WTI Crude Weekly

I expect Crude to make a bottom of 30 against the USD and then reverse and close above 35 for the week. If that happens i will consider crude to have bottomed out.

FED Rate Hike Decisions

FED Rate Hike Decisions

The Fed meets 10 times a year to decide on US interest rates. 

Inflation: - when demand starts overtaking supply we have a situation where the prices will automatically start rising.  In other words inflation is too many people chasing too few goods.  Once the economy reaches a stage whereby aggregate demand starts overtaking aggregate supply prices will rise and so inflation will set in.  The central bank of any country will respond to this by hiking interest rates in order to reduce money supply in the economy and thereby curtail inflation.  Thus from a trading perceptive it is important for a trader to gauge whether inflation is setting in and whether the central bank will move in to hike interest rates.  The trade should therefore look at the following data to check whether interest will go up.

Inflation can take place in the following ways for which different data has to be looked at.

Growth Push Inflation

Price Push Inflation ‘

Wage Push Inflation

Demand Push Inflation

Growth Push: - this results as s result of strong growth in the economy.  For ascertaining whether inflation is going up as a result of the growth we need to look at the following indicators: - 1) GDP figures 2) Unemployment & 3) Non-Farm Payrolls.

Price Push Inflation: - This results because of the prices going up.  For ascertaining whether inflation is going up as a result of the prices going up we need to look at the following figures.

PPI Figures

CPI Figures

Wage Push Inflation: - This results when there is wage pressure and earnings go up. For ascertaining whether inflation is going up as result of wage pressures we need to look at the following figures:

Average hourly earnings

Employment Cost Index

Demand push Inflation: -This results because of demand pressures. That means that consumer demand is so strong that the prices are pushed up as supply is not able to cope up with demand. For ascertaining whether inflation is up as a result of demand pressures we need to look at the following figures.

1-      Retail Sales 

At any point of time for the central bank to move in to hike interest rates it is important that out of the above four factors at least three should indicate a rise in inflation. Even if two of the above four indicate that there is a rise in inflation there is a possibility that the central bank may move in to hike interest rates but with three factors indicating inflationary pressures, hiking interest rates becomes a certainty.

                              Eccles Building. Head Quarters of Federal Bank in Washington D.C 

Effect of Interest Rates:

Inflation goes up – Interest Rates go up

Interest Rates go up – The currency whose interest rate has been hiked becomes stronger

So FED increases interest rates – US dollar becomes strong.

FED decreases interest rates – US dollar becomes weaker.

Further

Interest Rates go up – Stock Markets & Bonds come down & Vice Versa.

After the 2008 crisis the above might not be as simple as described above, but traditional wisdom dictates this is how the FED would respond.

A general rule of thumb is that if the FED responds by hiking interest rates 3 times, the US economy goes into a recession.

Deeper Correction in Dow, Post FED Meeting on 15th Sept & After Effects

I usually do not like to make dramatic statements and for the DJIA which corrected heavily during end of August I had only taken 16,000 as a correction point. If the coming week with the FED meeting approaching, the DJIA close is below 16,000, i believe there would be a sharp sell off again towards 13,820. In short September should be a happening month.

Effect on Sensex: Usually a 1000 point drop on the Dow means a 2000 point drop on Sensex. In all likelihood another sell off could happen targeting 21000 on the Sensex.

Effect on USD/INR: The Indian Rupee would touch 70, which would be the top for all times to come.

Effect on EUR/USD: Euro would move ahead of its previous recent high and target 1.1920.

WTI Crude: I don't expect crude to be a beneficiary of all this chaos created by the Dow however will be able to say next week after FED meeting.

USD/CHF & USD/JPY: I find these both counters very good sells at current levels.

Trading Performance of MoneyBoy

Below link takes you to the trading account of MoneyBoy. Provides all positions for viewing including history of account.

Trading Performance of MoneyBoy

WTI Chart-Possible Bottom Formation

I expect WTI Crude to bottom out at around 32 to 36 range.

DJIA Chart

USD/INR - August 2015 - Trade opportunity unfolding

USD/INR has continued to weaken as indicated by my earlier analysis, however i did not foresee the devaluation of the YUAN coming. Though 2.8% devaluation of the yuan is not much but the fact remains that another 2% or so could be cut by the Chinese Central Bank. So a strengthening Dollar, RBI cutting Interest Rates and now a devaluing yuan (Which is a major trading partner with most Asian Economies including India (China is India's largest trading partner and USA is number 2 since 2013) has all set into motion a rupee that is weakening. I however expect this to be the last leg of weakening for the rupee as also strengthening for the Dollar. The only change i would not like to make is that though earlier i did not expect INR to cross the previous high, with the yuan factor now in play i would be open to the Rupee briefly flirting with INR 70 before strengthening.

