Friday, September 17, 2010

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

   Finally,  Bulls Take a Breather ... !!!  

Nifty futures opened at 5842, slightly lower than the previous day's last traded price, on Thursday. As is common in strong bull markets, market immediately tried to test the previous day's high. It reached the previous day's high of 5875 and then started the sideways to negative trading before the monetary policy announcement by the RBI. 

The RBI announced 25 and 50 basis point ( 100 basis points = 1 % ) hikes in the repo and reverse repo rates. ( Repo is the process through which  RBI lends to the banks against collateral of government securities in the very short term and Reverse repo is the process through which banks can keep excess liquidity with the RBI  in the very short term. ) The hike of 50 basis points in the reverse repo seemed to be beyond the consensus estimate. The overall market reaction to the hike seems to indicate that the RBI is still behind the curve in raising the interest rates to control inflation.

Just after the policy announcement, the market recorded the then day's low. However, instead of  making any further losses, the market enacted another strong rally above the then high and recorded a new high of 5916 and 5902 in the futures and the index respectively. Even though Thursday was not expected to be a positive day for the markets because of the continuous positive closes  for so any days, anyone who have sold in the morning session in expectation of the consolidation would have made losses by the triggering of the stop losses above 5875. This particular matter is brought to the attention of the readers just to express the due weightage to be given to aligning of the positions to the dominant trend of the market in trading.  Well, the dominant trend is up and it is better to play the long side, provided the entries at suitable places. 

   Nifty Futures - Daily Chart    

Some more consolidation and profit booking can be expected before the markets making the next major move. In case of a consolidation or small correction, the highs, lows, last traded prices etc of the previous three day's bars can be used as reference points by the intra day traders.  

Updated Momentum Signal Spreadsheet

The updated spreadsheet showing the Momentum Signal as at the close of the trading on  16th  September, 2010 is given below : 
Nifty futures and the tracked indices have closed with the maximum upward Momentum Signal values of +100 for the eighth consecutive day.

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 September, 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 trading stop for long positions under the Ultimate Momentum Signal system  stands raised to  5791 ( i.e. 5916 minus 2.1 % of 5916 ). 

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Forecasting Markets said...

Markets may pull back till 5400 and surge again, be cautious with your longs and buy only when markets pull back. Markets have to break 4700 decisively in September itself, else NIFTY can reach 6536 in next 3 months before crash ensues

momentumsignal said...

Hi Forecasting Markets,

It would be better if you would also describe the reason for your analysis. I am not sure whether statements like " Markets have to break 4700 decisively in September itself,... " have any value as I believe market doesn't follow anyone's opinion or it goes according to any kind of strict count by anyone. OK, let's take it from day to day and in the meantime let's also believe that anything is possible.