Home > Uncategorized > MARKET NOTES: Small counter-trend correction before the slide continues.

MARKET NOTES: Small counter-trend correction before the slide continues.

MARKET NOTES: Small counter-trend correction before the slide continues.








Gold charts show a rather interesting tug of war between the bulls and the bears.  Briefly, A-B-C down on the chart represents the bears’ pull on the metal’s price while W-X-Y [shown as W-X-B on the chart] represents the tug of the bulls counter to the main trend, which has been down since the top of $1920.  The big question is how does the tension resolve itself?


Gold has bounced from its 200 DMA at $1660 while respecting the upward sloping trend line from the low of $2526.  However, this could simply be a counter-trend correction since the main trend is still down and the wave counts indicate we are probably in a terminating C – at least for the present.


Gold has support at $1620 followed by a very strong base at $1525.  On current form, a significant break of $1525 looks highly unlikely.   So the real choice is between $1620 or $1525 as the terminating point of this correction.


The markets always surprise but I would assume we are headed for the $1525 region unless further evidence points to the contrary.








Analogous to the Gold chart, we have the Silver chart here.  Note the counter-trend pull of the bulls shown here as W-X-B, is much weaker than the A-B-C down.


Silver is almost certainly headed for the $26 region.  The support may hold but that may not be the end of the correction.



WTI Crude:




Crude shows far more resilience on the charts than either gold or silver in as much as the counter-trend rallies have been much stronger than the W-X-Y of either of the two metals.


Crude showing some consolidation in the 84-86 range before it retests its support at $78.  Crude can surprise and rally before it gets to $78.




Dollar Index [DXY]:





Dollar has surprised in both the strength and duration of its counter-trend rally from 78.60.  Dollar has a strong OH resistance at 81.50 and then again at 82 above it.


Dollar index could consolidate above its 200 DMA AT 80.50 for the next few weeks before making a new move either way.  The long-term correction in the Dollar from its top of 84.25 is by no means over.  So the current rally can persist but is reactive in nature.








Euro closed the week at 1.2742 and could retest its overhead resistance of 1.28 over the course of next week.  However, the main trend is irrevocably down.


First major support lies at 1.26 followed by more substantial support at 1.24.  For the next week, expect a drift down to 1.26 after a retest of 1.28 as overhead resistance.








The Dollar behaved true to form moving up from INR 54 to INR 55 during the week.  Chart above shows we are in wave 5 of an up move that appears headed towards the previous top of 57.25.


However, the Dollar has a very strong over-head resistance at INR 55.50 and may well consolidate below it for a week or two before attempting an assault on it.  Expect some consolidation before 55.50 is taken out.







The current drop in the NASDAQ COMP may find some support in the 2700 region.  A much stronger support lies below it at 2500.  If we are in a terminating C to the rise from 1131 in September 2002, as I suspect we are for NASDAQ, then a correction down to 2500 by mid-December appears most likely.  The first confirmation of that scenario will follow a breach of 2750.


A termination of the current correction above 2500 will be very bullish for the long-term trend in the NASDAQ.



S&P 500 [SPX]:





Analogous to the NASDAQ, SPX has a major support at 1260.  SPX could consolidate above 1340 but below its 200 DMA at 1375 before making a fresh move down.  SPX is the stronger of the two us equity indices considered here.










NIFTY closed the week 5574, showing a sequence of lower highs and lower lows from the top at 5751.55 on 4th October.  The Sensex, not shown here, has also breached the upward base trend line from the low of 15,749 on 4th June 2012.  In fact Sensex is now exactly at the top of the gap created in the index on 14th September and any further fall in the Sensex will take it to 17,715, which is its 200 DMA.


NIFTY’s next support lies at 5525, followed by a more robust support at 5350, which is also close to its 200 DMA.  By my wave counts, we are in wave 3 of a terminating C on the NIFTY whose target could be in the 5100 area.  It may take a few weeks to get there though.




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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