Nickel is back in action!!!

Nickel prices went into a deep consolidation/basing out pattern for the last 8 months. Price is now above all significant DMA levels.



If prices are able to close above 13700 for the week, it would be bullish. Nickel can rise to 17500 - 18000 range on a sustained breakout above this level.

Natgas Jumps again!!!

Natural Gas prices very sharply up after retracing the previous rise. In the last post I had highlighted that Natgas is a buy on any weakness and this dip is an excellent opportunity to be on the long side of Natgas.

See these graphs -



Current prices have a strong support at swing low of $3.38 and pivot support is at $3.10. Natgas is expected to rise to $5 from current price levels.

Elliott wave Analysis - Crude oil nearing top

Taking previous view on crude oil forward it seems crude oil is now in a process of toping out. Yesterday’s price action is suggestive of price entering 3 of 5 of C.

Once this final 5 wave upmove exhausts price would reverse.

Current wave count suggest that price may top at around $68 - $70 range before beginning their down move to previous lows of $33 and further to new lows.

The complete down wave 3 was from 128.6 to 32.4. We look for fourth wave to retrace 38.2% of this wave which is at about $70. The corrective ABC calls for C = 1.618 X A which is at $62.5 and C = 2.0 X A is at $70.



Lower degree fourth wave of an extended third ended at $71.6.

There is a strong confluence resistance at $68 - $72 price levels.

On a one hour graph the rally looks impulsive. Look for sign of exhaustion after price jumps above $65.

USD/AUD long term trend

Australian dollar made a significant H&S pattern on its long term graph against the USD. However this pattern failed and prices fell below the neckline which is at 0.80 currently.

Previous support has now turned to resistance.

Monthly 25 Years Graph



The bull market in AUD was broken decisively in July last year. Since then AUD got cut into half against the USD. This rebound can be seen as a bear market rally which has retraced 50% of the complete fall.


Weekly 10 Years



A significant turn can occur at the current price range of 0.80 – 0.85.

Incidentally 0.85 is also the target prices by measured move analysis of short term double bottom formed in USDAUD on a daily graph. RSI is diverging and current market action is now looking topish. If prices reverse from these levels we should look to go short on AUD against the USD for target of previous low of 0.60 and further.

Daily 2 years

Crude oil and copper wave count

Crude oil and copper has given an impressive rally in the past few months. Copper prices bottomed out before equity markets started the current uptrend and crude oil followed with a lag.

The current market picture in copper is impressive as elliott wave structure saw termination of the bear trend at the bottom. Now copper is in the process of forming the first impulse of the new bull market. The following graph will make it clear.

The alternate count shown above will have a very high probability if copper trades below 200 for a few days. Termination of wave 1 may occur at 245-250 range if the triangle completes.

Crude oil prices have rebounded sharply. As I had mentioned in the last post here that crude oil is still in the fourth wave of the wave 'A' correction, it has taken an expected amount of time to reach the current price levels. The current price picture is now calling for termination of the current uptrend in few weeks. Take a look at this graph. For previous posts see this link



Crude oil rally looks like nearing exhaustion. On hourly graphs we have entered the wave 5 of 5 of C. Look for reversal pattern in days to come, retracements can be very deep.

Elliott Wave Count on Gold - X

Looks like current price move is going to make new highs. I have highlighted this fact in the previous post.

View all posts on Elliott Wave Count on Gold - Click here

Please take a look at the graph below. Risk reward is now in favour of bulls. $860 is now a clear support for upside targets of $1200.





Long term trend now looks like this-

Markets getting back to normal??

Gold prices are now rising relative to every currency and commodity. Gold is expensive in terms of energy, metals and other major currency. With the last elliott wave count in gold giving out the possibility that gold prices are entering a period of weakness and may test $700. However, in the short term it has completed a corrective pattern and is set to rise. I would update the count itself in the next post.

Now it looks like the money that has been thrown into the world markets by all central banks is doing a great good to the commodity markets. All currencies are falling relative to commodity markets especially the metals and precious metals indices. This is good news for the central bankers. The bad news is that stock markets are losing steam and some technical studies are turning bearish. But they have not given a clear sell as yet. Take a look at the following graphs -

Gold
Gold prices have come out of a strong flag pattern. The price study shows strong rise in volatility and with the trend up we can see gold benefiting strongly to the upside if stocks break down. With USD weakening, gold is getting the benefit.

S&P 500

Time and again I have seen seeming double top turn to double bottom. So wait for SPX to break below 875 to confirm a sell. But be cautious. Bands are signalling a sell.

