AUGUST 2020
We will be limiting our commentary in
the coming months to
Global and Indian Equities. We will be focusing more on
Physical Gold.
We stick to our predictions that the benchmark Global
Equities including India will re-test March 2020 lows
within December
2020. Our predictions of the indices testing March lows by
September 2020 have
been pushed further by one quarter.
This prediction has its roots in the
COVID 19 virus and also
reckless money printing by the Central Banks of the
developed countries. USA is
leading the world in terms of printing trillions of
Dollars without
keeping any hard assets ( precious metal incl Gold and
other foreign currencies
viz Euro, JPY etc ) as a collateral.
The global equity markets in the developed world were bullish in the month of July 2020. This rally is beyond our understanding. NASDAQ COMP in USA is trading at its life time highs of 10900+. The said equity markets are not based on fundamentals. Vaccine for COVID 19 is a very big gamble !
The COVID 19 virus has again
re-surfaced in EU and
Australia. In USA the virus is now infecting masses in
villages. Brazil, India
and Russia are having problems as the virus seems to have
entered the
"community transmission" stage. The
complexity of this
virus is still not fully understood by scientists all over
the world.
Investors are advised to stay away from
equities till
further advice.
Investors should focus on investing in Physical Gold. Spot Gold in Asia tested a new life time high of US $ 1991.00 pto on 8/3/2020. The price level of US $ 2000.00 pto now is just a formality.
Our price target by December 2020 at US
$ 2400+ is still
valid.
Cheers for Gold !
Gold prices today tested a new lifetime high
on Spot Asia basis at US $ 1943.80. It is now trading at US $
1920.00 as I print this update.
Gold prices surged pass its September
2011 high of US $ 1920.00 pto today in early morning trade
at Sydney and Tokyo Spot.
Our prediction on Gold is again Bingo !
Our next target is US $ 2400.00 pto or even
US $ 3000.00 pto by end December 2020. Let us see if our
prediction again comes true ?
Three Cheers for Gold !!!
JULY 2020
This
update is dated Tuesday 6/30/2020
NIFTY
closed today at a bullish level of 10302. We feel the
bull rally in NIFTY in India has topped at the level 10600 which
was tested last week. We repeat again that NIFTY will correct
savagely over the next six months or less, on the back of global
cues especially a brutal correction in ^DJIA and S & P 500.
NIFTY will re-test its March 2020 low of
7511 in the said time frame. All Global Equity
indices will re-test their March 2020 lows by end December 2020
if not earlier.
COVID 19
pandemic is out of control in USA, Russia, Latin America (
Brazil worst hit ), India, Iran and African Continent Countries.
Globally as of date around 10.52 million people have the virus
as of date and death toll is 0.51 million and counting. WHO
informed today that the pandemic is far from over and is
accelerating. This is an alarming statement.
The key US
Equity indices closed today at bullish levels as under :
a)
DJIA = 25812 (
March
2020 low – 18213 )
b)
S & P 500 = 3100
(
March 2020 low - 2191 )
c) NASDAQ
COMP = 10058 ( March 2020 low -
6631 )
The said
indices did retrace nearly 75 % to their Pre COVID levels of
February 2020 highs and NASDAQ especially breached past it’s Pre
COVID levels to test high of 10221 on 6/23/2020. FAANG Stocks as
mentioned in our previous updates were on fire ! The
global equity markets were bullish on back $ 2.30 trillion of
economic stimuli announced by US Govt and other Govts across the
world also announcing huge stimuli. The money has entered the
stock markets in USA and EU. We repeat these stimuli are all
temporary measures. The money will run out by end July 2020 in
USA and also soon for other economies in EU, Japan and UK.
Vaccine is also about 12 to 15 months away from date.
