Market Musings

It was a great relief to be away form tumultuous markets in last one month. S&P swung between 1150 -1250. Surprising factor was Nifty which did not made much movement and even when S&P is trading 200  points above its lows, Nifty is making new lows. This indicates a tremendous bearishness in Indian markets. It seems so surprising that just few months back everyone was bull on India and how economic factors and investor psychology change overnight. My own assessment is that Nifty can go below 3800 if not lower in next year. I am very bearish on Global Macro factors for next few years.

The first chart I am going to present is of Athens stock index. People may find it hard to believe but even Index can fall up to 90% if the country do not have option of money printing. Athens stock index which made a high of 5000 in 2009 is today trading at 680 down by almost 86 %. This chart is just to point out that stock prices can correct severely even from current levels.

Athens Stock Index

The second chart is that of Gold. I have long maintained my bearish stance on gold. Gold had currently broken the trend line which was supporting it since 1000 levels. The correction from here could be up to 1300 levels. I would again reiterate that gold would be a great buy between 1100 -1300 levels with stop loss of 850 and target above 3000 in next five years.

Gold

Silver is also following a similar pattern and had taken support at long term trend line. Any break below 26 -28 levels will result into further fall up to 20 levels but just like gold I think silver will be a very good long term buy at those levels with target above 100 USD an ounce in next five years.

Silver

The current chart is of INR which continue to loose its value against USD. I am very happy to be among the few analyst who foresaw the coming decline. I reiterate my target for INR which will reach 55 (almost done) to 60 levels against USD.

INR

The last chart is that of Nifty. Nifty is forming very bearish pattern. If nifty goes below 4700 than it will correct swiftly up to 4250.

Nifty

Risk in Europe

The risk rally is on and have gone beyond my initial expectations. As I wrote in my last post Italy bond yield would be the most critical thing to watch if they move beyond 6% they would move up sharply. As we saw in last week Italy bond yield moved up 20% and reached 7.5% before correction.

If we look at the given chart we can see that Italy's bond yield are just moving back to the trend line and if they stay above 6% then they will move up in future. Therefore this is only a temporary lull before the storms comes back.

In the chart we can see the primary trend line at around 5% level and secondary trend line above 6%. Only if Italy's yield goes below 5% I will change my view on sovereign debt crisis. .

Italy 10 Year bond yield

According to Italy's debt yield is following the same path as Greece did in 2010. Greece bond yield saw a spike in May 2010 and then corrected only to rise significantly after that. Italy may see similar patter but the uptick in yield should not be as vociferous as that of Greece was. 

Greece 10 Year bond yield weekly chart

I think the main yield to watch from here is that of France. The yield difference between France and Germany have been widening since last one and half month and it had reached a new high. France may become the next country to be attacked by bond raiders and if France comes under attack, it would prove to be the end of Euro. 

Comparison between 10 year Bond yield of Germany and France

I think the path from here is very clear.  They want to use EFSF to leverage or provide loan loss grantee and I think both wont work. A leveraged EFSF will be like a CDO with bad underlying assets and therefore no one will lend money to ESFS, because if EFSF looses money then no one will stand behind EFSF to repatriate that loss. (Last week in a 3 billion auction ESFS could only find buyers for 2.8 billion, rest was unsold).

I think ultimately ECB will be forced to become lender of last resort and they will be forced to buy sovereign debt form all PIGS countries. Although at this point in time Germany has huge objection to this but I think the objection is more symbolic and slowly as the crisis deepens Germany will give way and accept monetization of debt by ECB.

This will give a temporary relief to the markets but this solution will fail. The reason is that ECB is not FED. FED has the advantage of USD which is a reserve currency and USD is backed by one sovereign nation, where as ECB is neither a reserve currency and is backed by 14 different nations and is more unstable.

If ECB starts to monetize debt the result will be a fall in value of Euro to parity (which seems more likely on chart) and high inflation in Euro zone. Ultimately monetization will result into covert default by Eurozone by reducing the purchasing power of Euro and by higher inflation. Even for equity the price of stocks may stay at present level but their purchasing power would go down significantly.

PS :- The value of Euro completely depends on the faith people have in monetary union.  Monetization of debt by printing Euro will reduce peoples faith in Euro and may cause a panic where by people will start moving away form Euro to USD. If this panic starts there is no one to stop it and it will create a massive financial shock which would make 2008 look like a good year.

