Home > Uncategorized > MARKET NOTES: 14/01/2012. The Euro gets stress tested and still holds out.

MARKET NOTES: 14/01/2012. The Euro gets stress tested and still holds out.



MARKET NOTES: 14/01/2012.  The Euro gets stress tested and still holds out.



$-Index:  As expected in the last blog post, the $ was straining at the overhead resistance in the 80-82 area but a breakthrough didn’t look likely on the cards.  In terms of time, the $ could spend a week or more in this region depending on the gyrations in the Euro markets.  The probability of break past this level is very low barring a catastrophe in the Euro markets.  Retain my view that the $ will likely retreat from here in an orderly correction back to the 76 area.



Euro-$:   As expected the Euro was testing the major floor at 1.26 against the $ and came pretty close to nicking it.  A shy at the even more solid floor at 1.20 remained a distant possibility that never came into play.  On the time charts, the probability of Euro nicking 1.26 is almost exhausted.  Expect the Euro to stage a ferocious rally on short covering any time next week or two.  There is far too much negative sentiment built into the Euro.  Short Euro is a crowded trade if you consider the US mutual funds that have completely withdrawn from the Euro markets in recent months.  Cover thy shorts before they get taken off.  Runs!



Gold:  Gold staged a stronger bear rally than I expected though I did note in the last blog that even a rally to $1650 would not negate my bearish prognosis.  In the event it rallied to $ 1660 stopping out my trades with a marginal loss.  Am reinstating them.  Gold continues to be an orderly downtrend with the next target of $1550.  The nick above $1650 was just that nick to shake off traders like me.  A sustained rally above $1665 would negate my view.  But the probability of that happening is pretty low.  If the metal does get to $1550, the level is unlikely to hold for long.



NYMEX Crude:  This is actually a no-brainer.  Crude could linger for a week or more in the $98-102 range before breaking atop this resistance to reach for $115.  Crude is almost certain to reach for its previous high of $146 before the end of 2012.  Will the Iran crisis do it or will it be something else?  I don’t know but Crude on the charts says a shy at the previous high is highly probable after a break atop $105 followed by another minor resistance at $115.  India had better watch out.



HG Copper:  As mentioned in the last blog post, Copper needs to break above 3.7 to have a shy at 4.  At the moment it simply appears to be treading water. In passing, one may not note Copper is now more closely correlated to the level of economic activity in China than the US.  So copper is more properly a proxy for Chinese manufacturing.  How it will perform that role remains to be seen.



Shanghai Composite: As predicted in the last blog post, the bullish divergences that were pointed out there produced a nice 9% rally in the Shanghai Composite.  As one would expect, the index turned down from the first major resistance of 2300 for correction that could reach down to 2200 in the coming week.  Another shy at 2300 should follow that. A break past 2300 would put the Index on the path of a decent tradable rally to 2550.  With due caution, this could be the beginning of a fairly long and durable rally in terms of range and time.  Buy with stop losses at 2130.



S&P 500:  The US Index crossed above the 1290 area and has returned to test the top of 1280 as the new floor.  Upon holding that area, we can say with some confidence that a shy at 1350 before the end of February is on the cards.  The Russel 2000, an index that more accurately represents US mid-cap stocks, is poised just atop 750 and at its 200 DMA.  A break above 780 that clears the 200 DMA and the first major overhead resistance would confirm midcap participation in the emerging rally aiding the S&P 500 rally to 1350.  A word of caution is in order as mentioned in the last blog post as well.  The contest underway is between weak bulls and weak bears and is more technical than a real sustained Bull Run.  The rally can terminate abruptly any time and is not likely to stretch far beyond February end.  It is early bears and skepticism that will sustain this rally!



$-INR:  The $ is correcting against the Rupee having made an all time high of 54.5.  It could correct down to about 50.5.  Below is a major solid floor at 49 that is unlikely to be breached in a hurry.  Note that the $-Index is straining to break through its recent trading highs at 82 while the Rupee is actually appreciating against the $ in the Indian markets!  It doesn’t get more contrary than that and suggests the $ correction against the Rupee is only a technical correction after which the $ is likely to resume its climb against the Rupee.  With the crude oil market suggesting a bullish carnage in the oil market, the prospects for the Rupee in 2012 are anybody’s guess.  Be very afraid.



Sensex:  As expected in the last blog post, the Sensex bounced off the bottom of the trading channel but the rally lacks the firepower of the previous bear rallies.  It is currently poised at the first overhead resistance of 16,200.  Another major overhead resistance looms at 17,000 after that which is unlikely to be breached.  Sooner than later, the Sensex is goanna turn around and retest 15,000.  Would be interesting to see how the Sensex manages to “fit in” and rally in the S&P 500 and Shanghai indices without breaking its neatly defined downward sloping channels.





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
  1. Dinesh
    January 14, 2012 at 3:09 pm

    Good analysis !

  2. January 16, 2012 at 6:37 am

    dear sonali!i like your comments/tweets.keep up the excellent work.bless u.

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