In USA
some States after re-opening of the economy had to roll back to
containment measures. As of date in USA – fresh cases from
Southern, Eastern States and other nine States, the daily count
of fresh cases with infection are around 40,000. This figure
will touch 50,000 fresh infected case per day in a matter of few
days. The situation in USA, Brazil, Russia, Iran and India is
very grave. As per Dr. Antony Fauci – if stringent measures are
not enforced by the US Federal Govt in the coming few days, the
daily fresh infection rate will rise to 100000 patients/day.
Texas, Florida, California – situation is grave.
As per
Ex-FDA Chief ( Dr. Scott Gottlieb ) – 20 million people are
already infected by this COVID virus in USA as of date. These 20
million people have not been tested. This figure is nearly ten
times the official figure of 2.5 million. We are not aware on
what basis Dr. Gottlieb has estimated this figure of 20 million
Americans having the virus ?
Investors
have to save their own lives and lives of their families first
from this pandemic.
Then think
of profits from their investments. Hence investors have to
prepare to live safe and not fall prey to this deadly virus.
Having done that – you have would have made the best profits in
2020 !
The only
solution now is a vaccine which we feel will be available in USA
and EU by Q2 2021. If a successful vaccine is developed by end
October 2020 and is distributed globally by December 2020 – it
will be fantastic as death count around the globe will
minimised. But if the vaccine is only available by Q2 2021 – a
lot damage will be done. We cannot guess what will be the global
death toll figure by end Q3 2021 ?
We have
mentioned near complete exit policy in equity holdings
for investors in India and around the world in our last month’s
post. This virus will create havoc globally in the next 12 to 18
months. No amount of economic stimuli by Govts across the globe
will help unless a successful vaccine is developed. Economic
activity globally will be a small percentage as compared to Pre
COVID era. Millions of people around the globe will be
without jobs. People at the bottom of the pyramid will be worst
hit around the globe, as there will food shortages and this
strata can also be homeless. No funds to pay Rents or
EMIs. This will be major issue with Govts across the
world.
All the
countries around the world will further announce QE measures and
keep their currency printing presses running 24x7 to boost their
sagging economies. This currency printing cannot go on for
eternity. The value of major currencies in the world – US
Dollar, Euro, JPY and GBP will be seriously “de-based” against
Gold in the coming three years. The ugly head of inflation would
rise and initiate a new phase of “hyperinflationary
depression” in USA, not seen since 1930s ? USA is
mentioned especially as it is the world’s biggest economy and
the mighty US Dollar is referred to as a benchmark for other
economies and their respective currencies.
We are
now in firm global equity bear markets from 2020 to 2030,
contrary to almost all the market analysts in the world. We
repeat - the global indices have topped out in June 2020 and one
will see equities globally slipping deep into bear territories
in the coming 18 months or less from date. All rally’s will be
phoney and will fizzle out.
This 2020
economic crisis does not have its roots in a financial domain.
The roots are in medical science domain. This crisis is
not a recession. This is a breakdown. This crisis is
totally different and never seen since 1929 in USA. This crisis
cannot be fixed by politicians and economists as per our
understanding. The solution lies in science or lies in an Act of
God wherein the said virus leaves our planet Earth on its own.
So please
exit from equities now 100 % and be cash rich and buy physical
Gold which is not stored in any bank vaults. Put your physical
Gold in your safe deposits at home. HNIs can invest their
physical Gold in private vaults in Switzerland or Singapore.
Physical Gold will a currency till USA comes out of
“hyperinflationary depression”.
Our target
price of Spot Gold at US $ 1780.00 pto was tested on 6/29/2020.
Our next price target of $ 1920 pto will be tested by September
2020.
Hence
start getting out of equities and sit on cash. At least 50% of
your funds now should be in physical Gold.
Stay safe
and happy !
NIFTY
closed today at a bullish level of 9580. We feel the bull
rally in NIFTY in India has topped at the level 9600 which was
tested today and we feel that NIFTY will correct savagely over
the next six months or less, on the back of global cues
especially a brutal correction in ^DJIA and S & P 500. NIFTY will re-test its March 2020 low of
7511 in the said time frame. Once this level is
re-tested, we will post our updates regarding the state of
Indian equities from thereon.
