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Monday, July 13, 2009
Sunday, June 14, 2009
Crude oil update
Crude oil is now in the final impulse of the corrective upmove that began in late Feb this year. Prices have now risen to level which are consistent with resistance level of previous lower degree corrective 4. In previous updates I had mentioned the probability that oil will peak out at $68 - $72 range and a final impulsive peak cab be expected at $76 if these price levels are breached.
Currently crude oil traded at $72.5 in after hours globex market. Current Elliott wave structure suggest that the final leg 5 of 5th of wave ‘C’ is in force. Wave ‘5’ is tracing out an expected ending diagonal pattern. Strategy should be to wait and sell crude oil short on a break below $70.5 on completion of this pattern.
Currently crude oil traded at $72.5 in after hours globex market. Current Elliott wave structure suggest that the final leg 5 of 5th of wave ‘C’ is in force. Wave ‘5’ is tracing out an expected ending diagonal pattern. Strategy should be to wait and sell crude oil short on a break below $70.5 on completion of this pattern.
Wednesday, June 03, 2009
‘V’ is the word for 2009
‘V’ is the word for 2009 so far. I don’t know many market participants who saw the current market rally to be so furious and so fast. Neither did I expect. At best many traders called for a 50% rally over a period of few quarters. Now with most of stock Indices hovering around their 200 DMA in western markets and all Asian indices much higher from their 200 DMA question still looms whether we have entered a bull market or not. In my previous updates on S&P CNX Nifty 50, i.e. the Indian stock index, I had mentioned that prices suggest a bottom when we crossed above the all crucial level of 3200. Asian market too looks like they have formed a strong base. The trouble is the western stock markets. There is no clear indication from these indices whether this is a bear market rally or beginning of a new bull market.
The US stock markets have risen sharply over the last two months. The S&P 500 has rallied to a new high for 2009 which is 39.6% above the March 9th low. There are sector which have rallied in excess of 50% like materials and financials. There are some important changes in different markets that have occurred in the current calendar year. The US yield curve has steepened significantly and commodity prices have staged a strong rally along with an incessant fall in USD. The rising bond yields in a deflationary expectation scenario gave an early signal that stock prices will rebound sharply over a period of time. Equity markets always lag the bond markets and this was true this time also. There are two distinct signals that come from rising bond yields. First is the clear expectation of market participants that the economy is going to recover and growth will lead to inflation. Bond yields would also rise if there is an expectation of inflation without growth. This is a rare phenomenon and can occur only in case of misallocation of capital. This may happen if there is demand for goods and services due to excess liquidity instead of rise in base aggregate demand. Now the current scenario has seen continued unemployment in the US, EU and other western markets. There is continued weakness in retail sales and housing markets in whole of the western world. With stocks rising steadily, the real economy has not thrown out numbers which should appear after such a market recovery. This means that the monetization of debt has lead to a dramatic rise in expectation of a high inflation environment just after a severe deflationary threat. If we see the trajectory of inflation for the last one decade, there has been a dramatic shift from high inflation expectation – just at the turn of the century, then a deflationary threat due to tech bubble, then a high inflationary scenario due to the oil shock and back to deflationary expectation because of the financial melt down. The rapid change in inflationary expectation has been due to the severe monetary policy measured taken by central banks all over the world. The central bank either cut rates too low too soon or remained stubborn over a period of poor growth environment with high interest rates.
With bond yield steadily rising in the western world there is another phenomenon that explains the rise in bond yields. The buyers of western agency and government debt, especially the Asian countries are now worried about the long term stability of most of the western currencies and economies. This is leading them to purchases short term debt and either selling or not buying the long term debt especially in the US. This is leading to a steeping yield curve and a seeming expectation of a rise in inflation expectation. However this theory suffers from a serious threat from commodity prices. Most of inflation sensitive commodities like oil and copper have risen sharply. Gold has lagged this rally but is still near its all time high. The commodity indices have rallied sharply and steadily with support from agricultural commodities which are not directly linked with inflation and are generally cyclical and seasonal. The USD has been another factor which has supported this rally in energy, metals and some agricultural markets. The markets are devaluing the USD and there is a seeming revaluation of commodity prices. It’s been seen time and again the social moods drive the economy rather than the other way round. The bear market of 2008 has left most of the participants fearful of a fall in stock markets. Even a slight correction triggers bad investor confidence and poor financial reporting. So it’s prudent to keep and eye on how the USD moves once equity markets correct. Ultimately investors and governments along with their central banks have always returned to USD in times of crises and it becomes the safe haven when there is a real panic in the market. The argument that USD is doomed in the long term have held but in times of crises investors fear for their funds to be in a place which is ‘too big to fail’ or with some real value like gold.
