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MARKET NOTES: Russel 2000 tops 2007 bull market peak of 856 to close at 905.

January 26, 2013 Leave a comment

MARKET NOTES:  Russel 2000 tops 2007 bull market peak of 856 to close at 905.

 

 

 

The Yen surprised the world with its policy driven devaluation of about 15% over two months.  BoJ, along with the Japanese Govt has set a target of 2% for its inflation.  The two measures together indicate another round of currency debasement around the world.  It is highly unlikely that Japanese intervention wasn’t coordinated with the US and EU and is aimed at China.

 

 

Be that as it may, yields on US 10 year Treasury notes remain a benign 1.83%.  Any threat to the ongoing rally in equity markets can only come from reversal in the interest rate cycle.  Even that adversity may turn into something benign if it triggers asset rotation from bonds into equities.

 

The midcap space in the US is red hot.  Russel 200 Index that represents 2000 names in the US midcap space closed the week at 905.24.  Recall, the same index topped at 856 in the bull market that ended in 2007.  So in fact the midcap index has already made a new high some 5.7% over the 2007 peak.  That confirms breakout of humongous proportions in the US midcap space.  Will the leading indices like DJIA & S&P 500 follow suite?  It is highly unlikely that they will not.

 

 

Similarly EU markets continue to be buoyant.  DAX closed the week at 7857 and its next target is the all time peak of 8100.  Shanghai Composite closed the week at 2291 and barring small corrections is headed towards 2480.  Nikkei has turned down from 10,950 for a routine correction and has closed the week at 10,926.  It is most likely to break above that resistance come Monday.

 

All in all, Central Banks have done a wonderful job in pushing up equity values.

 

Nearer home, NIFTY is in a firm uptrend with a logical target of 6350.  Don’t forget sliding stops though.

 

 

 

US Dollar Index [DXY:

 

260113 DXY 

 

 

 

 

 

 

The Dollar closed the last week at 79.82, well below both its 200 and 50 DMA.

 

As noted earlier, the Dollar is correcting from its recent top at 84.24, which had a target of 78.50 by March end.  The move down on Friday confirmed the overall pattern for the correction.

 

The first target for the DXY is now 79.50 followed by the final target of 78.50.  Barring the usual corrective pullbacks, we can expect the Dollar to drift towards 79.5 to 79 over the next week or so.

 

Note this fall is the final leg of the correction and early terminations are not ruled out.

 

 

EURUSD:

 260113 EURUSD

 

 

 

 

 

The EURUSD staged a spectacular breakout above a long held trading range top of 1.34 to close the week at 1.3460.

 

 

As readers of this blog know, I have been bullish on the Euro since its bottom at 1.20 in July last year.  The bullish rally had a target of 1.35 by April and we are pretty much close to the price target with time to spare.

 

1.35 is a formidable overhead limit that will not be surpassed easily.  We can expect a test or two of the resistance but the most likely course for the Euro is one of sideways consolidation between 1.34 and 1.35.

 

Not bearish on the Euro.  It can surprise to the topside.

 

 

 

USDJPY:

 

260113 USDJPY

 

 

 

 

 

USDJPY closed the week at 90.90 knifing through the overhead resistance at 90.   The Dollar is in a phenomenal uptrend against the Yen and since the equation is policy driven, discerning price trends from charts is fraught with risk.

 

Having knifed through 90, the next major overhead resistance now stands at 95 and that could give the pair a pause.  If the breakout over 90 is confirmed early next week expect the Yen to continue to 95 with minor corrections.  On a failure to confirm the breakout, the Dollar could fall back towards 86 before resuming a more orderly rise up.

 

Yen is driving the general world currency debasement at this point.

 

 

 

USDINR:

 

260113 USDINR

 

 

 

 

 

The Dollar closed the week at 53.78 after making a low of 53.37 during the week breaching the upward sloping trend line on my charts though not on a closing basis.

 

On an alternate wave count to my bullish one for the Dollar, the first leg of the correction from the top of 57.3 in June 2012 is now nearing completion and the USD is due for a pull back towards 56.  However, this scenario needs the USD to stay above 53.50.

