Dear Members,

US 10 year T notes

I have written a lot about the inverse relationship of T notes and US equities and was anticipating for a while that the wave 2 rally could go on for months. Last week however bonds were down. No So far wave 2 has not even retraced 38.2% and it appears small, but EWI started to anticipate a 3rd wave down already, and it is a valid wave count. So let me discuss the reason. First on classic TA we have seen prices touch the 40 week average and sell off so till we cross that higher levels do not come right away. But if we break 125, near the 40dema, then we could be falling further. EWI's reason is that this small little bounce has seen Speculators go back to a huge long position on CFTC futures. The position for the ten year is bigger than it was at the wave 2 circle top in June 2016 last year. So that is extreme. In short traders went so quickly back from short to long that the tide may have changed. Let me add that yields are rising across Asia, including the India 10 year GSEC. So we may have a situation here that no one is watching. Wave 3=1 down for US T notes can mean that yields go up from 2.3% now to 3.5% over the next 6 months. That is big. So till what point will a falling bond market keep up the argument of money flowing into equities? There will be an inflection point when everyone especially the currency markets take note of a crash in the bond market. In fact the EM currencies have already started to decline decoupling from the dollar index. This trend should be watched closely as well. It could mean a falling dollar index and a falling rupee[INR], real[BRL], yuan[CNY], TWD, THB, RUB, ZAR etc.

India VIX - No worries at all

I am just Intrigued enough by the Low VIX to post this timeless poster from the ''MAD Magazine" on the India VIX, need I say more?

Copper -false breakout

The recent move up in copper was again an x wave. In many base metals I did note that either an x wave or new move is on. But I did think the flag breakout on copper could mean more. That is violated now. Copper is in wave z of 2. z is the last wave of any structure. But how far lower can it go. 50% retracement mark is at 2.45 and 61.8% is at 2.36. Both are open now.

Wheat CBT

Wheat at the CBT exchange - finally broke out of a falling channel [or flag], and should be in a 3rd wave. A rising channel indicates the potential to move to 490

Soy Bean

Soy Bean - broke the multi year neckline support at 2945. This puts the bullish case at risk and you must consider the extreme bearish case as well. A move below the recent low of 2760 would mean that Soy bean's triangle was a top formation. The neckline measurement would point all the way down to the 2000 mark unless we can get back above the 2945 level. So there is considerable risk given this break.

Indian Agro - Warning

Based on global Agro prices for the last 2 years I have been making a  bullish case for Indian Agro and they did rally for a while, but recently there were breaking down and so it takes me to the NCDEX, Dhaanya futures index. This is a index of Agro prices that they created and the weights are shown below.

I did post this index before with the wave 4 marking on it in 2013-2014 so wave 5 up was on. What is apparent now is that maybe wave 5 ended as an ending pattern. The index has been making lower tops and bottoms from the Point E and this is dangerous. Did India Agro just end a bubble in wave 5? Then we should be very careful on the bullish case for Agro here on. Also in this ending pattern C and E are almost equal. But this happens sometimes. Till we get a clear upward trend we should be aware that something is not right here and a deeper correction across the Indian Agro commodities is going on. If this wave count proves right then we can drop 33% on this index to the wave 4 low near 2000. In short avoid a bullish view on Indian Agro on NCDEX till a clear bottom is established.

Dow

The Dow may not have competed 5 waves for the Nov-Apr move and it is possible we see one more new high to complete the structure. If so a move to 21600-22000 is open in the near term.