The key
US Equity indices closed today at bullish levels as under :
a)
DJIA =
25383
( March
2020 low – 18213 )
b)
S & P 500 =
3044
( March 2020 low - 2191
)
c)
NASDAQ COMP = 9490 ( March 2020 low - 6631 )
The said
indices were bullish on the back of $ 2.30 trillion of
economic stimuli announced by US Govt and the vaccine
development euphoria. These stimuli are all temporary
measures. The money will run out soon as the world’s largest
economy is bleeding. In addition Vaccine euphoria will also
die down in the said time frame.
The tech
heavy NASDAQ was the best performer US Equity index in May
2020. We feel all the three equity indices as above have
topped out and in the coming six months or earlier - US Equity
markets will crash and re-test their March 2020 lows as
mentioned above. Global equity markets will also correct on
the back of correction in US equities.
We will
post our updates once the above March 2020 levels have been
breached – it could take six months or less. The next levels
will then be posted. As of now we feel if March 2020 lows are
re-tested, then we will see more savage corrections in said
equity indices. Let us wait till the March 2020 lows are
re-tested as mentioned above.
As we
have mentioned above – we are now revising our commentary
for the global equity markets from June 2020 onwards. We
are now advocating near complete exit from equity holdings for
investors in India and around the Globe.
So
please exit from equities now 100 % and be cash rich and buy
physical Gold which is not stored in any bank vaults.
This
update is dated Friday – 4/30/2020
The
COVID 19 virus is showing no signs of it being mitigated by
higher temperatures ( in excess of 40 deg celcius ) in the Asian
and Arican continents. USA, UK and EU are very seriously hit by
this pandemic with record number of infections and deaths. The
curve is flattening in the developed world but is on a parabole
in India, Asia and Africa. All the astrologers and pundits have
been proven wrong that this virus will cease to exist on planet
earth by end April 2020 !
We
mentioned in our last post that we do not agree with this end
April hypothesis and nor do we agree with the end September 2020
hypothesis that this virus will be contained. We still stick to
our estimates that an effective COVID 19 virus vaccine is about
18 to 24 months away – hopefully by q2 or q3 2021. All these
efforts of Remdisivir and other tweaked retroviral drugs are not
magic bullets to win over the virus which has hit economies all
over the world. These are not vaccines. These are drugs to be
given to critically ill Corona virus patients to save their
lives. Vaccine is the only panacea !
We
feel the target date of September or October 2020 for a
successful vaccine development by Oxford University, UK and M/s
BioTech GmbH, Germany is too ambitious. We are not hopeful of
this timeframe.
Global
Equity Indices have retraced about 21 to 36% from their
respective lows of March 2020. We could not anticipate the
velocity of this pull back in global indices especially in US
Equities - ^DJIA and S & P 500. Also pull back was very
sharp in the Indian Equity's Market. Almost a vertical spike
from March 2020 lows !
The
pull back rally was very very sharp on the basis of huge stimuli
being announced by Govts in USA, Japan and EU. Second trigger
for the recovery in Global Equity Markets was the possible
success of drugs like Remdisvir, BCG and Polio Vaccine etc which
turned out to be damp squids. The rally started fizzling out
today globally.
A
whopping virus stimulus package was approved in America by US
Congress in early April 2020 under the CARES Act 2020 for a
staggering amount of US $ 2.00 trillion. This is basically
“helicopter bazooka money” and is whopping 9.26 % of the US GDP
of $ 21.6 trillion as of end 2019. These funds are being pumped
into the sinking US economy in various sectors of US economy –
never heard of before in previous economic crisis in USA.
Details of this complex $ 2.00 trillion largesse is mentioned on
the website of US Govt. Total unemployment has hit 30 % in USA.
Total US Debt will rise to astronomic levels by end June 2020.
