Tipping Point in the Global Economy
President
Trump could not have chosen a more opportune time to initiate the trade war by
levying additional import tariffs on China and other countries. The process
started in Jan 2018. The US stock indices reached their peaks in Jan 2018 and they
could not have risen higher despite whatever good news might have poured in
subsequently. This means that they were already inflated considering the average
projected earnings of the constituent companies and that the markets were
ignoring the higher yields on bonds in the wake of increasing Fed rates.
The slide
below, which shows comparative line graphs/ charts of a few, highly inflated
assets in the past clearly indicates the above.
Please
refer to my post dated February 5, 2018, the link of which is given below:
What
started as a knee jerk reaction in the US stock markets towards the fag end of
January 2018 (Jan 29, 2018 to be precise) and which continued through the month
of February 2018 formed a very clear and distinctive two monthly candlestick
chart (for the months of Jan-Feb ’18) indicating reversal. The candlestick
chart of DOW given below is being considered as a sample and a comparative old chart
of silver is also being given in the following slide.
Nifty
Historically
(during past 3-4 years), Nifty has always taken a lead in establishing a
bearish trend ahead of DOW. So has also been this time. Nifty has formed a bearish
engulfing pattern on two monthly candlestick charts. Needless to mention that
Nifty is in a confirmed bearish trend.
A weak
USD against INR is most likely to help sustaining the Nifty being range bound
between 10100 and 10900 for next two months.
USDINR
Dollar
crossed past Rs.74 in the current month and may close above or around this
level by the end of October, however a pullback is imminent as a reversion to
the mean. USD will certainly see a dip to the levels of Rs.69 by the next Fed
meeting scheduled for December 18-19.
A most
likely 0.25% rate hike in December 2018, will again lead to dollar’s strength
taking it back to Rs.74-75 level. This could possibly be the cause of second wave
of sell off of the Indian indices and stocks.
EURUSD
A possibly
weak USD, generally against Euro and other currencies for next two months can at
best help sustain the US stocks and indices at current levels, beyond which the
US stock markets are most likely to enter a bear phase come what may.
To
summarise, the chance of Fed increasing interest rate by 0.25% during its
meeting scheduled in the month of December 2018 is extremely high.
Amazing Amazon
Please
refer to my post, dated June 24, 2018, the link to which is given below:
Given
below is the latest candlestick chart of Amazon:
Amazon
touched $1 trillion market cap intra-day, briefly, on one of the trading days.
Since then, Amazon has formed a dark cloud cover on two monthly candlestick
charts and is most likely to drift down further. It could possibly see sub $1000/
share levels in less than a year’s time despite possible robust growth in
earnings.
Some important dates to look forward to, in the
Oct-Dec ’18 quarter:
October 25, 2018 – Amazon’s quarterly results
for QE Sep 2018
November 1, 2018 – Apple’s quarterly results
for QE Sep 2018
December 18-19 – FOMC meeting
Crude Oil (WTI)
Crude Oil
is very critically poised at this juncture. Any disruption in supplies or any
cause in exacerbation of geo political tensions between USA and Saudi Arabia
can lead to rates of crude oils going high. However, any turmoil in the global
financial markets can also possibly lead to a diminishing demand, thereby
causing crude oil rates to drop from here.
Best
wishes for the festive season.
DISCLAIMER:
These extracts from my trading worksheets/books
are for the purpose of education only. Any advice contained therein is provided
for the general information of readers and does not have regard to any
particular person's investment objectives, financial situation or needs and
must not be construed as an advice to buy, hold and sell or otherwise deal/
trade in commodities, currencies, indices, securities or other forms of
investments. Accordingly, no reader should act on the basis of any information
contained therein without consulting a suitably qualified financial advisor in
the first place.
