Home > Uncategorized > Market Notes 23rd August, 2011

Market Notes 23rd August, 2011

 

GOLD

Gold, darling of the investing public, is in a very long uptrend that began in August 1999 and has continued since. Even during corrective cycles, the metal has maintained an upward bias. Corrections have been violent, sharp, but relatively short-lived all through the bull market. Having said that, we now enter a corrective cycle sometime early September, when a sharp correction in prices could set in. For traders, the signs of an impending correction have been obvious for sometime as the price of gold turned parabolic from a level of $1500 in April this year.  That sharp run up to $1880 is now due for correction. When prices go parabolic corrections can be deep.  On the charts, first support rests at $1600. That represents a correction of 15% of the top.  The correction could go deeper and will likely last for a while. Gold bugs beware.

 

COPPER [HG COMEX]

Copper started its long term bull run in Feb., 1999, a little ahead of Gold.  It continues in a bull run that saw a very sharp correction between May 2006 and Dec., 2008.  Since then it is been in a phenomenal bull run to 4.65 in Feb., 2011.  It entered a corrective cycle since and has seen an orderly correction down to 3.81 that continues and will probably end November this year or even earlier.  Barring a break of 3.7 levels, there is not much downside to Copper from the current levels. Copper being a fairly good indicator of industrial activity and world GDP growth, it isn’t signaling a drastic downturn in growth. An upturn in prices from current level of 3.81 would be an early indicator of growth picking up.  Watch the metal as a lead indicator.

 

OIL [LIGHT CRUDE NYMES]

NYMEX crude began its latest bull run, like most other commodities in Dec., 1998 or early 1999.  The first phase of this Bull Run took the price to a high of $148 in July 2008.  Since then the price has followed a largely corrective pattern and has come back to test a very crucial support at $72.  It is highly unlikely that this support will be breached. In fact the correction could end as early as the end of this month.  Oil, like Copper, signals an orderly correction and not a down turn in either in its own price or in world GDP growth.  Worth accumulating at current levels with appropriate stop losses.

 

Taken together, these 3 commodities, don’t signal a down turn in world GDP growth rates of the kind that the news flow appears to imply.

 

NB: These notes are just personal musings on the world market trends as a sort of reminder to me on what I thought of them at a particular point in time. They are not predictions and none should rely on them for any investment decisions.

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Categories: Uncategorized
  1. Vinod Verma
    August 23, 2011 at 12:45 am

    Don’t agree.All hypothetical.

  2. August 26, 2011 at 11:15 am

    Good analysis. Tho, price charts along with the analysis would be more helpful.

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