Rising bond yield combined with huge monetization of debt and an every increasing money supply is creating inflationary expectation. More than any where else the Asian markets with excessively low inflation, high money supply and growing economies are being targeted by all the excess liquidity in the markets. This massive money supply which is not being lent to consumers in the western markets is now travelling to emerging markets and to any other asset class which has some real value or growth expectation. Stock prices in Asia have exploded without any correction as foreign investors flock to these markets. This was augmented with a huge short covering that triggered the bottom in most emerging market equity indices.
Current intermarket relationships suggest that rising bond yields are indeed pointing to inflationary expectation. If bonds stage a rally from the current level, which looks like it would happen sooner than later, it is just a matter of time before the downtrend begins again as high inflation scenario is here to stay for the next few years.
For the next few weeks to quarters focus should be given to movements in the USD, Euro and JPY along with the strength in gold. If equity markets see strong falls on rising volumes and gold rises with ever increasing investment demand, it would be good to have your funds in commodities which have value. Asian and emerging market might be the bubble of the new millennium built of the highest money supply that was ever created.
The US stock markets have risen sharply over the last two months. The S&P 500 has rallied to a new high for 2009 which is 39.6% above the March 9th low. There are sector which have rallied in excess of 50% like materials and financials. There are some important changes in different markets that have occurred in the current calendar year. The US yield curve has steepened significantly and commodity prices have staged a strong rally along with an incessant fall in USD. The rising bond yields in a deflationary expectation scenario gave an early signal that stock prices will rebound sharply over a period of time. Equity markets always lag the bond markets and this was true this time also. There are two distinct signals that come from rising bond yields. First is the clear expectation of market participants that the economy is going to recover and growth will lead to inflation. Bond yields would also rise if there is an expectation of inflation without growth. This is a rare phenomenon and can occur only in case of misallocation of capital. This may happen if there is demand for goods and services due to excess liquidity instead of rise in base aggregate demand. Now the current scenario has seen continued unemployment in the US, EU and other western markets. There is continued weakness in retail sales and housing markets in whole of the western world. With stocks rising steadily, the real economy has not thrown out numbers which should appear after such a market recovery. This means that the monetization of debt has lead to a dramatic rise in expectation of a high inflation environment just after a severe deflationary threat. If we see the trajectory of inflation for the last one decade, there has been a dramatic shift from high inflation expectation – just at the turn of the century, then a deflationary threat due to tech bubble, then a high inflationary scenario due to the oil shock and back to deflationary expectation because of the financial melt down. The rapid change in inflationary expectation has been due to the severe monetary policy measured taken by central banks all over the world. The central bank either cut rates too low too soon or remained stubborn over a period of poor growth environment with high interest rates.
With bond yield steadily rising in the western world there is another phenomenon that explains the rise in bond yields. The buyers of western agency and government debt, especially the Asian countries are now worried about the long term stability of most of the western currencies and economies. This is leading them to purchases short term debt and either selling or not buying the long term debt especially in the US. This is leading to a steeping yield curve and a seeming expectation of a rise in inflation expectation. However this theory suffers from a serious threat from commodity prices. Most of inflation sensitive commodities like oil and copper have risen sharply. Gold has lagged this rally but is still near its all time high. The commodity indices have rallied sharply and steadily with support from agricultural commodities which are not directly linked with inflation and are generally cyclical and seasonal. The USD has been another factor which has supported this rally in energy, metals and some agricultural markets. The markets are devaluing the USD and there is a seeming revaluation of commodity prices. It’s been seen time and again the social moods drive the economy rather than the other way round. The bear market of 2008 has left most of the participants fearful of a fall in stock markets. Even a slight correction triggers bad investor confidence and poor financial reporting. So it’s prudent to keep and eye on how the USD moves once equity markets correct. Ultimately investors and governments along with their central banks have always returned to USD in times of crises and it becomes the safe haven when there is a real panic in the market. The argument that USD is doomed in the long term have held but in times of crises investors fear for their funds to be in a place which is ‘too big to fail’ or with some real value like gold.
