Monday, June 28, 2010

Update on The Ultimate Momentum Signal - 29th June, 2010

  A Test of the Resistance Band Ahead ...?

In the last update, it was stated that the daily chart of Nifty Future has not yet lost the positive momentum as per the indication of the Momentum Signal system. In spite of the last week's all round weakness in the western markets and the occurrence of a bearish shooting star doji  candle in the Nifty index weekly chart, the futures opened positively on Monday and rallied to close at 5338.50. The market seems to be in the process of re-testing of the resistance band as envisaged in the last Friday's update. If the world markets do not give any negative shocks overnight, the Nifty futures may retest the previous highs. Meanwhile, the Momentum Signal has closed in the neutral territory requiring an exit of the long position with an approximate profit of 130 points. ( Please see the details in the Momentum Signal Table ).
Nifty Futures - Daily Chart

Even though the Momentum Signal has indicated neutrality, the futures may go either way as no clear direction of the market is available at present. It is customary for a market to spend some time just below the major resistances before deciding the way forward. If the world markets do not negatively affect the Indian markets, the markets can even trade to new highs. However, if the markets fall below the stop loss level of 5265 it may attract heavy selling.

World Markets

The European markets closed with gains after sustaining losses on most days last week. The FTSE, CAC and the DAX closed with gains of 0.50, 1.61 and 1.43 percents respectively. The US markets were trading absolutely flat at time of this post  at 11.30 PM IST. 

Meanwhile at the G-20 meet, the leaders declared the intention of advanced economies to cut their deficits by half by 2013. This will limit their bond issues and consequently the US bonds hit new highs. The spending cuts may lead to the weakening of the present recovery which was achieved  on the back of government and central bank support. Paul Krugman, a noted economist, has commented  that the planned spending cuts by the advanced economies may pave the way for the third depression.  ( To read the story, Click here ).    In case any readers are interested in what happened in the great depression of the 1930, at least from the technical analysis pint of view, click here to read an earlier post published in this blog titled " What If The History Repeats Itself? ".

Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as on the close of  28th June 2010, is given below.

The Entry and the Exit levels of the last trade in accordance with the Momentum Signal Trading system are marked in the above table. As has already been stated, the system has indicated an exit of long positions as of Monday.  

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 29th June, 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 higher closing at the end of Tuesday's trading may indicate a gain of positive momentum for the futures. However, a  signal supported by a close at a new high may induce higher confidence in the move.  All major market indices barring the Indian and the German DAX are trading below their respective 200 day moving averages at present . Therefore, market may fail in the test of previous highs too. 

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