Tuesday, June 8, 2010

Update on The Ultimate Momentum Signal - 9th June, 2010

 The Markets In Disarray ... ?

In yesterday's post it was opined that traders may watch out for possible breakouts above and below the Monday's trading range and for any breakout failures thereafter. On Monday the Nifty future had opened with a gap and traded in a narrow range even though the losses were steep. Since the Monday's trading range was narrow, it was expected that the market may test the ends of the range to find the next direction. And this is exactly what happened on Tuesday.

The Nifty Futures opened flat on Tuesday at 5030 and traded lower for a very short time to reach a morning low of 5010. It rallied thereafter and tried to test the Monday's gap. It traded above the Monday's high of 5032 for four and a half hours almost confirming a breakout. However, it was not to be. The breakout failed miserably when the European markets started to fall. Once  the futures traded lower than the Monday's high of 5032 in the afternoon , it never recovered and offered  a breakout failure trade. The futures even broke the Monday's low of  4985 and reached a low of 4938. It finally closed at 4965. 

Nifty Futures - Daily Chart 


Meanwhile, the technical position of the market has weakened substantially on Tuesday. The Future has again closed inside the downward sloping regression channel. It has also closed below the 200 DMA at 5015. The only saving grace is that it has not yet broken the 50 week moving average at 4933. If  the Nifty Futures were to hold the 4910 to 4933 support from the 50 WMA, it may test  the 200 DMA. Below the 4933 level, the futures are supported only by the downward slopping regression channel lines and the previous lows.   

World Markets 
The European markets closed with losses on Tuesday, even though they were off their lows reached intraday. The FTSE, CAC and the DAX closed with losses of 0.81, 0.98 and  0.62 percents respectively. The US markets opened positively on comments from Fed Chairman Ben Bernanke discounting a double dip recession and on the strength of materials and energy stocks. However, the Nasdaq index lost more on weak tech stocks. At the time of this post ( 11.30 PM IST ) the US indices were trading  with losses ranging from  a quarter to one and a half percents. The US S&P 500 index was trading just below the key support level of 1050. The CBOE VIX index was trading at 35.79 below the previous day's close.  

Updated Momentum Signal Spreadsheet


The updated spreadsheet showing the Momentum Signal as on the close of  8th June 2010, is given below.


The Momentum Signal has  still returned   a positive momentum of  +60 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 9th 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 minimum closing values required for the continuation of the uptrend has increased and are above the 200 DMA. The closing values required for a sell signal have increased and are just below the low of Tuesday and 50 WMA . Wednesday's trading may decide whether the market rejoins the uptrend or corrects deeply.

Readers of this blog are once again requested to read the Risk Factors and the special comments about the  present market situation added in the previous day's blog. The comments are quoted below:

"Since the markets are still trading all over the place on the basis of  day to day international cues, any predictive system will be susceptible to many whipsaws. Hence, the Momentum Signal System will also be suffering from whipsaw signals at present. Trading light to reduce the risk of loss is the best option at present."

Cheers and Prosperous Investing and Trading !!!
 

 

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