The Global Market Trader Weekly Update – 4th September 2011

Hi friends,
I did not find the time for last week’s update although I did intimate some of my close friends about the week’s prospects through mail or chat. Almost all instruments covered in the last update behaved in similar way. Gold retraced to the figure of 1710$ and retraced. Nifty reacted around 4710 and then staged a pullback. The FED chairman’s speech at Wyoming was almost a non -event. It is pretty clear that the weekly charts of the Dow Jones, S&P500 as well as Nifty are bearish. What we are seeing right now is a pullback. Pullbacks are the trickiest to trade as you could end up giving all money back to the markets if you don’t have the expertise to trade them. In fact you could lose money even if you are an expert trader. One will find a lot of mixed opinions on TV channels. Some may say time to buy as bottom already made. Some may say sell into a rally and some may say buy on decline. But really a corrective wave after a huge fall could be quite high and it would be difficult for someone to just short on a rally. Also you may buy and then the market may just move down a couple of hundred points before turning up again. So these advises may be good for institutions sitting on a lot of cash but not for retail traders as they could be killed by the market volatility. Also remember that institutions need not be the best traders even though they move markets. Remember the number of hedge funds that got shut during the financial crisis!!!
A retail trader needs to be careful with tight SLs. That is the only way to survive. Maybe you could take a cue from the levels mentioned in the weekly update. They would help you but you still need to use your own trading skills for entry and exits as I am not there to trade for you.
Friday’s Non- Farm Payroll Report was disappointing and the US markets saw a sell off. This may get reflected in emerging markets on Monday morning but during the week there is a good chance of the pullback to continue.

What Are The Markets Saying?

US Markets

Dow Jones
The sell off on Friday has given a target of around 11041 and the market is likely to hold 11000 for the week. If this level breaks which looks remote for the time being then the market could slip to 10500 where it is likely to find support. On the upside resistance is at 11900.The upside move is likely only if the market is able to move past 11550. Now this is short term. In the longer term the Dow is likely to head to 9877 by/before January 2012 which could be the end of the bearish phase for the Dow.

S&P500
The index is likely to find support at 1150. The pullback could continue only if the market moves above 1200.
So be very careful and trade.

Metals

GOLD
The target of $2000-2012 which was mentioned more than a year back by October remains intact. At this point it is advised to exit all longs as we reach major targets on daily, weekly and monthly charts. So generally when this happens one could expect a deeper retracement.
It is difficult to put a point a level to buy gold right now as the level of 1710 was a good opportunity to get in. Right now one will have to look at lower time frames to get into a low risk reward entry which would be possible only during actual live trading. But the major support for gold is $ 1650.

Currencies

EURO/ USD
We are very close to the bottom of the range of the 55 period containment zone on the daily chart but wave PM seems to be indicating further downside for the pair. On all the time frames lower than daily expectations seem aligned. So target of 1.4120 looks almost inevitable and a test of the weekly 55 period mean looks possible around 1.3890.

GBP/USD
The pair is still trading in a range of 1.6450 and 1.6080 on the daily chart. On the 1 hour time frame the pair is approaching resistance at 1.6250. The strategy would be to look at resistances and sell with tight SLs and buy at supports with tight SLs.

USD/CHF
The pair is likely to test the 4 hour mean at 0.7995 before moving back down.

Indian Markets

Nifty
As expected the markets bounce d from lower levels and then faced resistance around 5050. On Monday it could move down but the nifty seems on course to 5300-5340 by mid- September. All longs are advised to exit at those levels as the market is likely to move and challenge 4500 in the next few weeks/months.

Happy Trading!!!

Savio

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Tags: dow, forex, Gold, Metals, SP500