Shifting to new home

This blog is now shifted to - www.trikaalcapital.com.

I am closing the coverage of long term forecasts e.g. gold, DJI, crude, and USDINR and it will be now available on subscription.

Launching regular advisory letters for investors and traders in S&P 500, gold, EURUSD, and RTS.
 

Exit Indian Equities

Primary trend on daily Nifty charts has turned down and even in longer term weekly charts it may turn down. Investors should book profits and should exit. Entry recommendation was given when Nifty was near 7980 (Link). Wait for next entry signal.
Though there was an early signal last week but I was waiting for more confirmation, my mistake.

Fed will hike rate? Complete Analysis

Conclusion: No, it will not hike rate.

Analysis: The key reasons of not hiking rate will be poor job growth and not so robust economy. Additionally, the impact of a rate hike will create unmanageable economic turmoil.
I am not elaborating as so many experts have already written so much about these topics.

Currency Wars are Heating Up

25 central banks have lowered rates since the start of this year, some more than once, according to data from CentralBankRates. It is one way of engaging in currency war, and it's not new, US did it with QE in 2008, continued for several years, then several other countries either devalued their currencies or cut interest rate. ECB and Japan launched massive QE programs.

News headlines of currency devaluations in 2015 -

• Turkmenistan - Jan, 2015 - Energy-rich Turkmenistan devalues currency against dollar ...
• Belarus - Jan, 2015 - Belarus devalues its ruble by 7%
• Nigeria - Feb, 2015 - Naira devalued again, trades at N198 to dollar
• Azerbaizan - Feb, 2015 - Azerbaijan devalues currency by one-third amid oil price ...
• Venezuela - Feb, 2015 - Currency Devaluation Baffles Shortage-plagued Venezuelans
• Vietnam - May 2015 - SBV lowers dong's value by 1% in second devaluation of 2015
• Angola - Jun, 2015 - Angola Central Bank Devalues Currency as Oil Slide Hits Revenue
• Egypt - 6 July 2015 - Egypt's currency devalued in attempt to encourage investment 

The major countries that cut interest rates in 2015 (and the number of times they did it):

• Australia - 2
• Canada - 2
• China - 3
• Denmark - 1
• Egypt - 1
• Hungary - 5
• India - 3
• New Zealand - 1
• Norway - 1
• Russia - 4
• South Korea - 2
• Sweden - 3
• Switzerland - 1
• Thailand - 1
• Turkey - 2
• Israel -1
• Indonesia - 1
• Romania - 4

Countries have become significantly more aggressive on currency front since this year. Future is definitely going to be more volatile in coming years. All who deal with currencies, energy, or metals will see turbulent times ahead. More on this in next update...

USDINR in long term downtrend

USDINR is now in a long term down trend. It may fall to 61.5/60 within this year.

Nifty Tracked

I had forecast in March 2014 that Nifty may rise to 9000 by 2016, though the target was reached quite earlier than that. During the several ups and downs since then, I held a bullish view on equities till March 2015. Between these two recommendations, Nifty rose from 6483 to 8550 (32% rise). My recommendations on key events during this period are plotted below on Nifty chart. All reports are available on my employer's website at http://www.rrfinance.com/Reserch/ResearchHome.aspxhttp://www.rrfinance.com/Reserch/ResearchHome.aspx
(Re-entry was recommended on 13 June, 2015 at 7980, after which Nifty has now risen to 8516 as of now)

Correction in Indian equities near its end

Nifty is near its bottom. Long term investors may re-enter.

Exit alert was mentioned on 23rd March (http://trikaaltrading.blogspot.in/2015/03/alert-dangers-ahead.html), mentioning to exit on a rise. On 23rd, Nifty had closed at 8550 and after a decline again rose to near 8800 in a month offering enough time to exit.
Last close of Nifty was 7982.9, almost 600 points correction or nearly 7%.

Equities markets are highly unstable

Nine countries in mid-east are at war (with more expected to join) and escalation is possible, terrorism by extremists is at all time high and is fast spreading in Asia and North Africa, developed economies are facing threats of unemployment, poor growth and deflation - but stocks are making new highs!

After six straight years of rising, valuations are not cheap and scenario has enough volatility to destabilize markets. 

  

Major factors indicating headwinds for equities –

1. Unrest in Gulf – Yemen was a US base for several years but US could not prevent rebels from toppling the current government. Now Kingdom of Saudi Arabia and its coalition of UAE, Bahrain, Kuwait, Qatar, Jordan, Sudan, Egypt are engaged in war against Yemen. Yemen is strategically important because it is located near Bab al-Mandab strait, a narrow waterway through which much of the world's oil shipments pass. KSA is also keen to protect itself from rising influence of Iran in Yemen. It is seen as a sectarian proxy war between Iran and Saudi Arabia and if it escalates, it will push up oil prices. Iran and other OPEC countries are also unhappy with the recent Saudi policy of declining to cut oil production. Iran is more desperate to see that oil prices rise and a protracted war would be favorable to it, Escalation may further worsen the situation as ISIS may enter to benefit from chaos and Russia may get involved to gain from higher oil prices. It has very strong incentives to see that this war protracts as its economy is in shambles and only rising oil prices can save it. There are rare chances that it will take the other option of agreeing to western demands so that its sanctions are removed. Russia and Iran have already stated that they do not like KSA interfering in Yemen.  
2. Unrest in North Africa - Libya, Nigeria, and Algeria are under Islamist extremists' terror since several years and in Tunisia, Mali, Somalia, Kenya attacks by extremists are rising, these are places of increasing concern. Growing terrorism will lead to reduction in risk taking capacity of investors.       
3. US growth is doomed – either by inflation, or by deflation. Whether Fed hikes rates or not its economy will face huge challenges. *
4. Eurozone in trouble – sovereign debt, deflation, unemployment, rising inequalities, poor growth *

Key question for long term investors –

What will drive future growth in developed countries – low rates, technological innovation, wars elsewhere, exports to emerging markets, or something else?

* Details to follow soon

Dow Jones: End of Rally

Multiple factors have indicated end of rally. One should exit US equities. (Last closing 17718, buy recommendation was given on 27th May 2013 at 15303, link - http://trikaaltrading.blogspot.in/2013/05/currently-open-positions.html).

Detailed analysis in next post.

ALERT: Dangers Ahead

Equity markets are looking risky globally. One should exit on a rise from equities to be on safe side though a confirmed exit signal is yet to come. If Nifty closes convincingly negative on a weekly basis, it may be an indication of end of uptrend.
Stay tuned in for more on this.

CRUDE OIL: Forming A Long Term Bottom

Crude seems to have formed a long term bottom near 44 that it touched in January this year. Multiple factors are indicating that a bottom has been formed. These are mentioned below –

1. Crude has taken support at its 17 years old trend-line (shown in red color)
2. This support also coincide with Fibonacci fan lines
3. An important 161.8% retracement level exists at 52, if gold sustains above this on a monthly basis, it will be a strong bullish confirmation
4. RSI is at deep oversold levels which have historically coincided with major bottoms
5. Our proprietary trend indicator is indicating waning of long term down trend and formation of a bottom 
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GOLD: Forming a long term bottom

Gold may not fall below 1150. It made a low of 1132 in November 2014 and is rising since then (CMP 1227). Multiple factors are indicating that it a bottom has been formed. These are mentioned below –
a. Gold could not breach 61.8% level support of its long range swing
b. RSI is indicating a clear bullish diversion
c. Gold has started breaching fan resistance lines
d. Our proprietary trend indicator is indicating waning of long term down trend and formation of a bottom