BSE Smallcap

On 4th October 2018, I wrote, “If we look at the small-cap index which is already battered in recent fall (-30%), we may see levels up to 12500 on the BSE Small Cap index which is another 10% fall from the current levels.”

Recently Small cap index made a low of 12,000 and is currently trading at 12,500 levels. If we look at the below chart, the correction in small-cap seems to be over and I think the small-cap index will outperform the markets going forward. 

I had given two other calls in the same post:

1)Bse Sensex as expected made a low of 33000 and reversed from there. I wrote an update on this in my post on March 2019

2) I expected INR to move to 75 - 76 levels. INR instead went through a bear market correction and strengthened to 68.50 levels before starting to correct again. I expect INR to fall to 75 - 76 level in the recent correction cycle. 

Tech Musing

I have been bullish on Gold since 2013 and every time I thought gold will break out it didn’t. In my previous post on gold, I wrote “we look at the daily chart of gold, we can clearly see time correction playing out. Since gold made a bottom in 2012 it had been almost 5 years since gold prices have been consolidating at these levels. If we look at the long-term structure of gold (in the yearly chart) gold had a 10X rally from 2001 – 2011 and since then it fell by 50% (price correction). So gold has completed its price correction and time correction. Look at the given chart I don’t see any reason why gold will not break out from these levels and surprise everyone on the upside.”

If we look at the chart we can see that gold has been making multiple inverse head and shoulder formation for the last 5 years and the neckline lies at 1350-1380. It had attempted to break above this level for 8 times and failed. Today once again gold is trading above 1380 and if it sustains above 1400, the target for gold most likely will be 1800 and maybe 2400 in the next five years.

Similarly, silver is also looking poised for a breakout and may move up to 20 USD and above. 

Tech Musing - Indian Interest rates.

The below chart shows the 10-year Yield on Indian GSEC and it's forming an evening star pattern. Indian 10 year yield is set to fall to 6% over the next couple of years.

Tech musing

In my previous post on 18th November,  I wrote, “Shanghai Composite is trading at the lower end of the 25-year-old channel and in past, it had bounced back from these levels for three times generating multi-bagger returns. It seems to me that China is on the cusp of a major change if these levels hold Shanghai composite can multiply 2X or 3X from current levels in the next 5 years.  The risk-reward ratio seems extremely attractive from current levels.”

Since then Shcomp has moved up by 15% to 3090 levels despite all the negative news on US - China trade war.  The up move should continue and we should see a substantial bull market in Chinese equity. 

In another post on 4^th October 2018, I wrote, “If we look at the long-term yearly chart of Sensex the trend line support exists at 33000 levels. Which means that Index should not fall below 33,000 otherwise long-term trends will be broken and we will be in a multiyear bear market. We can see the support marked on the chart with an arrow. A multi-year bear market should not happen unless we have a major geopolitical event and break down in global trade system. Hence this scenario looks highly unlikely to me and I believe that most likely index will bottom out at 33,000.”

Since then Index made a low of 33,291 on 26^th October and bounced back to match the previous high. As expected the more bearish scenario did not play out. If we look at the given chart of the index, we can see that resistance exists at 12500 levels. The index may break the resistance in case of extremely favourable election results. The long term target for nifty stays at 15000 to 18000