 

On a decisive breach of 53.50, the Dollar could head to as low as 51.50.  So it is decision time for RBI.  Will the Central Bank succumb to the currency war & let INR appreciate or will it make some policy move?  Decision time.  Stay out of the market until RBI clarifies.

 

 

 

Gold:

 

260113 Gold

 

 

 

 

With its decisive move from the high of 1680, Gold confirmed its intentions by turning down from its 50 DMA and then closing the week well below its 200 DMA.  Gold closed the week at 1656.60.

 

 

First target for gold from here is 1620.  Barring some corrective pullbacks, Gold should test its floor at 1620 over next week or two.

 

 

The long-term trend of gold is now decisively bearish and one shouldn’t assume the last low of $1525 would hold.

 

 

 

HG Copper:

 

260113 Copper

 

 

 

 

 

Copper closed the week at 3.6520.   It could move down to 3.6 next week before trying to knife through the overhead resistance of 3.7 to 3.8.  Copper is all coiled up for decisive action.

 

I am pretty bullish on Copper for a target of 4.0 on a break above 3.75.

 

Note the divergent trends in metals.  Commodities are no longer moving together in a cycle.

 

 

 

 

 

WTI Crude:

 

190113 WTI Crude

 

 

 

 

 

Crude has been India’s Achilles’ heel for decades and it is a measure of our myopia that it is also the single biggest subsidized commodity in the domestic market.  How perverse can a policy get?

 

Crude closed the week at 95.88, well above the 50 and 200 DMAs.  Its next major overhead resistance is 99.  A break above 99 will revise the entire outlook and wave counts on crude.

 

 

A breakout over 99 will be of tremendous significance for India.  It would mean that the correction in crude from the top of 148 is over and crude is again long-term bullish.

 

 

 

S&P 500 [SPX]:

 

260113 SPX

 

 

 

 

 

SPX has a resistance at 1520 followed by another major one at 1525 and then 1550.  It closed the week at 1502.96.

 

SPX is exhibiting all the signs of going parabolic.  The oscillator charts continue bullish and don’t show extreme overbought conditions.  They are also clear of divergences.

 

In terms of wave counts and time, the rally has about a month more to go.  So SPX has all the time & the steam to get to previous top of 1573 if it wants to.  Logically, that should be its aim for this rally.

 

 

 

 

NASDAQ Composite:

 

260113 NASDAQ

 

 

 

 

 

NASDAQ closed the week at 3149.71.

 

 

Recall, NASDAQ peak in 2007 was 2860 and that NASDAQ is currently well above its crash of 2007 level while SPX is not.  Of the two indices, NASDAQ appears weaker but is actually better placed.

 

Next target for NASDAQ is 3200.  No overbought conditions, no divergences showing, we can expect the NASDAQ to make it there safely.  In terms of time NASDAQ too is likely to peak around the time SPX does.

 

 

 

NIFTY:

 

260113 NIFTY

 

 

 

 

 

NIFTY closed the week at 6074.65.

 

After having topped 5950, NIFTY made two attempts to come back & retest 5950 but made two successive higher lows at 5992 and 6008.  A close above 6100 will confirm the running correction is over as NIFTY heads on to next target of 6200.

 

NIFTY oscillator charts are in neutral territory and the index closed to all time highs with time to spare.

 

Maintain my view that NIFTY’s next logical target for this rally remains 6350.

 

 

 

 

 

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.

 

 

Categories: Uncategorized

MARKET NOTES: You can’t argue with markets making new highs but caution warranted

January 19, 2013 Leave a comment

MARKET NOTES:  You can’t argue with markets making new highs but caution warranted

 

 

US markets continued to make new highs in the past week with S&P500 now standing at 1485.  There is nothing on the oscillator charts to suggest buying exhaustion.  The wave counts favor an extension of the rally to the third week of February.  Nevertheless, it is time for caution & selective profit booking.  Start by taking out the garbage in the portfolio.  Then take a look at weaklings that significantly under-performed the market since March of 2009.