Rising bond yield combined with huge monetization of debt and an every increasing money supply is creating inflationary expectation. More than any where else the Asian markets with excessively low inflation, high money supply and growing economies are being targeted by all the excess liquidity in the markets. This massive money supply which is not being lent to consumers in the western markets is now travelling to emerging markets and to any other asset class which has some real value or growth expectation. Stock prices in Asia have exploded without any correction as foreign investors flock to these markets. This was augmented with a huge short covering that triggered the bottom in most emerging market equity indices.
Current intermarket relationships suggest that rising bond yields are indeed pointing to inflationary expectation. If bonds stage a rally from the current level, which looks like it would happen sooner than later, it is just a matter of time before the downtrend begins again as high inflation scenario is here to stay for the next few years.
For the next few weeks to quarters focus should be given to movements in the USD, Euro and JPY along with the strength in gold. If equity markets see strong falls on rising volumes and gold rises with ever increasing investment demand, it would be good to have your funds in commodities which have value. Asian and emerging market might be the bubble of the new millennium built of the highest money supply that was ever created.
Tuesday, June 02, 2009
Nickel Update
"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" - Last update on Nickel.
The current picture on graphs looks like this -
Prices have come out of a range after nearly 8 months and look set to rise further. I see just one concern here that Nickel inventory remains very high relative to other metals. The LME inventory and other private warehouse stocks are still high. Weak demand combined with high availability of the metal has been able to cap prices for quite sometime. Look for a surge in volume for prices to confirm the current uptrend. Risk levels are now at $13000.
The current picture on graphs looks like this -
Prices have come out of a range after nearly 8 months and look set to rise further. I see just one concern here that Nickel inventory remains very high relative to other metals. The LME inventory and other private warehouse stocks are still high. Weak demand combined with high availability of the metal has been able to cap prices for quite sometime. Look for a surge in volume for prices to confirm the current uptrend. Risk levels are now at $13000.
WTIC and Copper wave count update
Last update showed how these two commodities are entering the 5th wave impulse. Copper prices have risen strongly and are now at fresh highs for 2009. The 5th wave of the wave '1' of new impulse is now in progress. Strong confluence resistance rests at levels of 242 and then 250 - 264 range. The triangle formation completion has invalidated the previous alternate count and emphasized the base count. See the following graph
Crude oil entered the 5th wave of wave 'C' of final corrective wave 4. The wave 3 of 5 is nearing completion and crude oil might take a breather before tracing out wave 4 and 5. Please see previous post for complete update. Following is the short term graph -
There is strong confluence resistance at $68 - $72 range. Look for rally to exhaust at these levels. Further resistance is at $76 if these levels do not hold.
Monday, June 01, 2009
USDJPY
USDJPY on weekly graph looks a good bet on the short side. 50 Week MA has capped the prices well. We got a nice bounce on daily graph.
Weekly MACD and Stochastic are now in sell mode and RSI (21-week) has broken down below 50.
This is a good long term short with a risk level of 101 and adding expected further weakness below 93 daily close. Expect prices to decline below previous lows of 87.
Weekly MACD and Stochastic are now in sell mode and RSI (21-week) has broken down below 50.
This is a good long term short with a risk level of 101 and adding expected further weakness below 93 daily close. Expect prices to decline below previous lows of 87.
Friday, May 29, 2009
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.
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.
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.
Thursday, May 28, 2009
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.
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.
Wednesday, May 27, 2009
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
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 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.
Tuesday, May 26, 2009
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-
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-
Friday, May 22, 2009
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.
Wednesday, May 20, 2009
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 -
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.
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.
Monday, May 11, 2009
Thursday, May 07, 2009
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.
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.
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.
Tuesday, May 05, 2009
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.
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.
Tuesday, April 28, 2009
A Swift Trade!!!
S&P CNX Nifty looks like a nice sell here. See the following graph -
Momentum oscillators have broken down and market will give a highly bearish close if it closes below 3280 to complete a double top pattern. Looks like we are heading to 3100 and possibly 2900. Risk is a new high above 3525.
Momentum oscillators have broken down and market will give a highly bearish close if it closes below 3280 to complete a double top pattern. Looks like we are heading to 3100 and possibly 2900. Risk is a new high above 3525.
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