Monday, July 12, 2010

Update on The Ultimate Momentum Signal - 13th July, 2010

 A Test of 5400 and What is Next ..... ?

As expected, the Nifty futures opened just above the high of last Friday's trading range and tested the previous intermediate high of 5400 in the initial hours of  trading on Monday. The futures traded to a high of 5399.85 on Monday. Having tested the previous high, the futures revisited the last Friday's closing price and reached a low of 5355.50. The futures closed at 5382 on the first day of this week at a new thirty month closing high. Now, the question is what next ?  It is customary for any market to correct mildly from any  major resistances before breaking out. It is also common for markets to spend some time before deciding the next direction. 

Nifty Futures - Daily Chart 

A possible scenario of the market correcting mildly to either to 5330 or to 5300 before attempting  to test 5400 is shown in the above chart. The next direction of market will depend on the corporate results and the international markets.

The Big Picture

The following chart shows why the 5500 to 5550 level is an important resistance to the market. The S&P Nifty index could reach only a high of 5546 on the rebound after the free fall of January 2008. Moreover, as already stated in the last post, the top end of the present trading channel of the index also coincides with same range. If and when the index is capable of breaking above this resistance range, the next target could be the all time of 6325.

  S&P Nifty Long Term Daily Chart

US Dow Jones Daily Moving Averages Chart 

The US Dow Jones index has reversed from it's 50 DMA on the last two occasions. The reversal areas are marked as circles. The next area where the Dow Jones index may encounter the 50 and 200 DMAs  is also marked on the above chart. Even if the Dow Jones may continue to trend upwards, it may spend some time in the short term before the onset of the next leg of the rally.

The European stock indices, the FTSE, CAC and DAX closed with minor gains of 0.66, 0.37 and 0.20 percents respectively on Monday. The US stock indices were also trading with minor gains at the time of this post at 11.30 PM IST.  

Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as on the close of  12th July 2010, is given below.

The Momentum signal has returned a +100 value indicating the maximum positive momentum as per the system.

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 13th July, 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 continuation of the uptrend have decreased and are below the closing values of last Monday. Barring any unexpected earnings disasters, the market may continue trade with flat to positive momentum in the short term.

As the Momentum Signal is primarily a trend following system, flat and range bound markets may force the system to indicate false signals ( whipsaws ).  The system does not consider any resistances too. All readers of this blog are requested to read the various pages describing the system and understand all the intricacies of trading the Momentum Signal and it's risk factors. Please do write in your comments and suggestions. 

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