Total US Fed Debt was $ 23.40 trillion as of 12/31/2019. Debt to
GDP ratio in USA was 108.3% as of end 2019. Now the additional
Debt of about US 2.00 trillion (assumed 100% is the fiscal part
of total stimulus of US $ 2.00 trillion ) will make figures look
more ugly. US GDP contracted by 4.8% (annualized basis) in q1
2020. The GDP contraction will be in excess of 5.3 % by end q2
2020. The US Debt to GDP ratio will hit around 124 % by end June
2020. This is based on estimated total US Debt of US $ 25.4
trillion and GDP of US $ 20.00 trillion by end June 2020.
The
total US Debt is capped at US $22.25
trillion but the US Congress has raised this to $ 25.40
trillion. No one is mentioning about the issue - Total US Debt
Ceiling Limit has already breached of US $ 22.25 trillion cap
after US Congress passed the complex US $ 2.00 trillion for
virus assistance – CARES Act. Maybe we need to be corrected on
our figures of current total US Debt at $ 25.4 trillion. We
repeat - maybe we need to be corrected on our figures of current
total US Debt at $ 25.4 trillion.
US
Fed can get out of this crisis temporarily ( as in the past
decades ) by printing US Dollars, Floating Sovereign Bonds, e-
Dollars etc. It should be noted that this debt ceiling raise has
repercussions on AAA rating of US Treasuries & Bonds.
The
Japanese Govt announced a massive stimulus of approx. $ 1.00
trillion ( equivalent JPY ). This is whopping 20 % of Japanese
GDP. China is in the similar range plus monetary stimulus.
Indian stimuli for the pandemic is only at US $ 60.00 billion –
which is only 2.07 % of its GDP ( nominal $ 2.90 trillion ).
Even Malaysia and Singapore are ahead of India at around 12 %.
India
cannot afford a higher allocation for Virus Stimulus in excess
of US $ 60 billion because of a fear of the Sovereign Downgrade
by rating agencies – FITCH, MOODY’s etc. Indian fiscal deficit
has already breached its target at 3.5 % of its projected GDP as
of FY2021. On the monetary front RBI slashed Reverse Repo Rate
for ADs by 25 bpts to 3.75 % - thereby discouraging ADs not to
park their excess liquidity with RBI. RBI wants ADs to lend to
Indian Companies. Indian Corporate Bond markets were almost
ill-liquid after the Franklin Templeton Debt MFs collapse in
India in April 2020. RBI moved in to inject excess liquidity
into the Indian Financial Sector so as to calm the Indian
Corporate Debt Bonds market.
Hence
as regards Global Equities including India – we are bearish till
end q3 2020 on account of virus pandemic. In May and June 2020
we feel global GDPs will shrink, unemployment figures will rise,
virus pandemic will not be contained, poor countries will need
IMF bailouts, famine in poor countries etc. We repeat will post
our comments when March 2020 lows are breached – we estimate
within end June 2020.
A
couple of earlier risks have still not been mitigated which will
add fuel to the fire when the global equities further correct in
May through June 2020 :
a) The
US Sovereign Bonds ”Yield Curve” is still inverted between the
2Y and 5Y Bonds. This had already suggested a looming recession
in USA in q4 2019
b) Trade
wars between China and USA is heating up again after virus
pandemic spread globally. USA is blaming China not doing enough
in tango with WHO regarding ground situation in Wuhan. USA is
also blaming China that it did not share the details of the
virus outbreak with USA in November through December 2019.
Chinese Govt has refused physical inspection of its facilities
in Wuhan and other Sites by team of experts from USA. There are
some conspiracy theories going around in USA that the virus is
man made by Chinese virologists in laboratories in Chinese. This
virus was not spread by bats and pangolins to humans in the
China. US Administration wants China come out clean on this
origin of the virus failing which China has to pay a huge fine.
US Administration is also threatening the Chinese that it will
cancel its debt obligations. China golds US Treasuries and Bonds
worth us $ 1.12 trillion. US Administration is threatening it
will default wilfully on its Chinese Debt of US $ 1.12 trillion.