The volatility in markets is more than what I have ever seen and is mind numbing. It is very hard to have a rational short term view on market prices and had become even more difficult during the current time of extreme volatility.

Therefore its better for trader to get out of their position and wait for market to give a definite signal towards which direction it wants to take. I am no longer sure of a large price correction in Equity, It all depends on ECB. If ECB choose to monetize debt there wont be any correction in nominal price of  market. Therefore I am taking a months break and hope that market will stabilize by the time I come back. 

The Sick Banks of Europe

This chart is one more additional chart which shows how EU banks are cheating the market. In Dec 98 the ratio of total assets to risk weighted assets was 2:1. Which means that if their capital adequacy was 6% of risk weighted assets it was 3% for total assets.

Today the ratio of total assets to risk weighted assets is at 4:1 which means that if their capital adequacy is 6% of risk weighted assets, it is only 1.5 % for total assets.  Coupled with Bank size with are 2 -4X GDP compared to 1X,  for US,  loan to deposit ratio which is more than 100%  and their high leverage almost 25 -40X, means that most of the European banking system is today insolvent. 

Total assets holds by EU banks are estimated to be 40 trillion dollar. While the total capital is only 2 trillion which means that they have a total Assets to equity of 20X. A mere 4 % loss on their balance sheet will wipe out their capital and make these banks insolvent. Moreover the GDP of Euro zone is 19 trillion which means that Bank assets to GDP are around 2X. On top of that Government debt to GDP is around 85%

The problem as per my view is that who will recapitalize them. When US wrote a blank cheque for US banks, the debt to GDP ratio in US was 40%. US banks are 1X the GDP. Their leverage was below 20X and their loan to deposit ratio was below 100 which means that they were not dependent on wholesale funding. While in Europe the math is completely different.

If the National government recapitalize bank then their own Debt to GDP ratio will shoot up. Moreover no one is willing to give loans to PIIGS (and unlike US they can’t print their currency to recapitalize their banks) therefore they won’t be able to raise money to recapitalize their banks. Other countries like France will join group PIIGS as the cost of recapitalizing their banks which will push their Debt to GDP above 100.

This means that even if 10% of European assets go bad the Government will have to raise 4 trillion Euro to recapitalize banks which will bring their Debt to GDP levels at more than 100%. For countries like Italy who have debt of 1.8 trillion and GDP of 1.3n trillion this is simply not possible to recapitalize their banks which means that lot of banks will fail.

We have already seen that all banks are deeply inter woven with each other and if one bank fails it will create a domino impact. The market has realized this. If Italy 10 year bond yield move above 6% than it will give us an indication that the end game has began.

10 Year Govt debt yield - Italy

Things can definitely be very different form the dire circumstances I have predicted. They can choose to monetize their debt collectively and take some hair cut by restructuring their banks. Ultimately no one will benefit from this fall out and Germany and France are the one who will suffer the most.

Therefore they all want to find a solution out of this. The problem is that EU is a group of 27 countries and they need to approve any change in EU treaty by unanimous consent, which is difficult to obtain in such short time frame. The problem again is that will they be able to have a unanimous consent to initiate strong measures in short time and keep their domestic audience also under check. Looking at the current agitation in US “occupy the wall street” which has now spread to EU it seems very difficult for Government to bail out their banks and still win votes. For a politician his top most priority is to retain power.

If they bail out banks then they will lose power and if they don’t the economy will go in tailspin and they will lose power. So it’s a very ugly choice for them. They are all playing the game where they get the maximum benefits by paying the lowest price. France wants EU to recapatlize all falling banks so that its own debt to GDP don’t go up while Germany wants individual nations to bail out their own banks so it don’t have to foot the bill of bailing out French banks. Other small countries don’t want to take part in bailout as they think they will unnecessary take the debt burden.

People are hoping that things will work out perfectly well but it never dose. Look at 2008 every time there was FED or Government announcement people thought that the worst is over but things kept on deteriorating. Similarly today in Europe we will see Government making big announcement but little action will be taken. There is so much uncertainty in Europe that something will give away. I will give 70% probability that things will go in a tailspin and 30% that this crisis will be managed well. Therefore I believe it is imperative that investors should get out of risky assets and stay protected in cash or short term debt.

On the ending note I want to mention that today’s banking has become worse than hedge funds. Hedge funds make speculative leveraged bets and take 20% of the profits they make while 80% is given to investor for bearing risk.  Banks make speculative leveraged bets and take 90% of after tax profits as Salaries and Bonuses and gives 10% to equity investor for bearing risk. And when these banks blow up tax payer will have to pay the bill for the mistakes they made. This situation is untenable and the current banking system needs to be changed. 

