Dear Members,

USDINR

USDINR touched the Sept high at 65.89. From the bottom on Jan 08, we can mark the entire rise as 5 waves as shown and we are in wave v of 5 if so. Yes it has not paused yet but watch this level. If we complete a 5 wave rise then wave A [or 1] is complete. Wave B down can test the wave iv lows near 64.72 before starting the next move higher.

Steel Prices

Since Steel futures do not directly trade we often look at other related data. Like this Hot Rolled Coil from CME that rallied from Sept'17 to date. Paused a bit now but near the highs. It tells you something about the steel price cycle.

Brazil

Last night US bond yields spiked and spooked markets, and so are Indian bond yields up. But one look at this, Brazil, consolidating for a while and now the daily momentum is in buy mode, looks like a rally starting in wave 5 of 3 or 3/3, one of the two, Signals an EM rally ahead.

Bonds v/s Dollar

The US bond market started to fall in wave 5 as anticipated with one difference. The dollar was not falling along side with it. The correlation between the two keeps changing from time to time. The recent period saw an inverse relationship till Nov 2017, but after that both fell together [inside the vertical lines]. It took two months for equities to react to this trend. When both fall foreign investors in US debt are hurt significantly. So this week when both moved in opposite directions it is back to the earlier trend. When both fall together again is when I would really be worried as it would signal an exodus from US bonds. Till then it is a reaction to other factors

Euro Dollar

The Euro dropped and the dollar ended at the upper end of the triangle I discussed. It is also very close to the 20 week average now which should be a resistance. So going back to the Euro this is the ideal wav count. Remember in Nov I marked the initial advance as 1-2-1-2, sticking with that the triangle we see should be wave 4. The lower line is at 1.223. So as long as we do not break 1.223 we should watch for a move up to start that is wave 5 of 3 [circle], and 3=1 larger degree goes to 1.32. So I would based on Elliott waves expect soon a major rally in the Euro and decline in the dollar, in line with what we saw last week, rising commodities prices across the board. 

US 2 Year abd 10 Year comparison

With the FED raising short term rates, the 2 and 5 year bond markets have led the way down for the bond market. As was the case last week they fell first to new lows. So first let me show you the 10 year that started wave 5 in a perfect channel [This is an upside down chart so the rising trend means falling bonds] and could be source of considerable fear as we go toward 118.50 at the channel or 117.50 where 5=1. 

However despite the bearish set up above I have only one concern that I discussed in the video on Friday. The 2 year has fallen so fast that the RSI is at 22 on daily and 16 on weekly. Weekly RSI has remained below 30 for months now. So this extreme oversold condition can get relieved suddenly when bond bears decide to cover shorts a bit near term. Not sure of the trigger, could be anything. Not sure that happens in a day or 5 but who knows when. Till that happens falling bond markets are a scare for most markets. As shown the fall in the 2 year would only be a third wave so 4 up and 5 down later still pending.

Lastly as noted in my currency update if the dollar and bonds are inversely correlating again then will a falling dollar [as I still expect], cause bonds to rally? So the bond market collapse is a slow motion train wreck but just in case some of these factors kick in, the current short term fear around bond markets can get pushed ahead in time a bit. Something to think about and watch closely. See if the dollar tops and its impact on the bond market for clues on monday/tuesday.

Nifty Video Update

Nifty video update

http://screencast-o-matic.com/watch/cFfbitbVtF

Rough Rice Continous CBT

Rice prices have been on the rise again. I did indicate a 3rd wave last year and we took our time to consolidate but now we are making 52 weeks highs in Rice again. 3=1 points to 15.50$ from here. Time to look at Rice companies?

Dollar Index

Last night I sent out a mail on the dollar because it stopped falling at exactly the lower line of a triangle formation on the spot. This is a futures chart and the upper line is at 90.19. A move up to the upper line appears on the cards. Above that the 20 week average is at 90.45. Any bounce should end at one of those levels if it is temporary. The record shorts in the dollar can trigger a larger move but we cannot be sure of that. Wave wise I still think this would be wave 2 of 3 and 3 of 3 down is next once the counter trend bounces are over. A break below yesterdays low of 88.94 would be a sign that the dollar is declining further. Till then we are in bounce mode.