This is an extreme step being proposed by US Administration but
the Americans will never do it as the US Bond Markets will crash
and other countries holding US Foreign Debt ( around US $ 5.70
trillion ) might start dumping US Bonds. Prices of US Bonds will
crash and yields will soar to double digit levels from current
sub 1.0% level yields. Hyperinflation ? This US $ 1.12 trillion
– US Administration can raise by increasing import tariffs on
exports of Chinese goods to USA. US Administration is also
planning to block US Pension Funds to invest around US $ 100
billion in Chinese Debt Markets. Please do not underestimate the
Chinese. If they are pushed against the Great Wall – they can
pull the “Nuclear Button” and start dumping US Treasuries &
Bonds in global markets. This will create a havoc in the US
financial markets. But we do not rule out this event in the
years to come !
Crude
Oil – BRENT Crude Oil July futures tested a price of US $ 15.99
pbbl at ICE London on 4/22/2020. This is a 20 year low for BRENT
Crude Oil. BRENT closed at US $ 26.44 pbbl July 2020 Futures at
ICE at close today 4/30/2020. Global Crude Oil market is
oversupplied and hence we saw a carnage in BRENT and WTI Futures
in last week of April 2020. We are not mentioning details of WTI
as we do not track the same as this Crude Oil is more USA
centric. But we all know WTI May 2020 Futures tested minus 40.23
pbbl on 4/21/2020 – lowest in the history of CME since WTI was
traded at Chicago. BRENT Crude Oil prices can trade in the US $
18.00 to 20.00 pbbl territory in the coming two months. Demand
destruction is about 30 mbpd on account of virus pandemic to
levels of about 60 mbpd. The production cuts by 10 mbpd by
OPEC++ will be insufficient from 90 mbpd production in January
2020.
At
these low Crude Oil prices globally some poor Oil exports
nations like Nigeria may have a Sovereign Default and will need
IMF bailout. Iran and some other crude oil exporting countries
may need a bailout ?
Gold
Spot NY tested US $ 1750+ pto in April 202 0. Our next target of
US $ 1780.00 pto will be tested within end June 2020.
We
advise Global and Indian investors to trim their exposure to
equities to only 25 %. Invest at lower levels in Pharma and
Bio-Pharma Companies, Vaccine producers viz – PFIZER, GSK,
SANOFI etc. Indian Stocks - BHARTI AIRTEL, BEL, BEML, HAL,
ASTROMICRO, L&T, ULTRATECH CEMENT and TATA POWER are some of
our best bets for the next 5 to 10 years investment scenario.
Please consult your CFO before you make investments in the above
stocks at levels of NIFTY below 7500.
Balance
be liquid with 25 % and 50% one can even buy physical Gold at
current levels of US $ 1700+ pto – although a bit expensive. We
repeat physical Gold will give investors best rate of returns
from date till 2025-2030. No other asset class in the world will
give you returns as compared to physical Gold from date to 2025.
Yes if investors missed the boat at $ 1350 pto levels – this
elevated level of US $ 1700+ pto is also good for a fresh entry
in physical Gold. We are talking about prices of $ 4500 to 6000
pto in 2025 through 2030.
Happy
investing ! Stay indoors till lock downs are lifted
!
APRIL 2020
This
update is dated today i.e. 3/31/2020 – Tuesday. On Saturday
3/21/2020 – Govt of India announced a nationwide curfew in India
for Sunday – 3/22/2020. This was extended to a complete lockdown
of the Indian economy w.e.f. 3/23/2020 to 4/14/2020 to contain
COVID-19 spread nationwide. Complete shutdown of the Indian
economy barring essential services. So we are all at home till
4/1/4/2020 !
