US Indices : Getting @ Interesting Points

Almost all US Indices are Getting @ Interesting Points.

So the key Q:

Is today the day of hitting a short term bottom.. and thus a point from were a decent bounce could start ? OR
Is today the day of breach of long term support trends, and so a start of another major down side movement all across ?
A friend mentions: i think there is still too much money with folks (even though with lesser purchasing power), and I see all sectors getting sold off today .. so where is it going ? I think it has to come back into the market, but I really doubt as a long term investment. So maybe we will see short rallies
which is what we have seen in this year.

Despite being hopeful of bounce or not.

Nevertheless, Interesting times to come, ahead.  Hold your breath for the Joyride and enjoy the game.

Oil, US and Indian Markets

State of OIL hysteria:

Some of it can be estimated using technicals around primary indicators like: Crude Oil, Oil futures, stock prices of Oil drillers and refiners.

Last week’s short covering around OIL futures and Index funds.. and recent correlated down action on most energy stocks hints on deleveraging continuing around OIL/energy.

Crude action in next few weeks should confirm what is going to happen
a correction or another spike before true correction happens
as Crude is still sitting up without major correction. Crude price is is the primary indicator and it is contiually staying up, which is a little bothersome.

State of indian markets
Taking a major hit – Some say because of oil, CRR, etc. Oh Well !!! OIL, CRR may be the catalyst. I think this was all expected and it unfolded.

Considering the bearish action that started early this year.. on 20K to 15K correction and then an expected bounce from 15K~17K (all published earlier on my blog) and then further down-spiral once it hit 17K at 50DaySMA as resistance line.

I expect some bounce to 15.5~16K region [some kind of succor rally ], before it corrects to 12K~13K region over next 1~2 yrs. In my mind, the economics of Indian Cos. needs to improve by-and-large, to sustain next round of big move on Indian Stock Market.

What puzzles me is Indian Exchange Rate !! Despite demand on $ for buying Oil.. the exchange rate should have been 39~40 by now. RBI intervention is too high to keep it that low. And that it still floats in 42+ region. But 9+% inflation is going to push them to change their monetary policy to make INR a stronger currency to reduce of cost Oil imports and commodity prices. More sooner than later. The govt. is stuck between need for election-economic gimmicks on one side and need for truthful economic policy and reform needed on another side.

US markets:

Under continuous correction for last 2~3 weeks.
I expect US indices to touch and test these levels:

Dow: 11900 support
NASDAQ : 2300 support,
S&P: 1300 support.

Amidst all this doom-and-gloom news on the blogs and media, I think all this is getting baked into current market levels. Depending upon how “recession fears” confirm themselves and “quality of earnings” in upcoming weeks, Stocks could rally/bounce off these support levels, or simply loose/crash base from here. Interesting times to play game-by-the-time-tested-rules or be on the side-lines BUT not to speculate. Technically, looks like Large-Cap-Value Stocks would likely be safer bets, Mid and Smalls caps to correct more before LongTerm Entry levels can be seen. I expect an interesting bounce to trade some profits after this correction. But a turbulent Year ahead IMHO.

Enjoy the Game.

Gold … Ongoing Correction and Beyond

As I mentioned, that Gold would correct to 840~860 range.. and it exactly did during recent months.

Now that the correction is under-way.. what seems next when we look at Gold’s (Weekly and Daily) Chart and it’s trend lines. I think the correction price point has been touched, but the sentiment indicators still indicate further weakness. And with the de-leveraging that’s being expected and seems to be happening in most commodities (Oil, Gold, Basic commodities, etc.), Gold could touch 80~820 region.

But I don’t expect sharp correction in Gold under 850 mark. Gold, as in the past, should form some base in this region till long term moving averages base out and new support gets formed, before gradually moving up.

Now some may bring in elements of rising USD and reversal in Euro strenghtneing from here on. I beleive at somepoint USD will stop correcting further and strengthen on. But considering the current state of US economy that seems far from remote, to start anytime now. Euro (due to rishing govt. debt on various weak and some strong economies) should unwind to $ parity over next few years. But USD is not yet ready to start the reverse strengthening move. So I expect USD Index to correct to ~60 from current ~73 region. And during such time ot turbulence in currencies, no matter which one’s become strong and which one’s become weak, Gold is very likely to stay a safe currency and inflation hedge, globally.

Here, I must state that:

Gold, unlike Oil and other daily use commodities, doesn’t serve any other useful purpose, so it’s ‘useful demand’ stays limited to jewellery. By-and-large, it’s an anti-currency and anti-inflation bet.. So as long as these forces stay alive, gold should do well. Once global stabilization of stronger currency framework happens, all speculative demand from Gold should move out. Luckilu, all speculative price action (futures and speculative based) for precious metals, moved away into Oil and some other commodities.. And this bubble rotation from gold into Oil, etc. caused Gold correction and Oil speculation. Good for Gold in long run.

In nut-shell, Advise stays un-changed, i.e. :

“Those considering buying gold, might want to wait for such corrections to 860 region, and then start to “gradually” accumulate. Those who have better clarity and right patience, may want to look for clear technical signals of bottoming signs and buy gradually towards next uptick.”

Enjoy the Game.

PS:

Some very useful links to read:

http://www.frontlinethoughts.com/article.asp?id=mwo052308
http://www.gloomboomdoom.com/subscribers/download/080601.pdf
http://www.frontlinethoughts.com/article.asp?id=mwo053008