 

What follows in the US will be an orderly 10 to 20% correction in values that will present significant buying opportunities.  But you need to create cash in the portfolio to be able to do so.

 

NASDAQ too continues in an uptrend with no sign of buying exhaustion.  Individual market leaders within the technology sector like IBM and Google are nearing the end of their corrections.  Their rallies from lows could fuel NASDAQ further.

 

Asian markets like Nikkei and Shanghai continue making new highs but off their recent all time lows.  Both have a long way to go albeit with corrections on the way.  NIFTY is a halfway house between the Asian giants and the US/EU markets.  It has completed a major correction but is again approaching all time highs.  It remains to be seen if NIFTY will follow the Asians or the US lead.  However, barring a retest of 5950 again, NIFTY too shows no weakness as yet.

 

Enjoy the ride but avoid getting greedy.  Disciplined profit taking is a must to survive in the treacherous markets ahead.

 

 

Gold:

 190113 Gold

 

 

Gold closed the week at $1687, just a notch below its 50 DMA but well above its 200 DMA.  This has been one of the longest corrections in gold barring the bear market of 1979 to 2001.  Yes, gold too has long bear phases!

 

There is no sign that the correction in gold has ended in terms of time or wave counts.  Gold has trending up with other risk assets and could test the upper bounds of the trading channel even making it to the $1750/1800 price area.  Or it could drift tamely to the $1550 area.  Whichever the trajectory, expect gold to retest $1550 before this correction is over.

 

Copper:

 

190113 Copper

 

 

There is no change in the Copper chart from last week.  The metal closed last week at 3.6790.

 

Copper is more closely aligned with price trends in industrial metals than gold or other commodities.  It is positioned at the fag end of an intermediate correction that may have already ended or will end soon.

 

Watch for a price break above 3.8.  That will confirm that Copper has ended a one-year correction and is now poised to explore higher territory towards 4.60.  As always wait for a decisive break above 3.80.

 

WTI Crude:

 

190113 WTI Crude

 

 

 

WTI crude closed the week at $95.56 well above both its 200 and 50 DMAs.  The 50 DMA is poised to give a buy signal over the next two or three weeks.

 

As shown in the weekly chart above, WTI crude could have ended 2-year correction at point “E” and is now in a new uptrend.  A break above $100 will confirm a new bullish trend in crude.

 

 

Watch for a decisive break above $100 over the next few weeks.

 

 

 

US Dollar Index [DXY]:

 

190113 DXY

 

 

The Dollar Index closed the week at 80.11.  The sharp rally at the close of the week was likely reactive and the DXY will likely resume its downtrend next week with a target of 79.

 

The bullish correction in the Dollar has room to run both in terms of price and time.  A cheaper Dollar is basically fueling the rise in all asset classes.  A termination of the correction in the Dollar will also likely terminate the rally in equities and other risk assets.

 

So the Dollar continues to be the key to many things in the markets.  Its original correction target was 77.50 to 78.

 

 

 

10 year T-Note yields:

 

190113 10-Year Treasury Notes

 

 

 

Yield on 10 year Treasury notes ended the week at 1.85% after having spiked up to 1.95% last week.  Yields are at all time lows never seen before.

 

Yields may drift down to 1.80% before retesting the 1.95% area.  The first sign of a turn around in the interest rate cycle and the consequent money rotation from bond to equities would likely emerge here once yields move decisively above 2%.

 

 

Unwinding the bubble in bond markets will not be painless.  But it might put a floor under equities and commodities.  Watch this space.

 

 

 

USD-INR:

 

190113 USDINR

 

 

 

The currency wars, fueled by bouts of debasement in the US Dollar, Euro and now Yen continued unabated.  They are likely to get more intense before things get better and the losers will be countries that have no choice but to let their home currency appreciate because they need to borrow.  India is one such likely loser.

 

 

USD-INR closed the week at INR 53.73, almost on the up-sloping trend line in the chart above.  That leaves hope that RBI will read the currency wars right and let the USD appreciate against the home currency.