This
update covers week number thirteen of calendar 2020 and two days
of March 2020 – 3/30 and 3/31/2020 for the analysis of benchmark
global indices. Brief synopsis is as under :
a) In the above
seven trading days – Central Banks and Governments of almost all
the important countries announced massive Fiscal and Monetary
policy incentives. On 3/23/2020 – NIFTY in India crashed to a 4
year low of 7583 but closed at 7610 down 1135 pts or down 12.8
%. This is the single largest daily fall in percentage terms for
NIFTY in its history. BSE SENSEX too followed suits and tested a
4 year low of 25580 to close at 25981 – down 3934 pts or down
13.15 %. India’s Central Bank ( RBI ) and Ministry of Finance
arrived with two fire engines to douse the fires during trading
hours on 3/24/2020. NIFTY early morning
had tested a fresh 4 year low of 7511. Late
afternoon - RBI cut Repo Rates by whopping 75 pts to 4.40 % and
cut Reverse Repo Rates by 90 bpts to 4.00 %. CRR Rate was cut by
100 bpts to 3.00 %. MoF – Govt of India announced an economic
stimulus of US $ 23.20 billion ( in equivalent INR ) and a US $
800 million ( in equivalent INR ) package for relief for the
poorest of the poor daily wages workers in India. NIFTY rallied
smartly from the 4 year low of 7511 on 3/24/2020 to whopping
high of 8598 at close of today. Up nearly 15 % from the lows as
above. NIFTY has staged a smart recovery in seven trading days
after testing multi year lows on back of global cues and
aggressive intervention by RBI and MoF to provide relief as per
above. Govt of India is not bothered about increased fiscal
deficit and wishes to contain the COVID-19 aftermath
manifestations.
b) Similarly
on 3/23/2020 - ^DJIA crashed to
its 4 year low of 18213, S & P tested fresh 4 year
low of 2191 and NASDAQ tested its fresh 52 week low of
6631. On 3/24/2020 – US Govt announced a US $
2.20 trillion economic stimulus package to bail out struggling
US Companies which need capital injection failing which they
will go out of business. Businesses in the Airline, Leisure
& Travel and Hotel etc. Modalities not announced – Loans or
Equity stake purchase. ^DJIA pole vaulted from the above low to
close today at 21917. Up whopping 20 %. S & P closed today
at 2584. Up nearly 18 % from the low as above. NASDAQ COMP is
the only benchmark index which still has not breached its
December 2018 low 6191. It closed today at 7700. Up nearly 16 %
from low as above. ^DJIA rallied by huge 11.37 % on
3/24/2020 at close – its biggest daily gain in percentage
terms since 1933. This kind of intervention by US Fed and
Treasury is unprecedented in the history of United States of
America. TARP in 2008-09 was around US $ 800.00 billion. But
with all these efforts - ^DJIA had its
worst week since 1933. ^DJIA was down 16.37 % in week
13 of calendar 2020. Volatility is very high in ^DJIA. The need
of the hour to keep America running even if it means keep its
printing presses running 24x7 to print US $. The US
Administration knows the perils of printing US $ worth trillions
without keeping any physical Gold as collateral. This headache
Nixon fixed for the US Fed on 15th August 1971 !
c) Rest all
benchmark Asian and European Equity indices did not breach their
lows of week 12 of calendar 2020. All respective Central Banks
resorted to interest rate cuts and announced economic stimuli to
save the companies operating in the Sectors as mentioned above.
Week 12 lows of equity indices we track will be breached in
April 2020.
Now we
have to see what is in store for the global financial markets
till June 2020 and then from June 2020 to December 2020 in
context of COVID-19. This virus has created havoc since we
posted our last update. USA, UK, Spain, Italy, France and UK are
very seriously hit by COVID-19 fresh infections and soaring body
counts. Lockdowns are not getting the desired results. The PPE
and Ventilators are in serious short supply. Doctors and Nurses
have died all across these countries. COVID-19 has not been
effectively contained by health authorities in these developed
countries. Iran is also in the same boat but we do not get the
right figures from this Islamic Republic. What about COVID-19
spreading to the African Continent ? Can one fathom what will
happen in these poor African Nations which have very weak health
infrastructure ? Millions will die in Africa if COVID-19 spreads
to all the countries ?
