MARKET NOTES: 17th December 2011: Gold confirms a long-term bear market

MARKET NOTES:  17^th December 2011:  Gold confirms a long-term bear market

 

 

Gold:  As expected, Gold turned down from well below the level of $1800 to plunge below its previous low of $1625.  Currently at $1602, Gold is in process of confirming 1610 as the new overhead resistance before moving down once more.  Upon a break of 1550, the next logical target for Gold would be $1400.  Gold price action has confirmed that it is indeed in a long-term bear market whose ultimate target could be as low as $1050.  Long-term investors still stuck in the metal should exist at rallies.

$-Index:  The $-Index sprung a minor surprise by turning up, rather than down, from 78.  In its current minor uptrend it may test its recent highs at 81 and even exceed it for a while before turning down again.  Consider $-Index in corrective phase with a downward bias that could test 72 before the end of April 2012.  Hence the current rally is really counter-trend but not unusual at the beginning of a downtrend as players create room for shorts.

Euro/USD:  Euro is on the way down against the $ having made a recent top at 1.48 in May 2011.  Its next logical target is 1.26 followed by it multi-year defining low at 1.20 which it may not attempt to test in the current plunge.  Hazardous to call a bottom in such volatile markets, but the Euro is close to the end of its fall and is more likely to turn up than down by the 2^nd week of January in the new year.  Considering that Euro hasn’t breached even 1.26 despite the headlines, all talk of Euro’s demise looks premature.  Would be advisable to close out Euro shorts in the 1.25 region.

$-INR:  INR is in uncharted territory.  Inflation differentials over a 3 year period with the $ indicate at target of 58.  As the $-Index heads up to test its recent top of 81, [and breach for a while] INR too may reach its target of 58 before consolidating for a while.  Indian Gold holders have been cushioned by the INR depreciation against the $ in domestic markets against the collapse in Gold prices abroad.  This cushion will likely end at INR 58 at least for a while as the INR consolidates.  This will end the vicious cycle of Gold imports bringing in deflation with them giving a much-needed flip to the Indian economy from the current recession.  Where will smart money head after Gold?  Real estate?

S&P 500:  The US equity markets appears to have resumed its journey down once more.  The ultimate target of this move is logically in the region of 1000 to be reached by June next year.  Minor pullbacks notwithstanding, there is nothing bullish about the US equity markets in the near term horizon.  The next logical target for the index remains 1100.

Sensex:   The Sensex is currently poised to test 15,500 having made a low of 15,425 already.  The level is unlikely to hold as the Indian market is now marking time with the S&P 500 and is likely to continue to be bearish till mid-2012.  A good base for the Sensex exists in the region of 12,500 that could be its target once 15,500 is decisively breached.  Testing time ahead for Indian markets as well as the fundamental news turns increasingly adverse.

Crude:  As expected, cruse has turned down from 102 and is currently headed towards 90.  Upon a breach of that level, WTI crude is likely to retest its bottom at 70 before the end of March 2012.

Shanghai Composite: As detailed in the last blog post, the Chinese market decisively broke through the strong floor at 2300 to end the week at 2180.  It may rally up to 2300 again, this time to confirm the old floor as the new overhead resistance.  Upon such confirmation, the new logical target for the index becomes 1700 area it last visited in November 2008.  That level could be achieved as early as January 2012.

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.