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

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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.