USDGBP

USDGBP - completed a 3 wave decline in a-b-c. Either wave A of a triangle is done or wave 3 of larger degree will extend. In any case we should get a move up to 0.82 first. Above 0.82 it can also extend to 0.84. The downside should not be limited for this cross rate.

USDCNY

The USDCNY continues to go unnoticed at new highs. This morning it made one more record reading and wave wise it could mark wave V of 5 up starting towards maybe 7.0-7.10 in the next move. Given so much noise last year about the weakness of the Yuan this is surprisingly being ignored by markets.

US 30 year T Bonds

US Bonds remain very oversold, and yesterdays dip does not change that. Momentum divergences continue as ROC shows loss of downward momentum but the lower top bottom formation is still to break to allow for a move up to start

Gold Bugs Index

The HUI or Gold bugs index of Gold Mining stocks also broke to a new low finally in the last two days after holding out for long. The hold out now looks like a triangle and so I am marking it is wave 4 of C. The this fall should be 5 of C and the last and final. Of course we need it to stop to call a bottom. We are below 61.8% now and at the lower end of a falling channel for the entire move. C=A*161.8%=156. Current close is at 170.

Relative Rupee

Someone quoted on Twitter that the Rupee is not likely to fall as much as the dollar index will rise. That reminded me of the Relative Rupee indicator that I have been plotting since 2006 to call on inflation. This is the DXy/INR ratio and everytime it overshoots on the upside inflation follows. So here is a chart. Where are we? Since 2001 we are in a rising channel. Prior to that the trend was almost vertically up. But since then we move up and down this channel through periods of super INR weakness and then relative strength. The last major run up was from 2010-2013 and I forecast that on Indiacharts live. in 2015 too I put out this chart and the indicator did rise but not anything to cheer about. So now as the indicator comes closer to the lower end of the channel I think it is time that the INR starts beating the DXY in the dollar game. this should mean a period of major moves up in the USDINR that beat the DXY to it if the lower line holds in the coming weeks.

ONGC

IC CHARTS- Long term

ONGC - fell from the 2014 high in 5 waves marked as wave A. Wave B has retraced less then 50% of wave A so far. Prices are very close to the upper Bollinger band near 215 on the Monthly chart below. My sense is it should not go much above that and the next move should be wave C down longer term. C=A = 84 . I cannot be sure that wave B is complete but this week prices sold off from the upper end of a channel on weekly charts and closed the week down so there is a case for it. A close below 195 would be a sign of weakness ahead.

HPCL

HPCL - Value Wave update

Monthly momentum remains in sell mode. Rising Oil prices may not help if the government does not pass the rise on completly. Price wise support levels to watch are 387-380-330. 330 is the rising trendline of the entire trend. Below that we confirm wave 2 down of larger degree that can pull back to the previous swing low near 200 if that happens.

NYSE Composite

Most US indices now show their short term momentum in sell mode. What is interesting is that the Dow is the only index that blew past its upper trendline of the highs. The S&P did not and neither did the NYSE Composite below. In fact the upper line of the highs of A and C was exactly touched on the chart below before the market halted. So watch the recent highs closely and till we are below the upper trendline here I would think of it topping out for US Equities.

S&P 500

The US markets continued to lead even in an extremely overbought scenario. That said the Dow has discarded the ending scenario but most other US indices have not. So it maybe early to say that this is not the case. In any case we need the markets to come off this overbought reading before going on. The S&P 500 was lagging behind by a large margin, and has just caught up with making a new high for wave E above the high of wave C and closer to the upper line which is at 2286. 

Other broad indices like the NYSE composite are also on a similar path. Remember these were the worst performing indices along with the Transports last year leading the decline during 2015 with inter market divergences. The NYSE Composite has not yet made a new high above the 2015 highs.

Europe a Rusty Mix

Europe is a rusty mix. Yesterday I did discuss a different way of looking at the DJ Eurostoxx. But have things changed for good for these markets? you can still argue both ways. So before being carried away by the bull case with reflation in the air, the wedges in US does have similar triangular developments in the Euro indices that we can look at for one last time till proven wrong.

Most of the rallies for the last 6 months did appear corrective and not impulsive to say that a 5th wave has started. Here is the DAX as a series of 3 waves into a triangle now. 

Similar pattern also on Netherlands. Good inflection points to watch till proven otherwise.

Bonds and Equities

After 2 weeks of trying to rally the US 10 year bonds are out of oversold territory on the RSI indicator. The 30 year bonds broke the low then were holding on to. So either the inter market divergence causes a bottom and a rally in bonds and a decline in US stocks. Or bonds resume their crash in which case this would be the largest decline in the US bond market since the 2013 Taper tantrum. I do not have to remind you what impact it had in 2013 on our bond and currency markets. So we remain critically poised. Add to that a rally in the dollar. So both the scenarios here of what happens next to the bond market in the US is not good for India, as it would impact us one way or another. For this reason I see no good news for us in the strong US and European stock markets recently. The wave counts below show that if new lows are made in the 10 year note this week it would be wave 5 subdividing into 5 waves itself. In other words the market adds 3 more waves down from here before it is complete, and could last for several weeks.

 The 30 year bond did make a new low so here is an upside down chart and an attempt to change the counts to an extention.

And lastly i should also show a chart of 1987. The 1987 US stock market crash was preceded by a huge move in the bond market down that saw equities fly. Up until the point that it tipped over. The horizontal line marks the top of US Dow index [blue chart], at that point rising rates in the bond markets finally tipped the stock market lower and they both started to fall together. So while the current trade of sell bonds and buy stocks sounds great, there is a tipping point for bond yields when it will also hurt US stocks.

Evening Star

Candlesticks are a great way of judging important support resistance levels. A candle pattern where a wave ends improves the probability of the move. Yesterday the Nifty formed what can be called a Evening Doji star. What this means is that the 3 candles together form a pattern where the second candle is a Doji with a gap on either side. This is not a classic gap but a gap in the real body or the box like part of the candle. The boxes do not touch each other. [New to candle patterns, the box is drawn from Open to Close and the line above it or below it mark the high or low of the day]. An evening star is when the 3rd candle changes trend to close well within the first candle. Usually a move halfway below the first candle as shown by the horizontal line is good. So yesterday we had an evening star. The Books by Steve Nison offer an interesting way to decipher candlestick patterns. Combine the 3 candles to form a single candle, taking the open of the first day and close of the third, and high low of the 3 days. Usually you get a hammer or inverted hammer which is another form of candle pattern that is more powerful. In this case the evening star is an inverted hammer as shown. An inverted hammer is a bearish pattern where all the gains are lost and the real body is less than 1/3 of the height of the pattern. The visual chart should be self explanatory. For more read Books by Steve Nison on Candlesticks.

Euro

The Euro managed to protect the 1.053 low made right after the Italian vote and took support at the Lower Bollinger bands. The bands have contracted so this support is important and given that it makes a higher bottom while daily momentum remained in buy mode, makes the case for a bottom stronger. I am marking wave ii down as an expanded flat that completed at the minor higher bottom. The next move should be wave iii up to 1.078 and higher.

Crude

Crude - has broken out of the tiangle pattern for wave B and closed above 52.30 for 2 days. The implications of staying above this level are for a move to 62$ near the May 2015 highs, but even more C=A near 68$ in the coming year.