Various other indices have given strong divergence. One important case in point is the US homebuilders ETF. It is forming a H&S on the neckline of an inverted H&S which will give an above average move is it breaks down.

XHB - Homebuilders ETF

Various risk gauge are turning positive. In the last one year there has been a serious discrepancy in the movement of certain markets in relation to the other. The USD and gold were moving in tandem, bond and stocks very moving opposite, USD and stocks were moving in opposite direction. These long term correlations were exact inverse of what they are in a normal market scenario. This was primarily due to the deflation expectation in the market. See this article from Marketwatch

A number of indicators are now showing that markets are getting out of this expectation and deflation expectation is actually abating. Certain markets like gold, metals and energy have started pricing in some inflationary expectation. This sounds very comforting but with rising unemployment and thawed consumer debt market, this could well turn out to be another nightmare.

The scenario that can now playout is a strong rally in commodities can lead to a rise in inflation. If this is combined with some money into the hands of consumer it could well buy some more time for debt implosion. Still its a mess that Central bankers have chosen to get into. If this fails then deflation spiral would be deep and would take years to go away. Markets are signalling some expectation of things improving but a reversal in stock prices would be the key to watch.

It is quite dramatic to observe the socio economic patterns as they turn out. The latest rally in stocks is actually helping companies to raise money, debt. It is not the other way round. So if stock prices fall again it would be just the test that is required to gauge the strength of economic improvement being witnessed. Bull markets don't emerge when we do less badly, they emerge when we can't do anything.

May would be interesting.

Comments are welcome.

USD holding on

USD index has broken all trend line supports and looks quite vulnerable. In my last Euro update I wrote that Euro might be entering the 3 of 3 which proved wrong. Euro remained in its previous range and is still unable to take out its previous high.

Now USD eliiott wave count on the index looks like this. I think the current structure calls for the termination of wave (ii) after which USD will enter wave (iii) to the upside.

This view will be negated below the USD index level of 76. Take a look -

Market Mayhem - Index explodes

S&P CNX Nifty closed 17% up after the congress came to power again at the centre. It was largely an unexpected result. Especially for me as it defied the trend in other countries which voted out the incumbent governments due to terrorism and financial meltdown. However the verdict created euphoria seen never before and has thrown open the door for our markets to remain the best performing market for the next few years.

The elliott wave count now looks a bit easy to interpret as the rule violation of 3 being the shortest is over. We clearly saw an extension in the third wave and now are in wave 5 of the higher degree wave 1. This means we are about to end the first impulse of the next big bull run. I have been writing this again and again that this is the last leg of uptrend. But it has stretched beyond expectation and it would be wise to wait for it to turn. Meanwhile CNX IT index has formed a definitive reversal signal and looks set to lead on the way down.

The latest elliott wave count on S&P CNX Nifty looks like this -



Your comments and analysis is welcome.

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Mometum Divergence

Nifty is witnessing strong divergence on various momentum oscillator. Yesterday Nifty formed an outside day which was preceded by a Doji Star pattern. These combination pattern signals exhaustion of the current move and combined with heavy divergence it would limit upside in the index.



This suggest long positions should either be exited or trailed. Selling pressure would be intensified below 3500.

Natgas Breaks out

Natural gas has broken out of a strong downtrend line. The prices surged yesterday closing above 50 DMA on NG continuous contract for the first time after it fell from its peak of 13.69.



Although US is swiming in Natgas with oversupply, the prices are now breaking out for the first time. This market is now clearly a buy on correction market.

Swift trade update!!

Last week I wrote that market may correct to lower levels. It proved dead wrong as markets regained strength. I have been counting the advance in five waves and last two weeks price range was looking like more of distribution in wave 'b'. However I have to revise the count to the wave 5 in progress of a higher degree wave (I) of a new bull market. A correction may take place once wave 5 exhausts. See the following graph -



In the above graph -

Wave 1 = 2539 to 3103 equals 564 points

Wave 3 = 2962 to 3511 equals 549 points

Wave 5 = 3309 to 3664 equals 355 points till now, may be its the high!!

Now wave 5 cannot be larger than 550 points as it will make wave 3 the shortest and negate the entire 5 upmove count of being a five wave upward impulse. So it looks clear that whatever is the extent of rise Nifty should remain capped at 3844. If it breaks that level too than the whole move becomes corrective. Overall the structure looks healthy and topish. Wave 1 will end with a surprise, overnight. Time projections still have room till mid of may. But Looks like a clear case of being very cautious with mid caps and some large caps.