Tuesday, November 18, 2008

Is the trend tiring

The USD index which gave an important breakout a few days back has seen volatile moves in the last few sessions as it flip flopped between 88 and 87. The break to the upside should lead to significant rally in the next days or trading sessions. If it is able to trade above 88.2 there would be a strong rally in the USD index to well above 90.

Take a look at the graph -

For the Elliott wave count refer to the graph - USD Index wave count

It is interesting to note that the USD index which is in general positively correlated to US equities is now serving as an important gauge of sentiment. A rise in USD has been accompanied by a fall in various stock market indices in the last few weeks and a make or break day is getting closer. In the next few days either the market would test its lows and recover significantly to its major resistance levels, like 11500 for Dow Jones Industrial, 1000 for S&P, 3500 for Nifty, or it would lead to a severe price erosion. I think the market internals are pointing towards a global rally that will take all participants by surprise if DJIA is able to holds its October lows on a closing basis.

If markets fall in the next couple of days and reach important support levels, there would be good opportunity to the upside in next one month. We are entering a strong seasonal phase in the next week and this can lead to a significant rally in the markets. So buying on any dip with October lows as risk levels may serve very well.

No comments:

Post a Comment