FED will start to hike rates from Sept or possibly from the next meeting after September this year in October. This will result in weakening of the Dollar as against usual wisdom that an increase in interest rates makes the currency stronger. This will also result in strengthening of the INR. There are of course other factors that will make the rupee stronger as already discussed in my earlier articles.

Below once again is the Chart I had put up earlier to see the INR right on track.

My target for USD/INR over the long term (end of 2016) will be the 50% retracement level for USD/INR which is approximately Rs. 53 to the US Dollar.

Gold Analysis

Gold continues on its downside. As indicated earlier i had expected gold to continue till around 3rd quarter to weaken. Particularly during these months before the festivities of Diwali and the marriage season following it, gold has shown a tendency to weaken. Looking at the channel chart below one can see that Gold has just about neared its bottom. It might possibly touch 1050 to end the downside.

If we look at the below chart and check the retracement levels from the start in 2001-2002 when the market went into a bull run to the top made in 2011 we can see that market is still above the 50% level which makes the case for moving up for gold stronger then silver. 

If we look at the daily closing on Friday we can see a double bottom and furthermore that double bottom is with a divergence. That makes a further pull back on Wednesday once Fed meeting result is out a possibility.

Lastly one can see the chart below and a good entry point would be if the market closes above 1125 this month. That would be another signal that gold is bottoming out and unlikely to test the low of 1179 it made earlier this week. However a close below the horizontal line, and a test of 1080 or even move to  1050 cannot be ruled out.

Silver Analysis

Silver like gold and other metals has been on a down side move for a long time. The wave count chart below that i have provided indicates that Silver is about to find a low and the correction waves of a, b and c are about to end. The trendline has been holding such that we need silver to go below 13.40 to consider an upmove an uncertainty in the near future. Silver down movement is also coinciding with the month of August -September which is the 3rd quarter of the year and as i stated earlier, i would expect dollar strength to start waning around the 3rd quarter or so. After the correction starts wave 1 and then correction of 1 is wave 2. This is usually a consolidation phase or accumulation as some people like to call it. So a really good time to enter the market in silver would be around the end of 1st quarter next year, until and unless one is comfortable with holding a position over a long period of time. A good strategy is usually to focus on waves 3 and 5. I have indicated a possible movement for wave 1 and 2 unfolding over the next 6 to 8 months.

The Next chart indicates the retracement levels and as the market has gone through the 61.8% retracement level, the market will need at least 4 to 6 months to consolidate and gather strength for an upmove. It would be best to avoid trading wave 1 and 2, be patient and look at silver next year to capture wave 3.

WTI Crude

History - All about Gold

Facts on Gold

• Boiling Point - Boiling point of gold is 2808 degrees centigrade.
• Melting Point - Gold melts at 1064 degrees centigrade.
• Measure of Gold - Gold is measured in Troy ounces. One Troy Ounce of Gold is 31.103 grams of gold. 
• Total Gold - Less then 175,000 Tonnes of Gold has been mined since the beginning of civilization.
• 21 Meters Cubed - All of the gold ever mined would fit into a crate of 21 meters cubed.
• 49% - Around half of gold mined today is made into jewelry, which remains the single largest use of gold. 
• Over 90% of the wolds gold has been mined since the California Gold Rush.
• 750 parts per thousand - Gold is often alloyed with other metals to change its color and strength. 18 carat gold is composed of 750 parts of pure gold per thousand.
• 80 Cm - The largest gold coin ever created was cast by the Perth Mint in 2012. Weighing one Tonne and measuring 80 cm in diameter, it surpassed the previous record, a 2007 C$1 million coin which was just 53 cm across.
• 2316 Troy Ounces - The largest ever true gold nugget weighed 2316 troy ounces when found at Moliagul in Australia in 1869. It was called the "Welcome Stranger".
• Atomic Number - The atomic Number of Gold is 79, which means there are 79 protons in the nucleus of every atom metal.
• London Good Delivery Bar - A London Good Delivery Bar, the standard unit of traded gold is made up from 400 troy ounces of gold.
• Gold is the 79th Element on the Periodic Table of Elements. 
• Of all the minerals mined from the Earth, none is more useful than gold. Its usefulness is derived from a diversity of special properties. Gold conducts electricity, does not tarnish, is very easy to work, can be drawn into wire, can be hammered into thin sheets, alloys with many other metals, can be melted and cast into highly detailed shapes, has a wonderful color and a brilliant luster.

