Monday, May 3, 2010

Update on The Ultimate Momentum Signal - 4th May, 2010

 The Sell Signal is Still Hanging In There, But ... ! 

The Nifty futures opened at 5235 on Monday's trade with a gap of 25 points from the last traded price and thereafter traded sideways almost till noon. It traded to a high of 5245 just after noon and then it  traded lower when the European  markets opened with some losses at 12.30 PM IST. The futures traded lower to test the previous minor low of 5198 it reached on 28th April, 2010. However, it reversed from a low of 5202 and finally closed at 5225.70 with a loss of 35 points. As the present sell signal is four trading days old and the future has not been able to  break the  previous minor low,  the possibility of some short covering may be expected in the next trading days.

Nifty Futures - Daily Chart  

Except the possibilities of a covering rally, the technical position of the market has not changed much during the past three trading days. The resistances at the 5290 to 5310 range remain the same.

World Markets
The Asian markets closed with losses on Monday. Even though a Greek bailout package  was announced on late Sunday, the package requires to be ratified by legislative action by the major EU countries. It is reported that Greece may suffer more during  the 'violent restructuring' envisaged by the IMF.  Global investors seems to be bit skeptic about the bailout. This skepticism is indicated by the near 1 % weakening of the  Euro against the USD on Monday even after the announcement of the USD 140 billion bailout plan. The European stock markets closed with minor gains on Monday on the strenght of the US markets. The US stock markets were trading strongly upwards on release of  data indicating higher consumer spending  and higher manufacturing.

The Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as on the close of  3rd May 2010, is given below.
The Momentum Signal has closed in the sell territory for the fourth day without much favorable excursion by the short instrument raising the risk of the short position.

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 4th 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  by around ten points for the futures and are at the Friday's low at 5251 levels.The possibility of the short positions exiting by a higher close in the neutral territory has increased very much. Even though the system rules prescribes  the  trailing stop at 2.1 % away from the low for a short position, the stop loss point for the short positions in the futures is brought down to the Friday's  low of 5252. This is done as a very special case.

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