Home > Uncategorized > MARKET NOTES: 28TH September, 2011.

MARKET NOTES: 28TH September, 2011.

MARKET NOTES: 28TH September, 2011.

It is extremely difficult to call markets when they are collapsing since much of the day to day action is driven by technical positions that are randomly liquidated.  So one can do little by way of prognosis except to indicate some logical targets that sort of help one judge the intensity of market moves against them.  As always the targets are not as important as the market behaviour in these critical areas that helps discern which way the wind is blowing.  With that caveat in place, here is my read on the state of some of the markets.

$ Index:

Of all the variables in the market, the $ Index appears to be the most well behaved.  It is in a strong intermediate uptrend that started at 73.5 and has a target of 81 set for October or early November.  Barring consolidations, the uptrend in the $ Index is all set to continue.

INR moves have basically reflected the recent strength of the $ in the markets.  That correlation could see a weakening as Rupee’s own fundamentals assert themselves over the long term.  Nevertheless, with the $ Index headed towards 81 mark it is difficult to see the Rupee strengthen against the buck in the near future.  A target of 52 remains very much in the realm of possibilities if only because the market’s reaction in that area will be crucial in telling us where the Rupee is headed in the long term.  Rupee does look oversold though even as it consolidates above 49 level.

Gold:

Gold appears to be in an intermediate bear market that could last for a couple of years.  It appears headed for 1400-1425 area.  It is in here that we will really have a clue as to where gold is really headed in this bear phase.  No meaningful consolidation appears likely before that area is reached. It is hard to see Gold bullish in the immediate future considering a strengthening $.

Copper:

Copper broke a crucial level at 3.7 that I did not expect it to break. That means one goes back to the drawing boards for a complete overhaul of the picture and a rethink on what the markets is telling one.  Having done so, Copper is bearish.  Unable to put a target on it but 2.5 will not surprise me.  Going purely by the charts and the wrong signals on it, I would suggest there is a lot of substance to Chinese rigging of the Copper market.  I won’t be surprised if something nasty turns up.  No trading in the metal until the chart becomes clearer.

DOW:

The DOW continues to look pretty bearish.  It has twice tested 10,600, a level that has held so far. Further tests of the level should be expected as the impulse wave down from 12,840 unfolds itself.  The next major support below 10,600 lies in the 9780 area.  It is a level that could be tested as we go along.  The breakdown in Copper charts suggests that we are in for far deeper corrections than envisaged before.

Shanghai Composite:

SC Index appears to be headed for a retest of 2330 level sometime mid-November or before. The really crucial area spans 2280 to 2330. Upon this area providing a solid bounce to the Chinese markets, one could begin to hope for better things to come.  Of all the world markets, China appears to be one that might bottom out earliest & most convincingly.  That is all the more reason to watch this index for clues in the 2280-2330 area.  A failure to hold this area will mean a retest of 1680 a level last tested in the crash of 2008.  What that means for the rest of the world is hard to imagine!

Sensex:

It is tempting to say that the Sensex is tamely proceeding to the expected target level of 15,000 to 15,500 that one had expected.  The Copper breakdown is warning that nasty surprises may be in store albeit for a very short period of time.  The 15,500 area is crucial and has been tested twice so far holding up well.  In terms of time we have the whole of October and a part of November before world markets tell us where they are headed.  So the level will almost certainly be tested again.  Upon a failure of 15,000, the level of 13,500 looms.  However, not all stocks bottom at the same time nor can all be bought at the lowest price.  These are not markets to sell in but selectively buy for the long-term portfolio.

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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