Uses of Gold:

1. Jewellery - As stated above 49% of all gold mined is used for jewelry. 
2. Gold is still used in dentistry though in a world today where everyone is too conscious about looks, the use is getting less and less. The first book published on dentistry, entitled Artzney Buchlein, appeared in 1530. The book suggests dentists fill cavities and rotten teeth with gold. Gold is a bio-compatible metal, meaning it can be placed in contact with a person's body and not cause harm to one's health.
3. Gold is a highly efficient conductor of electricity and is used in most electronic devices, including cell phones. Gold contained in connectors, switches and relay contacts allows phones to remain free of corrosion.
4. According to the World Gold Council, a single mobile device contains up to 50 milligrams of gold. That’s a tiny amount but nearly 1 billion cell phones are produced each year. With a gold value of about 50 cents in each phone, that adds up to $500 million dollars in gold each year!
5. Gold can also be found in most standard desktop and laptop computers. The precious metal is used in a CPU’s memory chip and motherboard, allowing parts of your computer to receive power and communicate with each other.
6. Gold acts as a reliable conductor, allowing for the rapid and accurate transmission of digital data from one device to another. In fact, only silver and copper are better conductors of electricity.
7. The earliest medical use of gold can be traced back to China in 2500 BC. Chinese physicians used pure gold to treat furuncles, smallpox, skin ulcers and to remove mercury from skin and flesh, says GoldBulletin. In India Gold is even today used in various forms for ayurvedic treatments.
8. Today the metal is primarily used to treat patients with arthritis. Gold salts are used to reduce swelling, bone damage and to relieve joint pain and stiffness. It’s a slow process; patients generally receive 22 weeks of gold injections before experiencing relief.
9. Gold is highly malleable and flexible. Gold can be beaten into thin sheets, only a few millionths of an inch thick. These sheets, known as gold leaf, are displayed on buildings throughout the world, such as St. Michael’s Cathedral in Kiev, Ukraine.
10. India’s Sripuram Golden Temple is the world’s largest golden structure. The spiritual park is made out of 1.5 tons of gold. The gold leafing provides a durable and corrosion-resistant covering, says GoldPrice.com.
11. It’s truly a gold universe. Space vehicles are fitted with gold-coated polyester film to reflect infrared radiation and to help stabilize core temperatures, says Geology.com. Without gold, darker colored parts of spacecraft would absorb significant amounts of heat.
12. NASA also protects its astronauts using gold. Astronauts’ helmets are covered by the extravehicular visor assembly. The visor is coated with a thin layer of gold to filter out the sun’s harmful rays, according to NASA.
13. 
    

Difference between Ounce and Troy Ounce

Most people don't realize that there is a difference between an ounce and a troy ounce. Ounce is used to measure commodities and when you go to a departmental store you could be weighed commodities in ounces, however gold is weighed in troy ounces.

One troy ounce weighs 31.1 grams

One avoirdupois ounce weighs 28.35 grams

Precious metals such as gold and silver are often sold by the troy ounce. Many people don’t realize that an ounce of gold is more than the typical ounce found at the grocery store.  In many English speaking countries there are two systems for measuring weight.One, for precious metals, called the troy ounce.The other is for Commodities such as sugar, grains, and other grocery items. It is called the avoirdupois ounce.  

It is thought that the troy ounce was named after a weight system used in Troyes France during the Middle Ages.

Tola or Tolah System for Gold used in India.
In India we typically used the tola system and gold and silver was sold in Tolas which is slighly more than 10 grams.  1 Tola [India] is equal to 11.6638125 grams. However now in the newspaper the quote for Gold price that you see is per 10 grams and increasingly the tola system is not used. 

Historical Prices of Gold (India)

Below is a link to an excel sheet which contains daily, weekly and monthly data for Gold from 1993 to 2011. In the daily history one can go to row 4612 and see how many time has gold movement been more then 50 dollars or 60 dollars or 100 dollars per day during the said period of 1993 to 2011. Just some analysis to give you an idea how volatile gold can be.

https://docs.google.com/spreadsheets/d/1jpSuK3CRA5gh0tDFwlk8aA6Pj23wfPi7vd_GdCu8kWE/edit?usp=sharing

California Gold Rush in 1849

South African Gold Rush in 1885 started by George Hamilton.

(The Article is under construction)

Researched from - World Gold Council Website, Wikipedia, The Power of Gold by Peter Bernstein, Livescience article by Stephanie Pappas, usfunds.com, many other sources from net and books.

