Tuesday, June 1, 2010

Update on The Ultimate Momentum Signal - 2nd June, 2010

   The Old Europe Strikes Again .. !

After the short covering rally last week, this blog had been expecting a small correction  for the past two days. (A quote from the last post : "The futures also made gains for the past four trading days and therefore, it may pause or make a small correction. Traders may watch out for such a correction for making   long entries if need be, on the basis of international cues." It was also stated that a test of the resistances after a small correction was the best case scenario for the bulls ). The cues for the expected small correction was provided by the European markets on Tuesday and  the correction even became a 100 point sell off. However, the Nifty Futures closed above it's 50 WMA at 4918.

Nifty Futures - Daily Chart

As the futures have made a correction after the fast and furious short covering, it may rally further in case the international markets stabilises or stops providing the frequent negative cues. The first resistance above the Tuesday's closing is the 200 DMA at 5002. And the next resistances are the falling trend line of the regression channel and the 100 DMA at 5107. ( Please see the chart above ).
World Markets

The European markets opened flat and sold off on Tuesday. The Euro also hit a new low. However, when the US markets opened lower and started rallying on the back of higher manufacturing data, Europe too recovered the losses. The FTSE and CAC  closed with minor losses of 0.48 and 0.13 percents whereas the DAX gained 0.28 %. The US market indices were trading with gains of half to three fourth percentages at the time of this post. ( 11.30 PM  IST ).

The Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as on the close of  1st June 2010, is given below.

The Momentum Signal closed with neutral values of +30 on Tuesday.

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 2nd 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.

The closing values required for the resumption of the uptrend have fallen and are below the closing values of Tuesday. There is high probability of a trade being signaled as on the closing of Wednesday's trade. The values required for the resumption of negative momentum are also near the trading range of Tuesday. As the market risk levels are still above the normal, curtailing the trade sizes would be advisable. It may also be noted that very fast markets are not very suitable for the Momentum Signal trading system and therefore whipsaws are also possible.

Cheers and Prosperous Investing and Trading !!!

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