Home > Uncategorized > MARKET NOTES: Revising the wave counts: 2nd Dec 2011

MARKET NOTES: Revising the wave counts: 2nd Dec 2011


MARKET NOTES:  Revising the wave counts: 2nd Dec 2011



Have done a complete review of my wave counts because the S&P 500 violated 1220 level after having rallied past it on 18th November.  The new counts are long term more bearish than I had thought, both in terms of downside targets and time.  While I am not going to discuss my wave counts, below are some of what the things that standout from the charts.



S&P 500:


The US markets appear to be sweeping out a fairly giant sized corrective wave from the top 1575 in October 2007.  The wave should terminate some time mid-June next year.  We are currently in an upward B wave in the larger C down that could terminate anytime now or before mid-December.  That is likely to be followed by some violent volatility as the markets try to find a bottom.  A plunge to test 1000 on the S&P 500 cannot be ruled out.  Now might be a good time to take some profits for those who bought the recent bottom 1115.





The Sensex on the charts has had a good correlation with the S&P 500 since July 2007 though it has significantly diverged from the highs and lows while keeping the overall rhythm.  It is hard to see that correlation break down in the immediate future.  Based on the pattern being traced on the S&P 500, the 15,500 is no longer inviolate.  A failure of the Sensex to convincingly take out 18,000 will see it return to test 15,500.  Below 15,500 significant supports exists at 14,000 followed by 13,000.  The probability of seeing the Sensex test 14,000 by mid May next year is pretty high.





As expected in the last post, the $ has turned sharply down from 80 level.  First major support for the Index is 76 followed by the bottom at 72.  The prognosis for the index is pretty bearish.  A breach of 76 will signal that the $ is going to be testing its all time low again by the middle of next year.  That will time well with the expected low in the US equity markets.





With the $ under pressure in the currency markets, a further depreciation in the INR would be unlikely under normal circumstances.  But these aren’t normal times and INR has not appreciated against the $ when the latter has been bearish.  Given the acute sensitivity of the INR to Indian equity markets, an appreciating Rupee can be ruled out till May next year.  One can therefore expect the INR to retest its recent lows at 52 after some consolidation above 50.50 to the $.  Beyond 52, we are in uncharted territory.





The bearish prognosis on Gold remains unchanged until and unless it convincingly rallies past $1800.  In fact the rally in Gold should turn south from $1775 itself.  Gold’s correlation with equity is increasing while its negative correlation with the $ is getting muted.




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 decisi

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