 

A fall below INR 53 in the Dollar will negate my wave count.  At the very least, expect a pull-back to INR 54.50 region.

 

 

 

S&P 500 [SPX]:

 

190113 SPX

 

 

The above is a weekly chart of the latest leg of the rally in the SPX to lend perspective to the discussion.  SPX closed the week at 1486, a new high.

 

Oscillatory charts show no buying exhaustion or negative divergences.  In term of time, this leg can continue making new highs until the 3rd week of February.  Could SPX make a new all time high?

 

Anything is possible including an abrupt early termination to the rally.  As such use very tight, sliding, stop loss orders to protect your profits.  And use the opportunity to clean out your portfolio of all ugly ducklings.  Junk the accumulated cats & dogs.

 

 

 

NASDAQ Composite:

 

190113 NASDAQ

 

 

 

NASDAQ closed the week at 3135, well below its recent highs of 3200.  Much like SPX, NASDAQ too could make a new high above 3200 or try to match that level.

 

The Index has time to run into the 3rd week of February and quite a few large stocks that are close to ending significant corrections.  The Index may well surprise with the steam left.

 

Same caveats as SPX apply.  Use tight stop losses to protect profits and clean out the garbage in the portfolio to generate cash to buy in subsequent correction.

 

 

 

NIFTY:

 

190113 NIFTY

 

 

 

 

 

NIFTY closed the week at 6064.

 

The Index could come down to retest 5950 again early next week.  If the level holds again, the case for an extension to the rally becomes stronger.

 

It is too early to tell how NIFTY will react to a possible correction in the US markets towards the end of February.  Next logical target for the NIFTY remains 6325 provided 5950 continues to hold in the next correction.

 

Take the garbage out.  Generate some cash and use tight stop losses to protect profits.  Don’t assume NIFTY can continue to rally if global markets correct.  Though it may.

 

 

 

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.

 

 

 

Categories: Uncategorized

MARKET NOTES: Rally in world equity markets continues

January 12, 2013 Leave a comment

MARKET NOTES:  Rally in world equity markets continues

 

 

The US equity market made a new closing high of 1472.12 on the S&P 500 index on 10th October.  Other markets around the world made new highs as well.  Some of them are listed below:

 

 

Market Index March 2009 Low New or recent high
US S&P 500 667 1472
UK FTSE 100 3461 6101
Germany DAX 3692 7666
Japan Nikkei 225 7028 10830
China Shanghai Comp 1722 2296

 

The last two Asian markets are just coming off all time lows and in the very early stages of what could be major rallies.

 

While there will be the usual corrections, there is nothing on the charts to show that the rally in world equities is about to end.  On the other hand, the bull market in US & EU equities is now in it’s 5th year.  At some point in the next few weeks or months we will see a fairly significant correction.  That said, for the moments the markets are in the hands of the bulls.

 

The Dollar may be nearing the end of its correction from its recent top of 84 on the DXY Index.  It had a target of 77.50 for this correction that it might fulfill in the next two weeks.  Expect sharp rally in the Dollar thereafter.

 

Commodities continue in the long-term downtrend but show signs of nearing the end of their correction in terms of time and price.  Some may have already put in a bottom.

 

Overall, world equity markets are no longer in sync.  Each market presents its own risk reward profile.  For the US markets, it may be time to take some profits off the table.  In others corrections may be used to buy into them.

 

Indian markets are poised on a knife’s edge testing the pivotal level of 5950, this time from the topside.  Should the level hold, expect further rally to the topside.  Should 5950 give way, a sharp drop to the long-term trend line could follow.  So keep stop-losses handy till the market rallies to the upside from 5950.  The point could be tested several times.

 

 

Gold:

 

120113 Gold

 

 

Gold closed the week at $1660.60, after turning down from its 200 DMA on the chart above.

 

Gold continues its bearish trend down.  It could test $1620 over next two weeks before rallying modestly in a corrective move upwards.  Expect gold to range between 1620 and its 200 DMA over the next leg of it continuing correction.