WTI Crude Buy Signal

FED Meeting Outcome - 17th June 2015

Consistent with what i have been saying, despite Ms. Janet Yellen indicating that Interest Rates would be hiked one to two times this year, the markets did not react in a dollar positive manner. Usually an interest rate hike makes the currency stronger. An anticipation of a rate hike also makes the currency stronger. This as we can see has not happened in the case of the USD yesterday, rather whole focus is on the Euro. I have been saying that the market has already played the role of a discounting mechanism as far as US interest rate hikes are concerned and will not react to interest rate hikes.

Euro on the other hand is the major focus of the market. Today the Finance Minsters of Europe meet up to decide the fate of Greece. In case there is a default on the part of Greece then this would be the first default on an IMF loan by a first world country. Great Article on this in the telegraph of today...
http://www.telegraph.co.uk/finance/economics/11682277/Greeks-admit-they-will-default-at-the-end-of-the-month-as-central-bank-turns-on-government.html

One must also look at the crosses since yesterdays movements were good on the GBP as well as the YEN. Both moved considerably more then other counters. Gold also reacted well to yesterdays events.

I would look at 1.1180 as a buy in EUR/USD.
GBP/USD still has a long way to go but might take a breather for now.
USD/JPY is a good short.
USD/INR - i expect USD/INR to continue to remain weak. Anywhere above 64.50 can start to short USD/INR which is likely to continue to strengthen throughout out this to the next year.

Will put up charts by the of this week. Waiting for more clearer direction on Crude.

Fed Meeting, Euro and Greece this week.

I do not expect much to happen in the FED meeting this week other than a possible hint at hiking rates sometimes in the near future. One must however be prepared for the inevitable as a trader. In case there is a rate hike, the US dollar will sharply gain in value against all major counters. However this strength will be short lived in my opinion, 2 to 10 days at the most.

The main focus this week is the Greek drama, which is equally important for both the Greeks as well as Euro Zone. Greece if decides to exit the Euro zone, will be isolated from the Euro zone. In addition there are concerns that China, Russia and such other ambitious emerging global powers will try to enter Greece and help it in what ever they can to further their own interests. US might also look at this as an opportunity to further its own interests in Europe. So there are geopolitical issues with the Greek default as well. Then of-course the markets are already nervous and a Greek default will affect a fragile recovery which is more difficult for Europe then for the US. Mr. Alex Tsipras knows this and is using it to his advantage.

I foresee good sense to prevail and with German and French expertise in keeping the Euro Zone intact the likelihood is that an agreement will be reached for a timely solution of the Greek Debt issue. 

Overall i would see this as a Euro favorable week. I would expect the Euro to strengthen further. I continue to see USD/YEN as a good sell opportunity. GBP/USD and EUR/USD good buys as well. 

Its worth risking on buying gold as well. Crude might take a little more time to give direction. 

US Dollar Analysis - Part 1

Some factors contributing to the strength of the US dollar are:

1. Greece repayments which is keeping pressure on the EURO.
2. Interest Rate scenario in the US. FED is expected to increase interest rates soon.
3. An overall improvement in the US economy since last year.
4. Interest rate scenario in Euro zone and in England.
5. USDX Analysis (US Dollar Index)

Greece is expected to make the next payment in June, which Greece is already refusing to pay. This keeps pressure on the Euro. Currently the Euro made a low of 1.0418 against the dollar in the month of Mar 2015. Due to the Greece situation the Euro is likely to lose strength once again, though I doubt it will make a new low. I would expect Euro to make a low of about 1.0480 or higher and then reverse. However markets have a tendency to take one by surprise and one cant rule out a new low.

Interest Rate Scenario in the US is likely to change as the FED has indicated it will resort to raising interest rates. However for now, OIL prices are low, and the US economy is better but downward pressures still persist. In anticipation of rising interest rates the market has already moved in favor of the US Dollar. I therefore believe that when the FED actually starts hiking interest rates. the US dollar will actually weaken. Traditionally a rule of thumb on the US interest rate hikes is that if the FED hikes interest rates 3 times in a row, the US economy actually enters a recession. 

US economy has improved over the last two years but the recovery is still fragile. Any shock or disturbance could push the economy back again. 

Euro zone is unlikely to hike interest rates for some time. UK has got a full majority government which bodes well for the UK economy but implementing programs to boost the economy will take time and till then the Economy will remain weak. Like the Euro we can expect the Pound to weaken further though the Pound is in a better position then the Euro. I would expect a low of 1.5150 at the most for the Pound.

