Tuesday, May 4, 2010

Update on The Ultimate Momentum Signal - 5th May, 2010

 Finally, The Sell Signal Delivers... ! 

The sell indicated by the Momentum Signal was just hanging in there for the last three trading days without any fruitful action from the market, raising the risk perception about the present trade. Normally, a short trade is expected to deliver the result much faster than a buy. This is because all market falls are driven by fear and panic. Finally, the sell signal has delivered.. !

The Nifty futures opened flat on Tuesday and traded sideways till around 1.30 PM. A small short covering rally in the market heavy weight, Reliance,  and the strenght  in the SBI counter helped the futures to record a high of 5238 on Tuesday. However, the selling augmented before 2.00 PM in consonance with the fall in the European markets. Finally, the futures closed at 5130.75, near the day's low. It has now closed below the low of 5162 recorded in the month of April. ( Please also refer to the Nifty Heavyweights post in which the doji candle seen in the monthly chart of the futures was discussed. ) 

Nifty Futures - Daily Chart   

The Nifty futures may get some support at the 100 DMA at 5120. As this support is a bit doubtful, the next support is the 200 DMA at 4940.

World Markets

Judging by the market action from the international markets at the time of writing this post, even the last bastion of the bulls, the US markets, have also joined the fall. All other markets were already in the process of a downtrend or were just joining the preset downtrend. If the fall in the US markets too turnout to be an intermediate trend, the present trend may become a major correction for equities all over the world. The US markets indices were trading with 2 to 3 % losses at 11 PM IST. As seen from the chart below, the US S&P 500 index has broken it's previous support at the 1180 to 1183 range. The increase in the implied volatility of the options captured by the VIX index is also seen in the lower panel of the chart.

 US S&P 500 and CBOE VIX - Daily Chart

The Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as on the close of  4th May 2010, is given below.

The Momentum Signal has closed in the sell territory for the fifth 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 5th 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 and the closing values required for the resumption of an uptrend have increased.  
The trailing stop for the existing short positions may be placed at  5236 ( 5128 Low Plus 2.1 % of the low ).

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