Home > Uncategorized > MARKET NOTES: NYSE Composite shows the US markets have also turned down

MARKET NOTES: NYSE Composite shows the US markets have also turned down

MARKET NOTES:  NYSE Composite shows the US markets have also turned down.



Spot Gold:  Gold took an awful tumble from the near $1700 levels, to make a low of $1612.  It has since tried to recoup some losses and could reach up to $1640 on the reactive up move.  If this is wave 3 of the impulse move down, a retest of $1500 level could easily be on the cards over the next few weeks.  Gold next target is $1550, and the metal’s reaction to this area will offer clues to gold’s long-term intentions.  For now, there is nothing bullish about the metal on the charts.


$1550 is an inflexion point for gold.  It has been tested twice before and such important levels do not give way till the 3rd or the 4th attempt.  Hence a failure to immediately break the $1550 floor will not make gold bullish in my view.



$-Index:  As if to taunt $ bears, and the crowd crying hoarse about currency debasement, $ again turned up well above the 78 level, and is currently placed just above 80.  $ could well head for the 82 mark again over the next few weeks.  It first immediate target is 80.5, and once atop that, a fresh assault at 82 appears likely.


One may note in passing that the $ rally here is rather counter-intuitive.  $ has been correcting from 88.75 level last seen in June 2010 and we are nearing the end of that correction.  Going by the wave counts, $ should be heading for a retest of 72 instead of 82.  However, strong violent bear rallies are common in Wave 5 of a bearish correction and the $ rally should be seen as a part of that process.  What this means is that [a] 82 may not be breached and [b] the rally could terminate abruptly.  Expect lots of volatility in the $ going forward.



Euro-$:  The Euro turned down sharply from 1.34 levels to test 1.30.  Euro has been in a downward correction since the 1.4950 top formed in May 2011.  On turning down from 1.34, the Euro confirmed that this correction is not yet over.  On a breach of 1.30, a retest of 1.26 is again likely though I expect the floor to hold up. On the other hand, an upturn from 1.30 will show Euro is triangulating between 1.26 and 1.36 for an explosive breakout, most probably to the topside.


Euro’s reaction to 1.30 bears watching for further clues.



$-INR:  The $ has been consolidating between 50.5 and 51.5 against the Indian Rupee.  As mentioned the last blog post, the next target for the $ is 52 followed by a test of the recent highs.  It is just a matter of time before we get there.



NYMEX Crude:  Crude Oil has an important overhead resistance at $110 that it tested in late February.  Crude has since been correcting and is currently placed at $101, a crucial floor.  A decisive breach of the floor would invalidate my working wave count prompting a complete reassessment of charts.  However, I don’t see Crude breaching this level easily.


Barring a breach of $101 decisively, I expect Crude to head back to $110 or even $115.  In fact Oil should continue to consolidate above $101 for some more time before it eventually breaks atop $110-115.  Not bearish on Crude but keep tight stop losses under $97. [Or $94 if you prefer!]



NYSE Composite:  The main indices of the US market, DJIA and SPX continued to drag out their top formation as expected.  That could go on a week or two more but should not concern us.  The NYA’s corresponding pattern at the recent top is interesting and shows a top at 8329.37 on 19th march followed by two lower tops on 26th March and 2nd April.  Between these tops, it made a series of 3 lower lows, the most recent of which was 8055 on 5th April.  That series of lower tops and lower bottoms confirms that the overall US market is turning down.  The main indices will in all probability soon follow the broader market.


It is too early to say how the coming reaction will shape out in depth and duration.  It is possible that initially, the declines could be small and shallow, followed by a deeper correction since the previous major correction was sharp impulsive move down.  Either way, NYA shows the correction may have already started in the broader market.


The major European markets have all begun their respective corrections.






Sensex:  The Sensex has an inflection point at 17,000.  It is a crucial level that cannot be expected to give way on the first two or three attempts.  During the week, the index rallied sharply from just this level to 17,665 before turning down again.  I expect the 17,000 levels to be tested again and even breached at the 4th attempt if not the next.  Nothing looks remotely bullish about the Sensex on the charts.




Shanghai Composite:  It is too early to say if China is headed for a Japanese style deflation though I have long argued that China’s growth over the last 4/5 years has primarily came from Government induced, bank financed investment and inventory build up boom that can’t be inflated any more.  I have also argued that land sales artificially inflate Chinese GDP numbers [relative to say a typical OECD country] by as much as 2% per annum.  So a prolonged period of slow growth will not surprise me at all.


No, this blog hasn’t gone fundamentalist.  I mention this because in keeping with my view, Shanghai Composite has been correcting continuously and consistently over the last 4 years without any of the fanfare and drama that we see in Indian or US markets.  This is obvious from the fact that while US markets are reaching for previous tops Shanghai is barely 35% of it peak at 6,200 now placed at 2302.


In short, much of the doom and gloom that the press has now started reporting is ALREADY in the price.



Still maintain my original working wave count that says the Chinese market made a bottom at 2134 on 28th December last year and is now in an intermediate uptrend.  In my view the correction from 2480 is reactive and could continue for a few weeks more.


My wave count will be negated if the index breaches 2160 which would correct 100% of the rise from last low to 2480, an unlikely event.



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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