I would also like to mention the YEN here. I expect at the most 123.80 on the top side for YEN. I don't expect YEN to weaken any further. The Japanese economy has been showing some signs of improvement. The Japanese Economy is expected to continue its strength into the next year. The Japanese Yen is already too weak and a weaker YEN will not make anyone happy. 

US Dollar Index: I expect the US dollar index to test its previous high of 100.32. It might actually make new high. If that happens one can expect all other counters to make new lows.

Summary: To summarize i expect Dollar Strength to continue further to around the third quarter of this year. By the end of the year the trend will reverse. I find the USD looking for a top which means that all other counters should be reversing around the end of the year. 

Currency Analysis - USD/INR (Indian Rupee against US Dollar)

My earlier analysis of 7th Jan 2015 had indicated that i expect the Rupee to get weaker against the US Dollar. Currently the Rupee sits comfortably above 64 Rs against the Dollar. I look at an approximate target of 66 and higher. From that point on, one can look at starting to sell USD and buy Rupee.

My assumptions on the Economic front are based on the fact that the new government in India for the last one year has been working very hard internally on simplifying rules and policies for foreign investment, and at the same time working hard abroad to attract investment. A simplified policy and rules regime, and an active bureaucracy and government bode well for foreign investments. Many contracts have already been signed with various countries and in various sectors. This money will now start flowing into India. The initial flow will be at around Rs. 66 or higher. By initial flow i mean the first 10 to 30 Billion USD would come at around the rate of 66 or so. However the subsequent flows will see the rupee strengthen and will be only at around 58-62 range. Then i see a continuous strengthening in the Rupee for a long time to come. The Rupee will gradually drift and stay between 48 and 52.

The second factor that will contribute to the strengthening Rupee is the return of Black Money. The government has been working on putting laws, agreements and processes in place that will start giving results. Most likely minor results will be achieved by the end of this year 2015. This would have a major psychological impact. As more and more money is recovered from abroad as well as from within the country, the Rupee will strengthen.

India focusing on development and attracting foreign investment and technology will be wanting to have a stronger Rupee which makes the imports cheaper. All major companies in India will want a stronger Rupee and will thus pressurize the government and RBI to keep policies in place that keep the Rupee strong. Paying back loans taken in USD also becomes cheaper if the local currency namely Rupee Strengthens.

To play a stronger regional role India will need a stronger currency and which will reduce dependency on USD.

In addition fundamentals of the Indian economy like inflation, fiscal deficit, budget deficit etc are all on target and government has already achieved them for this year. Strong fundamentals means strong currency.

Lastly technically speaking i am reproducing the chart from 7th Jan below which also indicates that the Rupee will strengthen.

We can see that the 61.8% retracement is at Rs.50.35. 

Trade Setup for WTI Crude

A great trade opportunity is unfolding in Crude in the coming weeks. Only a close below the 20 MA will be considered as a failure of the setup. The chances of success are 90%.

WTI Crude

WTI Crude, Gold, Silver - End of March 2015

WTI Crude and USDX

GBPUSD - Buy Opportunity

EUR/USD Weely

EUR is clearly holding on to current levels. The Greece issue has reached some sort of agreement. The US GDP was not very strong. Clearly EUR/USD could make for a buy opportunity.

WTI Crude

WTI CRUDE - DAILY CHART

Below is my view on crude. I still believe crude will try the bottom once again. The fact that crude has also gone through the 50 MA (blue) makes test of previous low open. Crude only needs to close below the 50 MA to give a second confirmation in addition to the triple top.

Gold Analysis

Silver Charts

Posting one of my favorite counters and one of the most difficult to analyse.

WTI Crude

EURUSD

Reserve Bank of India Meetings Calendar for 2015

           Date                                   Day         Time                   Event                            Actual    Previous
28th January 2015        Wednesday     11:00 A.M RBI Interest Rate Decision 7.75% 8%
3rd February 2015        Tuesday        11:00 A.M RBI Interest Rate Decision                      7.75%
1st April 2015              Wednesday    12:00 P.M RBI Interest Rate Decision
3rd June 2015              Wednesday    12:00 P.M   RBI Interest Rate Decision
5th August 2015          Wednesday    12:00 P.M RBI Interest Rate Decision
30th September 2015  Wednesday    12:00 P.M RBI Interest Rate Decision

Source: http://www.tradingeconomics.com/india/calendar#  

In India, interest rate decisions are taken by the Reserve Bank of India's Central Board of Directors. The official interest rate is the benchmark repurchase rate.

DJIA - Jan End 2015

DJIA looks all set to drop starting Monday.