Home > Uncategorized > MARKET NOTES: Major markets confirm an intermediate down trend

MARKET NOTES: Major markets confirm an intermediate down trend

MARKET NOTES:  Major markets confirm an intermediate down trend




Spot Gold:  After staging a reactive pullback from the $1610 area to $1680, gold has turned down again.  Gold’s target for this leg down remains unchanged at $1550.  In terms of wave counts, gold has entered the 3rd leg of the downturn that extends the most.  The target it achieves in this wave down will tell us if the fall from $1920 was a bull market correction or the start something more fundamental.  So the metal’s reaction to the $1550 area should be of great interest to bulls and bears alike.  Worth noting the positive correlation between gold and risk assets continues despite the sharp sell off in equities.


Not hopeful of a meaningful gold rally until early July.



HG Copper:  Like other risk assets Copper has also turned down after failing to pierce it overhead resistance at 4.0.  To my mind, Copper’s correction started way before other risk assets from a level of 4.5 in July 2011 and the present fall is a continuation of the same process.  What that means is that Copper fell from a level of 4.5 to 3.1 in the first leg of the fall.  The pull back from there was reactive in nature and rose to 4.0.  Copper is therefore now experiencing the second leg of a normal bull market correction.


On that reckoning, Copper could retest 3.1 again during the course of this correction and the correction itself would last till about first week of July 2012.  Don’t expect a very long bearish spell in Copper though the price drops could be sharp.  Also, given that Copper is in a long-term bullish trend, the floor set up at 3.1 is unlikely to be significantly breached.  So yes Copper is bearish but the potential downside has a floor.



NYMEX Crude:  Am greatly befuddled by the rude behavior of NYMEX crude.  One wave count, and it is the one that I have favored so far, projects Crude at $150 by March 2013.   That means crude should be going parabolic in prices near about now.  In this view Crude is unlikely to dip below $100 for any significant length of time and will soon see a return to the parabolic rise we have seen since the last bottom of $32 in January 2009.


There is an alternative count that would take Crude far beyond $150 but over a longer period of time.  In this time frame, Crude could consolidate between $75 and $105 for some more time before moving up from this trading range.


For the present, Crude shows a formidable double top at $110, which must be respected.  Hence until that level is taken out decisively, one cannot be bullish in Crude no matter what the geopolitics or fundamentals.  On the other hand, why trade in Crude if the picture is not very clear?  There is other juicy stuff to nibble at.  So am giving Crude a miss until the wave count becomes a little clearer.  Don’t expect a prolonged bearish spell in crude though.  Much of the price correction is already done.



Silver:  I don’t trade Silver.  So this is really for gold bugs, that lacking capital for gold, end up punting in Silver.  The metal is very bearish.  In my view the metal’s target for this correction is $21.  From the top made at $37.6 on 28th February, Silver should head down in a gradually downward sloping channel to $21 by end of December this year.


Normally, I prefer to get the direction right and leave price targets for markets to reveal themselves as we go along.  Making an exception here because Silver is very volatile and retail participation in Silver tends to be high given a perception of “cheaper price” and lower cost of entry.  And many among this class of investors hold on to positions in the hope that things will be all right soon.  Never works out in real life.


Expect a test of $20 before the year is out on Silver.



$-Index:  $-Index first target down remains at 78.  The pull back in the $ on Friday to 80.075 was just a correction to the fall through out the week.  Expect the downtrend to resume next week.  $ Reaction to the 78 area will offer further clues on whether it intends a test of 0.72 or not before the end of this year.  Not bullish on the $.



Euro-$:  Euro-$ first target remains at 1.30 a breach of which will open the way for a retest of 1.26 area again.  Remain bearish on the Euro for the near term.  The month of May may see the Euro decide to move decisively one way or the other.



$-INR:  $ has an overhead resistance at 52 against INR.  It appears to consolidating just above 51 before making the assault at 52.  Just a matter of time before 52 is taken out.  Remain bearish on INR.



S&P 500:  The S&P 500 Index finally turned around from its overhead resistance at 1420 to close at 1370 for the week.  While I have little doubt that the broader markets slipped into an intermediate correction long ago as explained in this blog, the S&P 500 has a trick or two up it sleeves to befuddle investors further.


First off, note that the floor of 1345 hasn’t been tested yet.  Until this gives away one really cannot speak of a correction for the full bull wave from the low of 2008 crash.  Secondly, the index bounced off the trend line that connects the low of 1075 and the low of 1158 in this rally.  So a retest of 1420, or even beyond is not ruled out.  In fact if there are enough trapped bears, S&P 500 can well spend sometime here doing nothing all through May.


Nevertheless, maintain my view that we are headed into a full blown correction that will test the strength of the humongous rally that we have seen from the low of 668 in March 2009 to 1420 in March 2012.



Sensex:  As mentioned in the previous blog, 17,000 on the Sensex held at the 3rd attempt and is due for a fourth test on Monday.  This time the floor at 17,000 may not hold.  The Sensex behavior on a breach of 17,000 will be significant.  A pull back after breach will signify an oversold market and more volatility.  On the other hand a tame passage below 17,000 will indicate a normally correcting market that will give opportunities for accumulation at the lows as the correction proceeds.  On a breach of 17,000, the path to 15,000 opens up for the future.  However, don’t expect a one-way movement.


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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