Monday, August 16, 2010

Update on The Ultimate Momentum Signal - 17th Aug. 2010

  The Indian Market Waiting for Directions ... ?

The Nifty futures opened at 5453 and it traded mostly in the positive territory for the first half of the trading on Monday. However, it started correcting by the middle of the day and even recorded a low of 5393, far below the previous day's low. It recovered some of the losses and finally closed at 5418 just below the low of last Friday's trading range.

The Nifty is being traded in a tight trading range for the last month or so. The India VIX, the Nifty options volatility index, hit all time low last week due to this reason. The implied volatilities of the Nifty options, which is measured by the India VIX, used to rule above it's US counterpart in the earlier days. Now the situation has reversed and the original VIX index, the CBOE VIX is ruling above the 25 mark whereas the India VIX is at 18 levels. However, the ATR ( Average True Range ) seems to on an uptrend for the past three or four trading sessions. The lower panel of the chart below shows the True Range ( TR ) in percentage terms and it's various moving averages. Any further increase in the ATR will be associated with a correction.

Nifty Futures - Daily Chart 



The Nifty future has closed in the sell territory as per the Momentum Signal system. ( However, readers are once again requested to go through the last paragraphs of this post to know more about  some limitations of the signal. ) The sell signal is yet to be confirmed by the market action as the trading is still confined to the month old range.

Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as at the close of the trading on  16th August, 2010 is given below :  
 
 
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  17th August, 2010, are given in the following table.


 Please click on the table to enlarge. For more info on the above table,  please click here.  
 
As matter of abundant caution, it is reiterated that the market is still range bound by all effects and therefore, the risks of the system indicating whipsaw signals are extremely high. 
 
"Readers of this blog may please note the following  'Risk Factor' which is being  repeated almost daily these days. The markets are trading in small ranges at the top end of a slow climb and for all practical purposes the trading is range bound. Range bound markets are not suitable for the  profitable trading of the Momentum Signal system."
 
"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."

Cheers and Prosperous Investing and Trading !!!

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