Monday, May 17, 2010

Update on The Ultimate Momentum Signal - 18th May, 2010

Another Test of 200 DMA, But What is Next ... !
The Nifty futures opened lower at 5018 and as anticipated in the last post, tested the 200 DMA at 4975. The futures even traded to a low of 5062 and thereafter, it rallied in step with the European markets which opened with some mild losses and traded to the positive territory. ( Experience shows that even if the Nifty futures breaches any major support or resistance by  10 to 12 points, it is not a valid  signal for a winning trade.)  The future's daily high was almost identical to the last traded price of Friday at 5070. 

The Nifty futures have tested the 50 DMA  (presently placed at  the 5215- 5220  levels) and the 200 DMA (presently placed at the 4975 - 4980 levels) twice during the past seven trading days. The futures have reversed from these major moving averages twice too. The major question now is: Is the market becoming a range bound one ? As stated in the earlier posts, it seems that the  Nifty  future is moving on the basis of international cues  mostly, especially the cues from Europe and the US. As the direction of the markets is unclear now, traders may check whether the Nifty future is able to  cross the 100 DMA at 5120 convincingly on any rallies. In case the Nifty future is unable to cross the 100 DMA, it may breach the 200 DMA again. The the next support for the future, below the  200 DMA,  may be at the 50 week moving average (WMA) at 4910.
Nifty Futures - Daily & DMAs Chart 

World Markets

Even though the European markets were trading in the positive territory when the Indian markets closed, the FTSE and DAX closed flat on Monday. The CAC closed with a loss of half a percent. The US markets were trading lower with losses of 1.25 % at 11.15 PM IST, on the fears of the Euro zone crisis and  disappointing earnings outlooks. The fear index ( VIX Index ) was trading at 33 at the time of this post. The Euro USD pair was trading near the recent lows at 1.2298. 

The US market indices are also trading between their respective 200 and 100 DMAs on Monday like the Indian markets. In major international indices, the Nikkei, Shnaghai, Hangseng and  the FTSE  have closed below their 200 DMAs on Monday.

The Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as on the close of  17th May 2010, is given below.
The Momentum Signal has returned -100 values indicating a sell as on 17th 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 18th 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.

A close below the 5120 - 5130 levels is still bearish for the Nifty Futures. However, the triggers for an uptrend as per the Momentum Signal system have fallen and are placed at 5140 - 5153 levels. It is also noted that the neutral area has shrunk to very minimal points. May be a major move is around the corner which may 'make it or break it'.

Followers of this blog are requested to please read the Risk Factors  3 and 4, which may be applicable  to the present market conditions.

Please do write in your suggestions and comments about this blog.

Cheers and Prosperous Investing and Trading!!!  

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pawankumar said...

i read an interestin line on twitter for Motilal Oswal Ltd. it read as "Short term thinking is the enemy of long term investment success !!" i thought it was kinda insightful

momentumsignal said...

Hi Pawankumar,

"Short term thinking is the enemy of long term investment success !!"
I completely agree with the statement. But with two caveats. (1) The so called long term is the sum of all short terms. (2) In the long term everybody is dead.

Now, a question too ! Is there any broking house who called a sell at the tops of 1992, 2000 & 2008 highs. Therefore, the said quote only shows the inability of an investor to manage a portfolio in the short term. Or in other words, it is only an alternative or a simple shortcut.

You may please take a look at the Nifty Fundas page of this blog for long term analysis of the markets.

Other than the above, I would like comments which are related to the context of this blog.