The Global Market Trader Weekly Update – 23rd October 2011

Hi Friends,

Great close to the week for the US markets. There were retracements during the week but eventually the markets closed higher. Now this is no surprise as we move into the last stage of the bear market. As I have maintained and continue with my overall view that the Dow and the Dax are in a bear market. But markets do not fall when everyone is bearish. In this entire downleg we did not expect a low below 9880 on the Dow and now 10800 is strong support for a rally which is likely to leave most investors thinking that a new bull run is on the way. This is the job of the bear market. In the short term it will seem to be a “Bear Trap” but in the medium to longer term it is likely to be a “BIG BULL TRAP”. Remember fundamentally and structurally things have deteriorated. Unemployment continues to be high, debt is mounting, housing isn’t improving, Europe is in a deep crisis, and China and India both have contracted in growth. By the way the Shanghai index made a new 52 week low which has gone unnoticed. Investors need to bear this in mind. For traders the strategy is different as they are more interested in riding with the short term market price action. The next week is going to be crucial with the EU Summit bailout announcement on Wednesday. The way the market has moved up I would not be surprised if the market sells off after the announcement even if the package is good. The reason is we are very close to resistances (daily and weekly ) and the rally so far has been one sided with no meaningful retracements. Also time wise the first target of 12225 is just about 400 points away and we still have two months to go. So a time wise retracement is also due. Besides the CBOE Put/Call ratio is at 0.50, a level around which there have been major pullbacks. So earlier into the week we could expect a short term top and then a retracement which could last for 7-8 sessions where traders could get a chance to go long. The overall short term trend is up and we are likely to go higher by the year end.

Now though I am very bullish on gold, it seems to me that a short term bottom is still not in place and a revisit of $ 1525 is likely. Any short term low formed is a good level to enter with a target of a new high.

What Are the Markets Saying?

US Markets

Dow Jones Industrial Average

The index has stiff resistance around 11900-11950. A retracement is likely in coming sessions with a retest of 11200. The index has a strong support at 10800 in the short term.

Currencies

Euro/Usd

Headed to 1.40 in the earlier part of the week where it has stiff resistance and could retrace.

Gbp/USd

Headed to 1.6100 in the earlier part of the week and could extend to 1.6200 where it has stiff resistance and could retrace.

 Metals

Gold

Short term sell area is around 1680$ for a target of $1500. Long term buy area is around $1450-1500.

 Indian Markets

Nifty

The index could still get to 5180-5200 where it faces stiff resistance. It could retrace to 4950 where one could buy for a good upmove. The resistance of 5200 is likely to break on the next upmove.

  Happy Trading!!

Savio

Share on Facebook

Tags: Bear, Bull, dow, forex, Gold