India Markets

Market Observations

BrandonWendell
Brandon Wendell
Instructor, CMT

We are nearing the end of the calendar year and also some supply zones on the major equity indexes. The Nifty and Sensex are making multi-year highs and the tone in the markets is bullish. This alone is a warning sign that there may be some year-end retracement or profit taking. Let’s take a look at the charts to see what they are telling us to watch for since price offers the truth.

Starting with the weekly Nifty chart, you can see there is a weekly supply zone at 5807-5946.  As of this writing, Wednesday, December 5th, price has made a fast approach to the zone and is currently stalling in the zone.  Students of Online Trading Academy know that this is an odds enhancer.

The negative divergence between the RSI and price also adds to the argument that price will likely drop from this supply zone or the next higher one at 6013-6177.  The current zone has been tested once in October.

The Sensex has a similar picture except the current supply at 19387-19822 has not been tested.  The negative divergence still shows but because the RSI has moved above 60 on both the Nifty and Sensex, we are likely to just retrace to the closest demand and hold.

Goldman Sachs in the United States just lowered their forecast for gold to $1800 for the next year.  In the MCX chart of gold, we have still been making higher highs and higher lows on the daily chart.  I will be closely watching the demand at 30291-30352.  Should this break, the bull trend is over and a decline to 29133-29282 is likely.  The RSI below 40 right now is bearish.  Be patient with gold though, we should have a mild bounce at the upcoming demand first.

For gold to break down, we would need to see a bounce in the US Dollar.  On the daily chart of the USDINR, we are seeing an approach to a demand zone of 53.61-53.81.  If we can bounce and hold the RSI above 40, then expect a rally in the dollar and the drop in gold.  The fresh supply for the dollar is 56.74-57.32.

bwendell 20121211 india - usd dec daily

Trust your charts and make sound decisions in your trading.  The Fiscal Cliff issue in the United States and continued uncertainty in Europe will offer lots of volatility in global markets.  Trade safe and trade well!

Disclaimer
This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.