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Rediff.com  » Business » The bull run in world equity markets remains intact

The bull run in world equity markets remains intact

December 17, 2012 19:15 IST
The present consolidation can be used to buy into some fundamentally good blue chips including select PSU banks that have lagged the general market, says Sonali Ranade
Gold: Gold closed the week at $1697, a level higher than the previous two lows and well above its 200 DMA at $1664. Gold hasn't been as weak as it should have been over the past few weeks. Gold could test its 200 DMA early next week before pulling up modestly towards the $1750 region. Gold continues in a long-term down trend. The pullback to $1750 region, if it happens, will be reactive in nature before a steeper fall towards $1525. It is difficult to predict when a price collapse will come during the next pull back. Look to sell rallies to the $1750 region.
Silver: Silver closed the week at $32.29, well above its 200 DMA at $31.75 but below its 50 DMA at $33.  Silver continues in its long term downtrend. It too could test its 200 DMA before pulling back modestly to the $33 region. Silver could mark time for a few weeks in the 33 to 31 range. Silver's intermediate range target remains at $26. 
WTI Crude: WTI crude closed the week at $86.73, well below both its 200 and 50 DMAs. The long-term trend remains down with a target of $76.50. Actually, crude's collapse to the $77.50 region could be in the offing in the next few weeks. Watch for a break in the price below $84.  Crude is looking very bearish on the charts.  While $77.50 remains the target, crude may not stop there.
US Dollar Index: The dollar closed the week at 79.56, well below its 50 and 200 DMAs.  The $ is in a very strong and violent down draft with a target with a target of 78.50 on the DXY. Whether it will get there first or pullback & then get there is difficult to say. Expect a bit of consolidation above 79.50 early next week before a lunge towards the 78.50 region.  A bearish dollar and a bearish market for commodities may emerge as the new normal correlation over the next few months!
EUR/USD: The euro closed the week at 1.3173, a touch above the previous high of 1.3168 on September 14, 2012. That new high may signal that the correction in the euro ended at 1.2650 on November 13, 2012. Watch for a decisive break above 1.32 over the next week. That would put the euro firmly into an intermediate bullish uptrend with a target of 1.3450 followed by a higher target of 1.35. A modest pull back to 1.31 before the vault over 1.32 will not be unusual. A fall below 1.31 would negate this scenario.
USD/INR: The $ closed the week at 54.43 against the INR.  The $-INR pair is well above both it 200 and 50 DMAs. Besides it tested a well-defined support at 54 before turning up. Moreover, the 50 DMA has just crossed above the 200 DMA indicating a bullish move for the $ against INR. The first target for the $ is in the INR 55.50 region. Given the confluence of bullish signals mentioned above, a move above INR 55.50 cannot be ruled out. Note, however, that the outlook for $ in the world markets is bearish. Despite that, the charts indicate the $ is bullish against the INR.
S&P 500: SPX closed the week 1413.48.  After a higher low at 1344 on November 16, SPX made a high off 1438 on December 12 breaking above both its 200 and 50 DMAs. Having broken above 1434 [its previous high] the index pulled back in an orderly fashion to support at 1410. That's pretty constructive price action. Upon further consolidation, another attempt at a rally to previous top of 1475 and beyond can be expected. SPX remains firmly in a long-term up-trend although we are pretty late into a mature bull market. The prognosis for NASDAQ is similar. Skipping NASDAQ for the Shanghai Index this time.
Shanghai Composite: The Shanghai Composite closed the week at 2150, up 202 points, or about 10.3% higher than its previous low of 1948 on December 4. That's a huge move although it doesn't quite confirm that Shanghai has turned up finally. It's had a few false signals in the past. Nevertheless, the index's 200 DMA lies at 2190, some 40 points away from its last close. A pullback from that region will be entirely in order. The low it makes after nicking the 200 DMA will determine if the index has finally put in a bottom. In terms of wave counts and time, the index has probably signaled a wave 4 up correction to be followed by another leg down. 
NIFTY: NIFTY closed the week at 5882.80. The index has been in a correction from the high of 5966 made on December 11. The correction had a target of 5800, which was probably achieved on December 14. Over the next week the index could rally modestly to 5900 before retesting 5800.  After consolidating between 5800 and 5900, for a week or so, the index is likely to mount a fresh assault on the previous top of 5960 and may end up breaking above that to aim fort 6000. The present consolidation can be used to buy into some fundamentally good blue chips including select PSU banks that have lagged the general market. Avoid illiquid stocks late into this rally.

NB: These notes are just personal musings on the world market trends as a sort of reminder to me on what I thought of them at a particular point in time. They are not predictions and none should rely on them for any investment decisions.

Sonali Ranade is a trader in the international markets
Sonali Ranade
Tags: DMA, INR, SPX, NASDAQ, WTI