reported as a possibility in the last post, a near USD One Trillion  bailout plan was announced by the European Union, European Central Bank and the International Monetary Fund combine before the market opening in Asia on Monday. The plan is also supported by the central banks of USA, UK,  Canada, Japan and Switzerland. As usual the US Fed will flood the markets with USDs by way of swaps against Euros, which the European countries and the central bank could use to stabilize the Euro. The bailout also includes buying of the problem sovereign bonds by the ECB. That means, the USD printing presses are working overtime now !  And the bears are running for cover .. ! ( At least for the time being ..! )

European markets closed with 5 to 10 % gains on Monday. The US markets were trading with gains of 3 to 4 % at the time of writing this post. ( 11 PM, IST ).

Nifty Futures

The Nifty futures opened at the Momentum Signal System's first stop at 5080 and traded between the open and the second stop at 5100 for some time, giving ample time to escape from the short covering rally.  For a trader who followed the second stop,  depending up on the various entry points which were available for the last sell signal, the short position in the futures made a minimum profit of 124 points. 

The futures easily traded through the resistance at 5120 ( 100 DMA )  and rallied further to close at 5207, near the day's high.  In case of a small correction, the 100 DMA at 5120 may act as the support.  Last month's low of 5160 may also act as a support now.

Nifty Futures - Daily Chart with Moving Averages

Nifty Futures - Average True Range Chart

The above chart shows the various ATRs ( Average True Range  ) of the Nifty futures in points. As you can see from the chart, the 2 Day ATR of the futures has increased due to the sell off and the fast and furious short covering rally.  In normal cases, the ATR decreases when market rallies. Since the markets are more volatile because of the shock and awe action of the sovereigns, risk averse traders may wait for the volatility to subside before taking a view on the market.  

The Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as on the close of  10th May 2010, is given below.


Momentum Signal has returned a value of -80 for the 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 11th 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 resumption of the downtrend are far below the Monday's close.  The closing values required for the resumption of an uptrend have decreased.
 
Please do write in your suggestions and comments about this blog.

Cheers and Prosperous Investing and Trading!!!   



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