Tech Musings: US market

In my previous post on US markets written on 16^th November 2013, I wrote, “ In the given chart we can see that S&P has been trading within a channel and the upper end of the channel is around 1810 – 1840 levels. I firmly believe that S&P 500 will peak out at these levels before the end of this year. From next year there should be a sharp correction in S&P500 and it may fall to 1500 – 1550 levels. I think the probability of this scenario playing out is more than 70%.”

As we can see from the chart S&P500 topped out at 1844 in December 2013 and could not move above that level in entire month of January. In last week S&P500 saw some sharp fall and has corrected almost 3.5% to 1790. 

I think S&P will see some serious downside in current year. I think there is a high probability of S&P falling to 1650 or even 1500 levels but there will be several support before S&P can go there.  I think, we have a very high probability of seeing a 10% -15% corrections in global markets.  

I will only change my view if S&P500 gives a weekly closing above 1860 – 1870 levels.

Tech musings:-

I have been maintaining a bearish view on crude oil since last year.  In my last update on Crude oil on 16^th November 2013 I wrote, “Crude oil moved up to 115 levels and has crashed to 93 from there. I still believe that crude oil will close the year below 100 USD level and see a sharp correction in next year. The target for Crude stays at 70 dollar.”

Crude oil indeed closed the year below 100 levels and has corrected sharply in the first nine days of 2014.

If we look at the given chart of Brent Crude we can see that it is forming a evening star in a yearly chart. The impact of this pattern is going to be profound and I won’t be surprised if Brent crude sees more than 30% correction in current year.

Similarly the second chart is a yearly chart of WTI crude. WTI crude is having a strong support at 87 – 90 levels. Once this level is broken I am expecting WTI to fall upto 70 USD levels in current year.

Some thoughts:-

We may be witnessing the start of a long term bear market in Crude oil. The shale gas revolution in US will turn US form largest importer to a net Exporter by 2015 – 2017. This is nothing short of a miracle achieved in less than a decade of shale gas exploration. 

Similarly shale gas is available globally and exploration of shale gas in next 6 – 10 years will reduce import demand substantially. 

Secondly reduction in geo-political tension between Iran and US will add another 2 – 4 million barrels per day in supply in next few years. 

Lastly, I firmly believe that the price of natural resources like Crude does not depend on aggregate demand and aggregate supply but on marginal demand and supply. Once the marginal demand for crude will fall the price of crude will correct disproportionately. For example if the demand for crude falls to say 80 million BPD from current 86 million BPD it may cause a 30% or 40% crash in oil prices.

Tech Musings Commodity

In my last post on Gold on 16^th November 2013 I wrote that, “All long trades on gold should keep 1270 as a strict stop loss on a weekly closing basis. If gold moves above 1350 it may go to 1425 and 1475 levels. On the contrary, If gold fails to move up in the current month than it is highly likely that we will see a sharp downside in gold and it may fall towards 1000 USD levels.”

Gold and silver both broke my stop loss and fell below to previous lows. Although it is too early to take a buy call on them, I think that both metals are poised to move up sharply.

If we look at the first chart of gold It seems that gold will bounce from here. Traders can keep a stop loss of 1180 and go long on gold.

 


 

Similarly traders can keep a stop loss of 19 and go long on silver at cmp of 20.10