Market Musings

September was a month of consolidation after  brutal fall in August. Precious metal and energy corrected significantly so did currencies. I am presenting review of my past calls in this post. 

I have been consistently mentioning my post that Gold was looking weak and the metal saw its worst fall in last 30 years in this month. At one point in time Gold touched a  low of 1532 and thus hit my target of 1550. If we look at the given chart we can see that gold had just completed 23.6% retracement and had closed at 1627 levels.  I think in coming months gold will break below 1500 levels and we can see 1300 on charts which will be 50% retracement for gold. The maximum correction in gold can be expected up to 1100 USD. I think long term investor should start buying gold in the range of 1200 -1400 and invest atleast 25% of their investment portfolio in gold as I think that coming time is going to be very tumultuous for fiat currencies. 

GOLD

Silver had seen even a bigger correction than gold . If we look at long term chart of silver we can see that it took support exactly at the trend line which is at 26. Silver have also completed 50% retracement level at 29.300. I think there will be some more downside to silver and it can fall up to 20 USD an ounce, it it goes below 26 USD an ounce level.  I think Silver just like Gold would be an excellent long term buying opportunity and investor should start accumulating silver between 20- 24 Ounce with a stop loss of 14 ounce. 

Silver

Crude corrected to 80 levels and is consolidating at these levels. Crude is also forming a very bearish pattern and any weekly close below 77 USD will indicate a larger correction towards 55 -60 USD levels.

Crude Nymex

If we look at the long term chart of Euro we can see that Euro is trading in a downward sliding channel. As expected Euro corrected form 1.43 levels to 1.34 levels in September. I think Euro will continue to correct in coming time and it should fall up to 1.15 levels and it can even go to parity with USD as the long term support line rest there.

EURO

Below is the chart of S&P500. We can see that even after a fall of 250 points on S&P retracement have been insignificant. Although S&P did 50% retracement (1231) it consistently sustained between the range of 1130 -1170 during the last seven weeks. Thus it seems that S&P 500 have completed its time retracement but has failed to do any sustained price retracement which itself is a very bearish signal.

Even if we look at the pattern we are forming a head and shoulder pattern and if SPX breaks below 1100 the conservative target for this pattern break out is at 1000 and it is even possible to see 900 on charts. 

SPX 500

As we all know that FMCG are defensive companies and generally protect wealth during bear markets. Here is the chart of Hindustan Unilever, You can see that HUL  made a high of 324 rs in March 2000 and after consolidating between these levels since last 12 years HUL had given a fresh break out. I think HUL is going to move up sharply form current levels. Having said that I also want to point out that HUL like most other FMCG companies are trading at a very high valuation levels but as per charts it is all set to go higher. Therefore it may also be constructed as proof that markets will fall sharply in coming year and this will result into a flight to safety where people will rush to invest in companies like HUL.

Hindustan Unilever

Risk rally in the offing

The pessimism in the current environment is widespread and it seems that a counter trend risk rally is in the offing. After watching today’s price action I am having a gut feeling that we have seen an intermediate term bottom and hence we can see a substantial rally for short term.

I will advise everyone to exit short with stop loss 1 -2 % below current lows. Stop loss for Nifty will be around 4700 and for Dow would be around 10500. Aggressive traders can also go long on Index with stop loss 1 -2% below current lows. I think some announcement for Europe is long due which may spark at 10 -15% rally in all risk assets.

I will prefer to buy the following risky assets in the following order.

&l  European banks

&l  European stock index

&I  Nasdaq 100

&;  Dow and S&P500

&;  Nifty and Asian stock index

&;  Copper and crude oil.

I will keep stop on all of them 1- 2% below the current low. I think the risk here is around 3% while returns can be in the range of 10 -12%. DXY can substantially correct and dollar can weaken. I also expect the correction in price of Precious metals to continue.

This rally can last anywhere form 1 - 6 months and is a sucker rally. People will feel that the worst is over but the next wave of selling will emerge once the risk rally is over.

Gold - Time to start accumulating

This post is just a head up on gold. It had corrected significantly form 1920 to 1570. Gold had done 76.2% retracement and the current support is around 1583 levels which i doesn't seem will hold. I think gold will correct to 1500 USD levels. 