 

Copper:

 

120113 Copper

 

 

Silver closed the week at $30.41.  It continues in a downtrend and could drift down to $28 over the next two weeks before a corrective rally.

 

Copper presents a more interesting picture in the metal sector.  It has been triangulating from the top of 4.6 hit in February 2011.  Note the downtrends in other metals such at gold & silver can also be similarly analyzed though the case for such a model in their case is much weaker.

 

The above 5-step triangulation would suggest that Copper is nearing the end of its correction.  The next dip down towards point E on the charts may not go all the way to the trend line.  Copper bears close monitoring over the next 2 to 3 weeks.

 

WTI Crude:

 

120113 WTI Crude

 

 

Crude closed the week at $93.56 well above its 200 DMA and its resistance at $93.

 

Crude can also be seen triangulating from its top at $114 in April 2011.  One possible count for crude is shown above which indicates crude could have ended its correction at point E already.

 

If crude sustains over $93, it will confirm the above scenario.  If it falls back below $93, then that could be the new point D and we could for the $85/86 region once again.  In terms of time, the charts favor another dip before crude moves out of the triangle.  However, the sequence of higher bottoms since point C cannot be ignored.

 

 

US Dollar Index:

 

120113 DXY

 

 

The Dollar made some fairly deceptive moves above the down-sloping trend line but fell back to end the week at 79.61.

 

DXY had a target of 76.50 for this correction.  It hasn’t fallen below 78.60 from the top of 84.25.  DXY could test 78.50 over the next week or two.  However, we are fairly close to the end of the correction in the DXY.  Dips to 78.50 could be used for buying the Dollar.

 

In terms of time, the sideways movement in the Dollar could extend towards the middle of March.  Price-wise we would be pretty much done once it hits 78.50 assuming it gets there!

 

 

10 Year US Treasury yield:

 

120113 US Tresury yield

 

 

EURUSD made a high of 1.3365 after correcting down to 1.3000.  The Euro could begin another bout of correction from its high of 1.3365.  But it would be a sideways correction.  The next target to watch for is 1.35.

 

More important from a market perspective is the yield on 10 year US Treasuries.  As noted last week, the yield spiked to high of 1.96% before reacting to 1.84%

 

The 1.90 level represents a key level.  Crossing over to the topside would open up a new trading range for the bond markets and signal that interests are beginning to bottom out.

 

 

USD-INR:

 

120113 USDINR

 

The USD turned down well below the key resistance level of INR 55.60 but stayed above its 200 DMA closing the week at 54.86.

 

I continue to favor a wave count that sees the USD retest the highs of INR 57.3 by May end.

 

Over the next week or two, the USD could move sideways but with an upward bias.  A retest of 55.6 could be on the cards in the next two weeks.

 

A decisive break below the 200 DMA would negate this analysis.

 

 

S&P 500:

 

120113 SPX

There is no arguing with markets making new highs.  SPX made a new closing high 1472.12 before closing the week at 1472.05.

 

SPX continues to be in an uptrend.  Using the same wave count that led me to expect new highs despite all the doubts and corrections of the past weeks & months, I think we will continue to see new highs on the SPX till the middle of February.

 

However, the US market is not monolithic.  It rotates sectors.  For instances tech stocks have been seriously correcting while SPX made new highs.  Therefore look to take profits in stocks that show signs of having peaked out.

 

 

Shanghai Composite:

 

120113 Shanghai Comp

 

 

This week we look at Shanghai rather than NASDAQ.  The latter continues in an uptrend and some frontline stocks that are nearing end of their corrections like Google or IBM could continue to propel it to new highs.  Will revert to it next week.

 

Shanghai made a low of 1669 in October 2008, which sort of corresponds to the low the US, & world markets made in March 2009.  It then rallied to a high of 3498 and has been correcting in an orderly fashion since then.

 

In terms of price the recent low of 1949 could be the bottom of the market.  Shanghai is presently well above its 200 & 50 DMAs and could rally to 2500 before correcting.  The low in the following correction could confirm the bottom.

