The Global Market Trader Weekly Update – 2nd October 2011

Written By: Savio Rodrigues on October 3, 2011 No Comment

Hi friends,

The week was more or less in line with expectations. The US markets first staged a pullback and then resumed their downtrend. The pull back was in anticipation of the European Bailout plan which was to be voted by Germany. Since Slovenia is yet to vote on the Plan on 11^th October and there is supposedly some resistance from this country, the pullback fizzled out and markets sold off yet again. Sell off was across the board in global equities. But the market is setting itself up for a big upmove once the current downmove is done with.

‘Operation Twist’ is good news to equities. By forcing longer term yields lower money will find its way toward high yield investments and that means Equities.

If the European Bailout plan is passed by Slovenia it is again a good sign for equities. First of all it shows that Europe is serious about the crisis and they are also serious about the euro not falling apart.

An additional stimulus by the US cannot be ruled out if the USD continues to strengthen.

In the immediate short term though, the bias towards equities is likely to be to the downside.

What about gold? Is the Bull Run done with? In my view fundamentally nothing has changed. Are the uncertainties gone off? Has the US economy resolved its problems? Has the European Debt crisis been resolved? Is the risk to the global economy done with? When none of this has changed then why would the outlook for gold be bearish? So fundamentally the outlook continues to remain bullish though in the short term we could see some price damage. Long term investors should utilise downward price movements to buy physical gold.

What Are The Markets Saying?

US Markets

Dow

As expected the index pullback back toward the 11300 mark and then sold off. After the current close below 11000 the level of 10700 is likely to be tested again. A break below 10600 could target 9877 where a short term bottom could be in place.

S&P500

The downside target is likely to be 1050.

Metals

Gold

As expected the metals found support around $1525 and bounced back sharply. Those who have gone long around those levels are advised to book out as a retest of $1525 is likely and we could expect lower levels. The metal seems to be in a corrective wave from the $820 to $1924 upmove and a move to $2000 is still possible although the time factor could be delayed. If the metal gets to $1325 it is a very good buy for investors.

Currencies

EURO/USD

The downtrend has resumed and the pair could target 1.3100 this week. A mild pullback around 1.3300 is possible.

GBP/USD

The downtrend has resumed and could target 1.5200.

Indian Markets

Nifty

As of now the view on the downtrend remains the same with a target of 4680.

Happy Trading!!!

Savio

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