Gold 240 minutes chart

The most pessimistic target for gold  is around 1100 levels (indicated by the blue line on second chart). Under no circumstances I think gold will fall below 1000 levels. I think long term investor should start investing in gold as it would be a safe haven when our current monetary system will be in turmoil. You can invest 10 -15 % of your investment portion (which is dedicated to gold) and average gold as it fall lowers towards 1100 levels. 

Gold weekly chart

It may be painful for investors to invest in gold at 1500 and watching it go down to 1100 levels but this is a pain worth taking. 

Market Musings

I have written a post in July last year   in which I was contemplating about the different cycles which markets will pass through in next few years.  I was expecting that market will go through the following cycles

 PHASE:-1

Phase	Time duration	Investment to hold	Investment to avoid
Deflation Scare	0 - 6 Months	Short term US sovereign debt, Investment  grade high cash flow generating corporate bonds, USD	Equity, Commodities, Gold, Crude oil
Double dip recession/Deflation	6 -12 Months	Short term US sovereign debt, USD	Equity, Commodities, Gold, Crude oil, all other debt except sovereign debt

At the end of Phase one the government will have options of either adopting quantitative easing or go for deficit reduction and choose to take a deflation hit. I believe that the government will go for quantitative easing.

Phase	Time duration	Investment to hold	Investment to avoid
If Quantitative Easing II comes and Reflation Trade begins	12- 24 Months	Commodities, Precious metals, energy and Equity	US treasury
Inflation	24 - 36 months	Precious metals	everything else
Hyper inflation	36 -  60 months	Precious metals, Food grains	everything else

* Readers may note that the time duration I have mentioned is just for illustration. Actual time duration may vary as per the future economic environment.

The market worked fine till re-inflation trade but instead of moving towards high inflation we are slipping back to deflation trade.  I think we are now going to repeat this cycle starting again form deflationary scare and therefore investor should rearrange their portfolio towards Short term US sovereign debt, Investment grade high cash flow generating corporate bonds, USD. The rest of my post is only about the review of all the calls i have given recently. 

Following is the chart of Australian Dollar and i have given this call 11, September when AUD was trading at 1.045 today it is trading at 0.9767. I expect this weakness will continue as the demand for metals and coal weakens AUD will correct very severely may be towards 0.75 levels in coming year. 

AUD

I have written a note on crude oil on 19th September when it was trading at 87 USD today crude made a low of 80 USD. I think the long term trend is down and it will reach 60 levels in next few quarters. 

NYMEX Crude

 In the same post I also wrote about copper which had crashed form 379 to 325  levels in just few days. 

COPPER

DXY index have already reached 50% retracement and is currently facing resistance at 78.90. I think that it may pause and consolidate at these levels which indicates that global equity markets can also pause and consolidate at these levels. I will be watching DXY very keenly and if it closes above 79  levels on weekly basis it will indicate a new wave of selling in all risky assets. 

DXY Index

Euro had also done 50% retracement and is taking support at 1.34 levels.  Since DXY and EURO both have completed their 50% retracement I think there is a good probability that they will consolidate at these levels before breaking out.  I think long term trend for Euro is negative and it should correct below 1.20. I will keenly watch 1.34 levels and if it breaks below 1.34  I will go short on euro. 

EURO

Although gold is correcting since last three weeks I have not given a short on gold as European situation is very volatile and it may cause huge volatility in gold prices. Therefore any call on gold will require a constant monitoring and strict stop losses in place. 

I think that gold is forming a gravestone doji pattern in its monthly chart and it should close around 1750 -1800 levels by the end of September. If this pattern is confirmed that October can be a very bearish month for gold and gold may crash down to 1550 levels at the minimum and even to 1400 in coming quarter. 

GOLD

I am most happy to spot the free fall in INR which started at 45 levels and INR have depreciated at to 50 levels in matter of days. I think the fall in INR is too quick to be comfortable and 50 is a psychological resistance, therefore I expect INR to consolidate at these levels and even correct to 46.50 levels before making the new upmove. My long term call on INR remains bearish and I think the next target will be 52 and even 60 in next few years. 

INR

Readers may remember that I have written that unless Nifty closes above 5120 levels it will move up. In last three weeks Nifty made four attempts to conquer but failed to close above 5120 levels on weekly basis. I maintain my view that any long call on Nifty should be taken only if nifty closes above 5120 levels on weekly basis. 

Nifty Weekly chart

This is a monthly chart on Nifty we can see that Nifty have already completed 38% retracement which is at 4800 levels. I expect that nifty will break below 4750 (weekly closing basis) and will move towards 4200 levels at the minimum in coming months. 

Nifty 

I would also like to inform my readers that although this is my broad call on markets, Market will always be very volatile with sharp pull backs and investors should not be disturbed by them. I would also like to inform my readers that there is no certainty in the markets, we all work on probability and I see an very high probability of a repeat of a 2008 crisis which will be 10X more worse.

CommoditIes Update

Some of the commodities which were showing tremendous weakness have now given confirmed sell. My own assumption about the global macro are very bearish and therefore I am expecting a good sell off in all industrial metals and energy. Let us look at the first chart of copper.

In the chart we can see that copper have made a distribution pattern and have broken below the trend line. It had also done a failed retesting of trend line which gives more conviction about the impending fall.  Traders can sell copper at cmp and on pull backs  with stop loss of 405. 

Copper Monthly Chart

The following chart shows the retracement on copper. The downside target for copper is at around 330 and 290.

Copper Retracement

 Similarly Nymex crude had been forming distribution pattern and have broken below the support  Traders can short crude at Cmp and average it around 88 with a stop loss of 92.50 and target of 75 -77 USD.

Nymex Crude

Currency Update

This week was a very eventful week for currencies. We had a massive breakout in DXY. Swiss Bank limited the movement in Swiss Franc and risk aversion is back in global currencies. In the post I written on 15 June 2011.

The current global macro environment is very volatile and it becomes difficult to predict short term prices movements for assets. Following are my observations and expectations as to how global macro will shape up in next few years

1. My base case scenario is very bearish and I expect Dollar up move will continue as global equity markets sell off due to risk aversion. 
2. Energy, Base metal and Industrial metal prices will tank as Chinese Economy slows down.
3. In the current decade I think Chinese GDP growth  will surprise on the down side and will perform worse then even the most bearish forecast.  
4. European banking stocks have seen a 50% fall in last one month which implies that something is terribly wrong in European banking system and this will have spill over impact on global banking system. 
5. LIBOR has already increased by 50% in last two weeks which suggest that risk in inter-bank lending is increasing, We may see credit cycle coming to a halt, this will have serious negative impact on Global economy and global equity markets
6. Greece 2 year yield have reached 50% and CDS have reached 30% which means that Greece default is inevitable. I think there will be many other countries which will also default and we will see significant changes in Euro zone. 
7. Euro will not exist in its current form which makes me extremely bearish on Euro target around 1 -1.15, maybe much lower. 
8. Gold is forming a terminal pattern and I expect it to correct form the current levels. But when I look at the uncertainty in the global macro and risk in Europe it becomes very risky to go short call on gold and other precious metals.  
9. QE III seems inevitable and may push asset prices up (temporarily), but its impact will be diminishing and lower then it was for QE2. Looking at charts my own gut feeling is that QE3 will have a negative impact on asset prices. 

• I think markets have already reached a tipping point where increasing monetary base will not necessarily push up prices of risky asset. Today risk aversion is so high that no matter how much more money is printed it will flow into (deemed) risk free assets like US and German treasures and therefore we will see all time low interest rates for them.

• US CPI inflation is already at 5% and if QE3 pushes energy and food prices up it will be very negative for global economy.

• US consumer average hourly wage is decreasing and will decrease further due to rising energy and food cost. Which means lower consumption. Perhaps this is the only reason why we QE3 was not announced by Bernanke on August 27.

• Emerging markets which are facing extremely high inflation will be face even worse inflation due to rising food and fuel prices which will cause further tightening and more slow down in global economy. 

Below is the Australian dollar chart. Its very near to its long term support and warrants a sell with a stop loss of 1.08 and target of 0.92 and 0.86. Sell off in AUD will also indicate a sell off in commodities. 

AUD/USD

As expected DXY went up form 73 levels to 76.50 levels in two weeks. This sharp increase in DXY indicates risk aversion and i expect that this risk aversion will continue going forward

DXY

My target for DXY is around 80 (at the minimum) I also feel that DXY is now breaking out of 26 years of down turn and I will not be surprised to see DXY at 100 -120 levels in next three years. 

DXY

Euro have broken a very important trend line and I expect a sharp correction in euro to 1.15 levels. 

