Home > Uncategorized > MARKET NOTES: The expected bear rally is here but how far will it go?

MARKET NOTES: The expected bear rally is here but how far will it go?

MARKET NOTES:  The expected bear rally is here but how far will it go?



$-Index:  As expected in the last post, the $ turned down from 82 and is currently placed 79.01.  Is the $ rally over?  Clearly, the $ is oversold in the short term.  And in the long term the $ has to head down as QE3 takes hold.  The question really is if we can see another sharp pull back to 82 before the final descent to test 72 or has the descent already commenced?  I would venture there is at least a 50% probability of a pull back on the time charts before we begin the final descent.  Shorting the $ at this time might not be the right strategy.  Wait for higher levels.



Gold:  Gold is behaving exactly as equity at this point.  Gold’s return compared S&P 500 over the very long-term averages about 1.  In recent years, Gold has hugely outperformed the S&P 500 and we may be returning to a period of negative performance soon.  In any case, as far the charts are concerned, Gold’s rally to $1738 has violated the top of the downward trending trading channel and its price action from here on will be worth close scrutiny.  A base formation at $1660-1680 will be the first indication that Gold may intentions to rally further.  Until then, the rally remains a bear rally.  A break above $1800 will invalidate this view completely.



Euro-$:  Euro closed at 1.32240 on Friday, breaking above the first overhead resistance at 1.32.  Upon consolidation at this level, the Euro is likely to head much higher, the next logical target being 1.37.  The charts appear to suggest that Greek default on its CDS will be a non-event likely prompting an intense bout of short covering that could take the Euro much higher from here.  Keep fingers crossed for the news out of Greece expected this Sunday.  The downside to the Euro from 1.32 level is very limited.



INR:  The weakening $ in the Indian market is case study in how capricious our foreign exchange market is.  The $ was falling like a stone against the INR even as it peaked at 82 in international markets. It has since come off a bit at 79.5 but nothing justifies the $ collapse from 54 to 49.5 in the Indian market.  But then why argue with markets?  The INR is essentially testing the previous $ high of 49 as the new floor.  It reaction to this area will be instructive.  On holding the floor of 49, $ will likely seek higher levels against the INR though the pace of ascent back to 54 levels may be more orderly and measured this time.  A break below 49 for the $ is highly unlikely at this point.



S&P 500:  Has the S&P 500 already turned down from the high of 1333 on 26th January?  The index has a few days more to spend in this area capped by 1350 at the top before turning down.  Interestingly, a golden cross of 50-day DMA crossing over the 200 DMA is expected coming Monday and one shouldn’t discount the power of that signal.  However, such spurious signals are what you would expect in a bear rally to trap bulls so the event is a bit suspect at this point.  The probability of the S&P 500 making to 1430 should not be ruled out.  Bear rally tops can be hard to predict.  On the other hand you never know when a bear rally runs out of steam.  Frankly if I played bull, I would take all my profits and quit the market unless the market clearly breaks past 1430.  But early bears are easy meat so wait to short until a top is clearly indicated.



Russel 2000:  Russel 2000 hit the indicated target of 800 like bull’s eye making a top of 800.27.  The Index has the potential to make it to 825.  It has time of another 2 weeks in which to do it.  Since mid-caps are where the pros trap the uninitiated, a golden cross on the S&P 500 and a break past 800 on the Russel 2000 are almost given.  Such is the stuff with which bull traps are baited.  You have been warned.



Sensex:  Sensex has the room and the time to nick 17,500 in sync with the world equity markets.  It is unlikely to go beyond that in this rally.  In the immediate term, the Sensex is overbought.  Not bullish on Indian markets in the short term.



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 decisio

Categories: Uncategorized
  1. pavan
    January 30, 2012 at 11:27 am

    hi maam,
    can u tell about shree renuka sugars trend plz……

  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: