|Fortnightly Close||Dow Jones||Nasdaq||Nifty||Gold||Crude Oil
| US Dollar Index
In the equities segment, the fortnightly battle was won by the bulls with reasonable gains, but it has not passed without solid counter by the bears. It will be interesting to see how the coming weeks shape up with no major event in place.
Precious metals are the one where we had phenomenon selloff and a rally from the lower end but it all happened in a snap of time. US-listed mining stocks are yet to come off the shock and wisely as there is a scope of a fresh round of selloff on precious metals before they turn up for next large move.
By now many of you would be wondering what is happening with the market and how long it can stay disconnected from the looming economic reality. How is it still able to move up and stay afloat? CNN Fear & Greed Index points to the answer.
Markets are overvalued globally, but could they get more overvalued?
Yes it can, and the more time it spends in this overvalue range the move down will be faster.
All these can keep the index in green for longer than our assumptions. But when the tide turns thin volumes will lead to fast decline. If the above is true for global markets, India has its own midcap frenzy. In all of it, reducing some long term positions and keeping cash is no harm. With this stage-managed world we would have Apaarr (abundant) opportunities to deploy capital for risk-adjusted returns.
We are seeing money flow increasing in agri-commodities, which generally can lead to inflationary numbers and spoil equity party. We like coffee and sugar as soft commodities that are at the cusp of a multiyear bull pattern formation.
Globally equity continues to stay above its key moving averages. Trader driven volume indicates that new traders should use options to hedge their exposure because reversal can be swift and devastating for an inexperienced trader.
As expected, USD has found its support at 92 and would remain for a while to test 94-95 ranges which should be used to sell as we are heading lower on USD sooner or later to 88. This part of the move would be devastating for many markets because below 92 most of the emerging market economies are not prepared for export substitution. Hedge premiums are still relatively cheap and exporters need to get their currency exposures hedge for this probable move.
We believe short selling EURO is best of trade in the currency pack in terms of risk-reward ratio. USDINR will remain range-bound as the central bank has to manage the gush of dollar liquidly and manage the export economics
Crude oil is under shell shock and determined not to move. It is rare for crude to trade in a narrow range for two months, maybe narrowest with the lowest volatility. We would be going full-on long in it once it breaks below 40 to eat out stop losses and then gradually head to 46-48 range. The falling rig count is a clear indication that we have supply shock coming in near term. Whereas alternate energy is long term story, the near term demand of crude can’t be challenged by the alternatives.
We had a great year with Gold and Silver trades and would wait patiently for our next entry. Gold at $1840 and Silver at $23 can make us active again. Meanwhile, we are studying platinum, a metal which is 30X rare to Gold and trading at its lowest ratio to gold in the last 50 Years.
We have a list of US ETF to invest and ride this rally.
Copper and other industrial metals Copper has finally broke $6500 but the lack of volume doesn’t augur well. Other industrial metals are also trading well above the comfortable buy zones so we shall stay inactive on these metals for a while.
These are information, views of best of minds, and my humble opinion, take the trade and investment decisions based on your risk profile, objectives and asset allocation. There are times we need to sit on cash and wait for the market to correct and there are times when we have to stay invested and allow the market to move up. In short, inaction in the market is the most rewarding act, once you are set on a clear plan. So fill up buying orders on asset class where there is a need to allocate funds and reduce priced up assets to keep cash for better times.
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