Home > Uncategorized > Market Notes: Was the last week a breakout?

Market Notes: Was the last week a breakout?

Was the last week a breakout?


$Index:  From its recent top of 80.4, the $Index has corrected almost 75% of its previous surge. Last week the correction stood at 50%.  While 100% corrections are not ruled out in Forex markets, and the time charts show the correction has a week or so to go, the overall trend has been for the $Index to make higher lows since May 2011.  In all probability the price correction in $Index is over.  Time-wise, the $Index could linger in a trading range testing the 75 region.


Spot Gold:  Despite the huge upheaval in the world equity markets, Gold did no more than test it first major overhead resistance at $1750.  Gold’s reaction to the rest of the risk asset markets is instructive.  Firstly, Gold is no longer a hedge of any sort, if ever it was such an asset.  Instead Gold has become positively correlated to other risk asset prices particularly equity markets.  Secondly, even here, Gold underperformed other risk assets in the recent surge by a significant margin achieving only half of what other assets did.  At $1750, Gold has corrected about 60% of its fall from $1916 to $1535.  A 75% correction can’t be ruled out.  Gold is poised at a major overhead resistance level.  Safe to say Gold remains in a primary down trend and within that, it may be at a near term trading top.


S&P 500:  The probability that the S&P 500 has completed its correction and broken out for a retest of 1375 and beyond is very high. Having surged past its major overhead resistance at 1220 on 10/21/2011, the Index came back to test the new support 1220 on 10/25 and 10/26, and held well above it on both occasions. Since then it has pierced through another overhead resistance at 1270 and is in the process of confirming the new support.  Barring the usual corrections, the passage 1370 appears safe.  On the time charts we have a failed wave 5 as often happens in bearish corrections.  Usually it reflects an oversold market.  What it portends though is that correction following a test of 1370 or from wherever it tops out, the S&P 500 will correct slowly and retest recent lows.  In short the markets not gonna runaway from here.

NYMEX Crude:  As expected, crude turned around from its major support at 75 and is headed for a retest of its major overhead resistance at 100 that it is unlikely to breach in a hurry.  Nymex crude could mark some more time in the 75-100 trading range before it makes a decisive move either way.  Safe to say $75 is the new floor for crude over the next few years.


Sensex:  The Sensex has gapped through its major overhead resistance at 17,500.  Price and time corrections for Sensex were very nearly complete anyway and it preferred to surge up with the world markets.  First major target for the Sensex lies at 19,000 followed by 21,000.  Barring the usual corrections on the way up, there is nothing on the charts to suggest any major hiccup in the march up.  On the other hand, the gap at 17,500 is a huge support and is unlikely to fill up in a hurry.  That suggests, the markets will not be coming back to retest recent lows in this move up and trapped shorts had better cover at prices they can get.


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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