Sunday, August 1, 2010

Update on The Ultimate Momentum Signal - 2nd Aug. 2010

A Cliffhanger Day in the Offing ... !!!

The Nifty futures opened lower on last Friday. After failing an intra-day excursion to test the trading range highs, it slowly declined to close at the lower end of the range. The Nifty future has been hanging above the 5350 level since 12th July, 2010. Even though the Momentum Signal has indicated a sell, the market needs to confirm a downtrend by trading below the said support level of 5350.

Even though the market has been expecting a profit growth of 25% or so, the quarterly results seems to have fallen short of the expectations. A study by the Business Line reports that the quarterly growth of profits has  only been in the lower end of the double digits. As the markets have been trading at the top end of Price Earnings Ratios ( Nifty PE was at 22.31 on last Friday )  in expectation of a 25% growth of net profits, a correction seems to be in order now. ( Click here to read an analysis of Nifty Valuation matrix. )  However, the correction may still depend up on the movements of the markets elsewhere.

Nifty Futures - Daily Chart

The Nifty future has support at the 5225 levels if it breaks below the cliffhanger support at 5350.

Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as on the close of  30th July 2010, is given below.

The Momentum Signal has returned -100 values for the future and the underlying index as on last Friday.

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  2nd 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 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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