Wednesday, July 28, 2010

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

 Range Bound Markets and Another Sell Signal ... ?

The markets have been trading top heavy for some time now. This blog has also been writing about the rich valuations of the the markets for some time. These days, the trading  has been concentrated on limited number of large caps and mainly on small caps and mid caps. The market has been encountering selling pressure at the higher levels for some time. And these are  the classical symbols of an intermediate top too.

The Nifty futures opened in the positive territory on Wednesday and traded flat for half the trading day. However by midday, the weakness in the market heavy weight, Reliance, started to affect the market as a whole and the market returned to the middle of the earlier narrow trading band between 5350 and 5410. The Nifty futures closed at 5393 for the day. The Momentum Signal system, which indicated an exit of long positions as on Tuesday, has indicated a sell as on Wednesday. However, as already stated in the previous posts, this sell signal will be confirmed by the market action only if the market breaks the 5350 levels. 

Nifty Futures - Daily Chart     

Even though the Nifty future has broken the black support line, it has some support at the 5350 levels as shown by the horizontal red line in the picture. The futures may have lower supports at 5300 and 5225 levels.  

World Markets 

After recording good gains for the past week, the European stock indices, FTSE and DAX corrected by 0.86 and 0.46 percents respectively on Wednesday. However, the French CAC index ended  marginally up with a gain of 0.11 %. The US stock indices were trading with moderate losses on the back of falling durable goods orders and mixed earning reports at 11.30 PM IST.
Updated Momentum Signal Spreadsheet

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

The Momentum Signal has indicated a sell on the basis of the last traded prices of the Nifty futures and the Nifty index as at the close of trading on Wedenesday.

Projected Momentum Signal Close Values

The projected levels Momentum Signal values applicable to various ranges of closing values of the Nifty Futures, Nifty Index and the BSE Sensex,  as at the close of next trading day, ie. as on  29th July, 2010, are given in the following table.  
      Please click on the table to enlarge. For more info on the above table,  please click here.  

The present sell  signal will be technically confirmed  only when the market  falls below the 5350 levels and trades there for some time with good volumes.  

As the Momentum Signal is primarily a trend following system, it may indicate whipsaw signals in range bound markets. As such, 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 too. Please do write in your comments and suggestions.

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