EURO

My call on INR was bang on target we saw INR move up form 44.50 to current 46.50 levels. I think that trade balance will become more negative with simultaneous decrease in FII, FDI investment, decreasing expat repatriation and slow down in IT exports. Moreover Government finances are in worst shape ever as the Government have used state treasury for  useless programs like NAREGA ( where 80% of the money is wasted in corruption) and farm loan debt wavier which according to me is bribe paid by the Congress to buy votes.

We will see the full impact of mismanagement done by  congress led UPA government if global economy slows down. I expect rupee to break above 52 levels and probably o 60 levels in next few years. Below is the chart of INR. Near term target for INR is at 47 and 48 levels. 

INR

Bulls are back (for time being)

This is a follow up article on my August 19th post.  As we see Nifty finally made a low of 4720 last Friday and completed a 1000 point fall without any significant retracement. I have already sensed a selling exhaustion in the market. Last week market did a five % pull back and made a panic bottom on Friday. 

Today, The down side trend line is broken and I expect nifty will at least complete 38.2% retracement of the entire down move. 

Nifty breaking out of trend line

As per retracement levels nifty will move up from here to 5100 and 5211 levels. Over all I expect that the up move from here will be sharp as it is today and Nifty will swiftly move upto 5211 and may be to 5325 levels. It will also fill the gap it created during its swift down move. From there on fresh selling should emerge which will take markets to lower levels. 

Nifty Retracement levels

Gold Bug's Bitten

My last weeks write up on gold was almost prophetic. Gold on Friday closed at 1878 and made a high on Monday at 1912. and than cracked 210 USD in three days. This is exact pattern of buying climax I have written about.

Today gold is forming a head and shoulder pattern and if it breaks below the trend line 1775 and 1750 it target would be around 1550.

Gold forming Head and shoulder

Gold short term trend line is at around 1750 if gold breaks below 1750 it will give you a clear short signal. 

Gold Short trend line

Gold will atleast move towards its base trend line and support for gold is at around 1530 levels. 

Gold Long term trend line

Therefore risky traders can go short on gold at current levels i.e. 1784 -1820 range. stop loss will be at 1850 and target will be at 1500 levels.

Risk averse traders should short gold below 1750 on closing basis stop loss would be at 1850 and target will be 1550.

Is this buying climax in gold

Gold have moved up from 1500 USD an ounce to 1880 USD an ounce in less than two months. Its almost 25% up-move in two months. As per my understanding of price patterns I think we are witnessing a buying climax in gold. 

What is a buying climax?

As your stock or the market up moves up, at some point there will be a realization on the part of the general public that they are being left behind. They missed buying in the Trading Range, they missed buying on the way up, and now, the stock is calling attention to itself by virtue of its high price. Often this is accompanied by news reports on how well the company is doing. The Composite Operator has been waiting for this opportunity to unload his shares. He started unloading on Preliminary Supply, and now he has his best opportunity. The price action on the Buying Climax will come with wider price spread indicating the buying frenzy, and increased volume, more so then has been seen anywhere in the uptrend. The closing prices will be in the top of the price range as the price moves day by day to the top of the climax. In rare cases. Exiting on the Buying Climax is our most favorable exit strategy (See Money Management).

Second Definition 

Situation where the price of a stock, commodity or other financial instrument, quickly rises but then falls. The initial rapid rise in prices is characterized by high volumes of buyers along with a price increases and can result in quick plummet in stock price due to the fact that there are no more investors willing to buy the stock at higher price.

Third  Definition 

The end to a rapid price rise in a security, commodity, or overall market for a type of asset, such as real estate or bonds, characterized by all of the likely buyers jumping on the bandwagon. After a buying climax, the market will fall sharply. A dramatic run-up on strong volume is a sign of a buying climax.

Look at the current chart in gold the price have moved away form the long term trend line and had accelerate and had almost move up in a straight line. I think this is a buying climax and atleast gold will make a immediate top in term. 

Gold

Let us look at few other buying climax.

Buying climax in nifty in 2010.

Nifty 2010

Buying climax in Nasdaq in 2010.

Nasdaq 

Buying climax in S&P500 in 2010.

SPX 2010

Buying climax in nifty in 2008.

Nifty 2008

We can see that most of the time when ever a long term trend ends it ends in a buying climax where most of the common people gets into the asset. I think we are witnessing a similar buying climax in gold. I think gold will make a high of 2000 USD an ounce before we see any correction. I would like to caution my reader against short selling gold at 2000 but definitely it would be the time exit your long position on gold.