The Global Market Trader Weekly Update – 9th October 2011

Hi Friends,

The week was in line with expectation. Most indices tested their support levels and bounced back. The bounce back was supported by some good news. The Bank of England launched a second round of quantitative easing, pledging to buy a bigger-than-expected 75 billion pounds of assets with new money. The European Central Bank followed up with aggressive liquidity measures, throwing a lifeline to cash-strained lenders. The European Union also said it would present a plan for a coordinated recapitalisation of banks by member states. The rally in the US markets has been much stronger than that of emerging markets although it is US which is actually in a secular bear market. Emerging markets like India, China are definitely slowing down as PMI for August of both countries was below 50 which indicate contraction. However in comparison to the advanced economies they are in much better shape. India is on a better footing than China as it is more of a closed economy which has a huge demand of internal consumption. The biggest threat to the Indian economy though is the lack of swift implementation of policy measures. The infrastructure is still lacklustre. There are scams reported each day. There appears to be a kind of revolution ready to erupt against corruption. Unless the will to create a truly safe investment environment for the Foreign Institutions is put in place the inflow would always flow in and out causing high market volatility. This is good for traders as it gives swift movements and profit opportunities. But definitely the retail investor is not going to put his money in.
The European Commission is expected to present a proposal on bank recapitalisation before the EU leaders summit on Oct 17. This is an important event to watch out for. Expectations are of an additional package worth at least 1-1.5 trillion euros. Now most European Indices (DAX,CAC,FTSE) are in a corrective wave to the decline which means that there is further decline in store for these indices which also means that most other global indices are also in line for a decline. So whether it is a sell on news or before news will only be known by live price action.
Gold continues to trade in a range but the probability of it testing the support and possibly going below $1525 is high. Eventually though gold is headed higher as uncertainties will continue to plague US and Europe for a long time to come.

What Are The Markets Saying?

US Markets

Dow Jones Industrial Average
The index broke the support of 10700 but bounced back strongly to close above 11000. The index is still in a danger of moving towards 10000-9877 by/before 7th November 2011 which could be a short term bottom. For the current week the index is likely to trade in a range of 11300-10600.

S&P500
The S&P is more or less correlated to the Dow Jones although it is a much broader index. The target could be around 1050-1000 which could be a short term bottom.

Metals
Gold
Expect to trade in a range of $1660 and $1610. The probability of a break to the downside is high. So traders can sell on highs.

Currencies

Euro/Usd
The week almost hit the previously mentioned target of 1.31 before bouncing back. The pair is looking weak and 1.31remains on cards. For the week 1.3300 is a good support which is the 1 hour 55 period containment zone from where it could bounce to 1.3500. Sell on highs.

Gbp/USd
The pair could is in a corrective wave on the daily chart and could move toward 1.5750. Sell on rise.

Indian Markets

Nifty
The index is unlikely to go beyond 5050 and the next move downside is likely to break the level of 4710 on the downside. Targets are 4680 and 4550.

Happy Trading!!!
Savio

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Tags: Currencies, dow, forex, Gold, SP500, volatility