 

NIFTY:

 

120113 NIFTY

 

Nifty crossed over atop the 5950 pivot in a rather dramatic fashion on 2nd January but has faithfully returned to retest the level from the topside.  The pivot could be tested multiple times since it is critical to the continuation of the rally.

 

Upon the market holding above 5950 over the next week or two, the rally should continue to its logical target of the previous top of 6350, albeit with corrections.  A break of 5950 would precipitate a rather severe bout of correction.  Keep stop losses tight till the market clears the 5950 area safely.

 

 

 

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.

 

 

 

 

 

Categories: Uncategorized

MARKET NOTES: Expect NIFTY & world markets to rally sharply

January 5, 2013 Leave a comment

MARKET NOTES: Expect NIFTY & world markets to rally sharply.

 

 

 

The “fiscal cliff” was one more instance to show that so called “fundamental events” is usually factored into the price charts much before the event.  Usually, not always!  In the event, bears were forced to cover shorts in risk assets. The rather strange moves in prices, after the fiscal cliff sailed past, showed the way bears had placed their bets & hedges. Gold, Silver, Oil and USD rallied on bears unwinding their hedges!

 

With the cliff having receded, normal business returns to markets.  That means markets will continue their long-term rally that started in March 2009.  We are into very mature bull markets in equities in the US and EU.  Long-term bull markets do not end in a whimper so some kind of top formation is certainly on the cards.  My guess is that this bull phase will end in toppish market by end of February.  That will not end the bull market.  But it will be a fairly serious correction that will appear more like bear market than a correction in its intensity and depth.  With that caveat, it is time to ride the wave.  Don’t get greedy on the way though.

 

Indian markets have had a serious correction in 2011 while US & EU markets rallied on.  They aren’t has “stretched” as the western world’s markets.  Asian markets, on the other hand, may be on the verge of new bull markets.  Both Shanghai and Nikkei are coming off multi-year lows fuelled by liquidity & valuations.  Will the Indian markets also chart an independent course?  Too early to tell but safe to say peaks and troughs will be coordinated enough in time. PSU banks, steel mills with owned mines, cement are some sectors that look attractive on the charts in Indian markets.

 

 

Next logical target for the NIFTY has to be 6350, the previous top.  Can it be done before US markets correct?  If so, Indian markets would also have to go parabolic.  That is something only time can tell.

 

Gold:

 

050113 Gold

 

 

 

 

Gold closed the week at $1648.9 after having made a low of $1626 on Friday.  With this move below its 200 DMA, Gold has confirmed it is in wave 3 down from the top of $1797 on 4th October.

 

Gold could come up with more deceptive moves as it drifts below $1640 over the next few weeks.  However, the long-term trend is firmly down and an eventual retest of $1525 is still on the cards.

 

A decisive close below $1640 will trigger the next move down.

 

 

Copper:

050113 Copper

 

 

Silver closed the week at$29.95.  It cud pull up from $28.50 region to just under its 200 DMA.  That it is headed towards the $26 region is no brainer.  So we examine the more interesting case of Copper this week.

 

Copper closely mirrors the CRB Index has a rather intricate & fair deceptive weave to its fractal patterns.  Nevertheless, sometimes the overall structure of the fractals becomes obvious as shown above.

 

Copper moved down from 4.6 to 3.1 in the first move down shown in the bigger red arrow.  It then moved in a corrective move up from 3.1 to 3.8.  [Yellow arrow].  The next move should be down to a retest of 3.1 again although this move can fail partially and terminate earlier than 3.1.

 

Some traditional TA, that ignores the fractals, would treat the above chart as a case of triangulation and get hopelessly lost in the wave count.  It is in many respects triangulation, but in terms of fractals not just up & down waves.

 

A move up beyond 3.8 would negate my analysis completely.  On the other hand a move below 3.7 would validate a further move down to at least 3.4 and indicate a retest of 3.1 is on the cards.

