Dollar Index

The Dollar index has consolidated in this range for long. When the momentum reversed late last year I considered the idea that the dollar could make a top longer term. It made sense then. Now months later momentum is back to near zero. The Monthly Bands have contracted and we have support near the lower end near 91-92. So the set up is more bullish than bearish from here. Also there is the possibility that the next move is not just within the current trading range but a breakout to a new high. A breakout above 101 would mean that wave 5 up to 110 and maybe as far as 117 develops.

Copper

Copper prices have been pushing to breakout above the falling trendline at 2.254. A close above the line would make the case for wave C up to go to 2.40. While this was always possible the rise in wave C did not appear impulsive with several overlaps, and wave C is usually 5 waves. But if prices do breakout that would be the best thing to consider.

DJ Euro Stoxx 50

Even with a new high in FTSE and the Dow, the DJ Euro Stoxx 50 index is at a lower top. It halted its 4 day of gains in what appears like a 3 wave a-b-c rise. So should another wave of selling in European stocks start from here? Watch out for it because this would be the 4th lower top on the index since April.

Brazil - One step back

This market requires taking a step back from the bearish outlook. Reason is the completion of 5 waves in a falling channel that can end a complex wave. Even if Brazil does not enter a new bull market it can do a larger degree X wave like India did breakout of the channel. C=A can go to almost the previous high. 2010-2016 has been  a 6 year bear market for Brazil. C=A would take the Bovespa back to 70000. One level to watch for failure is near 59000, that is 61.8% of the bear market.

Russel 2000

The Russel 2000 is near the previous wave 4 area or swing high and still looks like an expanding triangle for the rise. Though S&P has blown above the upper trendline of the expanding pattern we need to give it time to see that it is not just a throw-over or false breakout.

Volatility Post Brexit clues

The US CBOE VIX, dropped back to the lower base trendline so it is time to review this chart i put out before the Brexit Vote. I made a comparison with one year back when we saw a similar pattern when the Grexit Vote took place in June 2015. The post event panic subsided and the Nasdaq hit a new record. This time round the Dow is at a new record. Now the question is whether we will see a repeat of the previous pattern, a final explosion in volatility like we saw the last time. Right now no one is expecting it. But given that the entire global rally is on the back of central bank buying or expectations of easing and not Real Earnings growth on the ground, pay attention to this chart now very closely in the coming weeks....Just in case.

BSE IT - Day of Reckoning

The CNX IT index finally has its day of reckoning after years of calling it. I think I first did this with Tata Motors and after years it did a throw over above the line and then gave back in 6 months gains of the entire wave E. It bounced off the lows of wave D of the ending pattern since FEB 2016.

So what is different on this chart? It has taken its own sweet time to form a top throw over in wave E and is now threatening to break down. I think the break down started with Infosys today. So wave D is at 5000 and the IT index is at 10000 odd. A 50% drop in 3-6 months if the same pattern follows, lies ahead.

Now here is a closer look at the IT index as it looks a bit different than Infosys thanks to the impact of TCS. It is a series of head and shoulders patterns [you will find such patterns described in ''Martin Pring'']. The measurement of the second head goes closer to 7300.

Video Update - LSR

I have marked this Video update as Long Short Update because it covers many Macro Trends and issues to watch

https://www.youtube.com/watch?v=ZvvCkbWCJeA

One point that came to my mind and may come to yours too after you listen to the Update and see the history of the Dollar v/s EMs, is that after the SE Asian crisis, the second half of the dollar rally did not affect the Asian tigers so much as they were bailed out. So as we enter the next leg of the dollar rally would it affect anyone? Will it just be bullish for all markets in correlation with a bullish US market?

It is possible that happens but it is early to know yet. Reason? The rising dollar back then was not a currency war globally or maybe I do not remember that part. It did reflect money flow to the US Tech bubble. And the currency crisis in EMs was due to hot money. Russia was a true rub off effect of the rising dollar though. This time we have many more countries with a rub off effect and yes because the world has a lot more dollar denominated debt. I did not hear that Brazil Russia Venezuela were bailed out by the IMF like the SE Tigers were. Europe is too busy bailing out its own banks and institutions. So what we should do is watch how the markets respond to the rising dollar once more rather than draw a conclusion. IF somehow that gets managed and some Big Bailouts are doled out [instead of the promised Bail ins] and is US positive then we may have a case. But we are already at Tech bubble valuations on average for Equities so you really need to make a bigger bubble call here by watching what happens next for these asset market for a while. Because any larger trend would last for quarters and then there is a lot of time at hand.