Back to the Grind

I am not sure if it is the Holiday effect but often the markets appear to go dead or narrow ranged during these periods. So the market did not make much progress. Still from my last podcast to date there is no change in my view. We are witnessing a globally synchronised market bounce back and that is more visible in EMs and Asia than the more volatile US equities. I am back from a long break visiting some serene spots in MP, and I hope everyone has had a break of sorts from their work schedule.

We are in the Midst of a election season that just ended in the US and will do so in India by early Dec. The important trends I discussed this week were the potential trend reversal in the US dollar after months of pushing higher. The dollar bear market could make a comeback. 
That is what the EMs maybe dwelling on. Also Oil had its biggest decline in months with no market impact as yet. But as I noted in a recent economic update Oil and equities are more correlated than most realise and a bottom in oil near term could be bullish stocks as well. If you missed that article find it here

Here are some updates from this week to keep you up to date.

 

USDINR USDINR  - appears to have been helped by the falling crude prices. And now I expect the dollar index to start a larger decline because of the where it is placed in retracements and sentiment. So USDINR broke the wave c low and I have changed it to an extention in wave c that will now break up into 5 waves. We are in wave iii of c. The next support is at the wave iv low of the last rally at 71.56. Major support on weekly charts is at 71.15 at the 20 week average if the decline becomes steep. A steep decline might mean the alternate wave count kicks in that the fall is a larger wave 2 of the long term 5th wave. The existence of a zig-zag suggests that and I may change the counts accordingly as it unfolds.

 

Crude So if you were waiting for the first sign that WTI crude has bottomed we got it from the positive closing after a 12 day losing streak in wave v. It extended longer than I thought and now the low at 54.75 maybe a pivot for an up move that can retrace the entire fall to some degree. Now lower lows cannot be fully ruled out ever but the wave completion with sentiment and RSI are indicative that this is a good first sign and others should follow. In terms of initial retracements 23.6% is at 60 and 38.2% is at 63.28

 

Dollar Gold Copper Euro Crude Yesterday I discussed extreme sentiment and it is now across the board the dollar DSI is 91% of traders bullish is indicative of a top, Euro at 6% of a bottom, gold at 7% for a bottom Crude at 7% and Copper at 10% so a top in the dollar and bottom in commodities appears indicated based on sentiment readings of the daily sentiment index poll. This daily chart of crude shows a 5 wave decline in late stages waiting for a snap back rally.

 

S&P 500 Both these options Remain open near term, see green and blue markings as alternate views. Both point up first then down. Wave ii is a top below point a and wave c is above point a. Eventually a 3rd wave down of larger degree follows that will break to a new low.