 

 

WTI Crude:

050113 WTI Crude

 

Crude too made deceptive moves to the upside prompted by short covering in risk assets across markets as the “fiscal cliff” scare evaporated.  Crude closed the week at $93.09.  As in the case of Copper, this level is deceptive and unlikely to hold up over the next few weeks.  Expect crude to fall back below its 200 DMA at $91.75 and drift towards $87 level over the next week or two.

 

 

 

US Dollar:

 

050113 DXY

 

 

 

The $ moves during the week indicate that the correction in the $ underway since the top of 84.17 on 24th July may have terminated at 79.31 on 19th December.  DXY closed the week at 80.61, well above its 50 DMA and just below its 200 DMA after having nicked it.

 

 

Over the next week, the $ could move down to test its support at 80.40 before drifting up.  The intermediate down trend in DXY is now over and we can expect it to resume its slow but steady drift back to 84 over the next month.

 

10 Year Treasury yields:

 

10 UST Yield

 

 

US Interest rates have been at their all time lows over the last 4 years & cheap money & ample liquidity the chief driver of asset prices.  Is that about to change?

 

Treasury yields on 10 year notes spiked above 1.89, a key resistance level since August of 2011.  That break out of a range could be significant.  Furthermore, the lows of the yields since August of 2012 have been trending up as seen in the chart above.

 

With Fed bond buying ending, yields may creep up over the next weeks & months.  We will begin watching this space from this week onwards.

 

 

 

EURUSD:

050113 EURUSD

 

EURUSD surprised by tanking below 1.3150 abruptly as the rally in the DXY took off.  While the tanking was a surprise, [not to followers of this blog 4 we anticipated this move!] the move down is actually the last leg of a correction down to 1.30 support.

 

If the EURUSD holds above 1.29 over the next weeks or 10 days, we could see the resumption of a strong uptrend in the EURUSD.  Despite the steep fall, the rally in EURUSD is far from over.

 

$-INR:

 

050113 $-INR

 

 

For a variety of reasons, I have been bearish on the INR for many months.  From the charts above, it should be clear that I am bullish on the $ and conversely bearish on the INR.  That will not change until $ moves below 53.50.

 

The $ closed the week at 54.93 after bouncing from its 200 DMA 54.45.  That is bullish for the $ over the next week or so.  The $ could drift up from here to 55.50 which is a very strong overhead resistance.  This may not be breached next week but will surely be tested.

 

 

S&P 500:

 

050113 SPX

 

I was one of the few to ignore the noise & din of the “fiscal cliff” and proceed purely in terms of the technicals and wave counts, which indicated that the correction preceding was a wave iv correction and wave v was yet to come.  Happily, that proved to be the case and the wave v could extend – by my reckoning to mid-February.

 

That said, SPX closed the week at 1466.47.  In terms of the body of the candles, that’s a bit higher than the high of 14th September 2011.  The index could correct from here to 1450 or so.  But a more likely course is a vault over 1465 before coming back to test that level as support since the bulls are unlikely to give away any gaps from hereon.

 

NASDAQ Comp:

 

050113 NASDAQ

 

 

 

More than the SPX, the NASDAQ Composite illustrates the gaps in the markets charts that delineate price levels at which the bears are trapped.  The bulls are unlikely to give away these gaps before the end of February, ie for the rest of this bull move, which could be the wave v of 5 of V albeit with extensions.

 

If my hypothesis is correct, NASDAQ is unlikely to fall below 3080 even as it corrects and will shortly resume its climb back to 3200.

 

 

NIFTY:

050113 NIFTY

 

 

As expected last week, NIFTY climbed over the 5950 hurdle and closed the week at 6016.15.  As I had argued last week, the NIFTY’s rally may track the US markets but it is moving to a logic of its own.  In this it is somewhat like other major Asian markets such as the Nikkei and the Shanghai Composite which are coming off deep corrections.

 

That said NIFTY has now moved into a bull phase whose target could be the previous high of 6350.  There will be corrections on the way of course but some of these could well be running corrections.

 

I would give the NIFTY clear skies at least till Mid-February or such time till the US markets indicate a top.  Expect NIFTY to correct in line with the world markets then.

 

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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