Sunday, May 16, 2010

Update on The Ultimate Momentum Signal - 17th May, 2010

 Risk is in the Radar of Investors ... !

Last Friday, the Nifty futures opened near the Thursday's low and traded higher in the initial stages. It achieved the day's high of 5202 by 11 AM. However, very negative cues from the European markets ensured that the futures failed in it's test of the 50 DMA at 5220. The futures sold off even below the 100 DMA at 5120 and the then weekly low of 5080. It finally closed at 5069.

Even though the Momentum Signal had initiated a buy signal, the signal completely failed  this time. A trader who would have taken a long position would have made a loss of 103 points. In this connection please note that the previous post itself had raised certain doubts about the the market by pointing out  the formation of a doji candle and the directionless nature of the markets. In addition, it was stated that the market is totally dependent on international cues for further direction.

Nifty Futures - Daily & DMAs Chart    

The upper panel of the chart shows the formation of various doji candles just before the reversals in the recent past. It seems that such doji candles have more predictive power in markets which have more uncertainty and and are likely to trend down. The lower panel shows the various DMAs of the futures. The Nifty futures may test the 200 DMA at 2975 in the coming week. ( Please also read the previous post on Nifty Heavy Weights for more analysis. ) 

World Markets 

The European markets sold off further after the close of Indian markets on last Friday on the back of increased fears of a dissolution of the Euro currency and the possible contraction in the economies of the debt laden countries.The US market indices also closed with losses of 1.5 to 2%. However, the US markets were able to recover some of it's intraday losses before the close on Friday. The US indices  were trading near their 100 DMAs at the close. The CBOE VIX closed at 31,  much below the 41 levels it reached a week ago.

The Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as on the close of  14th May 2010, is given below.

The Momentum Signal has returned neutral values as on 14th May, 2010.

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 17th 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.
   Please click on the table to enlarge. For more info on the above table,  please click here.
Any close below 5127 - 5132 levels  is bearish for the Nifty Futures and would indicate a sell signal.  Traders may please note that volatility is increasing at present and therefore the risk in trading may rise. 

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Cheers and Prosperous Investing and Trading!!!   

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