China has
done a miraculous job of containing the dreaded COVID-19. China
is an authoritarian State and hence could implement lockdowns
very seriously in Wuhan. They protected Shanghai and Beijing
very effectively by not allowing any international flights to
land directly at these international airports since late
February 2020. All international flights were to smaller
airports nearby and all arriving passengers were placed in
quarantine for 14 days and screened 100 %. Those found infected
were treated. I have a hunch that Chinese have some anti-dote
with them for COVID-19 which was transmitted by Bats to Rabbits,
Reptiles or Snakes. From Rabbits or Snakes the virus infected
humans in Wuhan. Chinese are opening Wuhan slowly. Also easing
curbs in Beijing and Shanghai. Factories are returning to
normal. Whereas in the rest of the world all factories and
commercial activities as shut. What is going on ? The puzzle has
parts which do not fit properly to assemble a correct picture !
There are
a lot of renowned analysts around the globe who are giving their
opinions about the future of Equity, Sovereign Bond and Debt
instruments. The problem this time is not financial like in
2008. In 2008-09 cash was pumped in by Governments and
businesses were partially nationalized, merged, restructured
etc. This time the problem is not financial but medical.
Only Science has a solution by way of Antibodies administration
to the COVID-19 infected patients or Vaccine development.
Doctors in the developing world including India are giving a
combination of – Chloroquine / Hydroxychloroquine +
Antiretroviral drugs to COVID-19 infected patients. But this is
not a permanent way to cure a viral infection. We need a vaccine
to treat COVID-19.
March 2020
– the equity markets have performed worse than in the month of
September 2008 on a monthly basis. US Equity markets have
performed worst in Q1 2020 in terms of percentage falls since
the Great Depression. These are very serious matters
and analysts are predicting all will be back to normal by
September 2020 as vaccines will be in place by August 2020. Some
astrologers are predicting all will be in control without a
vaccine by April 2020 . COVID-19 will vanish completely by April
2020 on its own due to high temperatures. We cannot say with 100
% certainty.
We feel
that global equity markets we track will breach week 12
lows and fresh lows as above for NIFTY, ^DJIA, S&P and
NASDAQ COMP in April 2020. COVID-19 will not be contained.
The
genetic code of COVID-19 has been discovered and analysed by a
few global vaccine manufacturers as of date. The trials will be
over by September 2020 and the vaccine will be ready by early
2021. Vaccine development is not measured in time frame of
months but years. Rotavirus vaccine was ready after eight years
of its genetic code discovery.
I am very
very bearish on the global Equities, US Sovereign Bonds, US
Dollar Index from date till end 2020 as I do not feel COVID-19
will completely vanish by end April or end September 2020. Due
regards to astrologers - Kuntz, Celeste Browne, Subbiah etc.
This will not happen.
We are
entering a phase in USA where situation will be like 1929-32.
The effects will be felt globally. We do not agree with United
Nations recent report that China and India will be the beast
performing economies in the years to come because both have
successfully contained the spread of COVID-19. China may have an
anti-dote to this COVID-19 virus but what is the guarantee that
a second wave will not hit China ? China has opened it “wet
meat” markets for Dogs, Bats and Pangolins in a few Provinces.
In India COVID-19 will explode like USA, Italy and Spain in the
coming months.
We have
entered a long term bear market for global Equities, US
Sovereign Bonds and US Dollar. US Bond markets will crash once
Chinese “press the nuclear button” and start offloading US Bonds
worth 1.5 trillion. Chinese will start dumping US Bonds in Q3
2020 onwards. Cash and physical Gold will be the king !
We predict
a global equity meltdown within December 2020. We predict US
Bond Market crash within December 2020. Post these events –
global equity markets too will crash. US Dollar will be
seriously debased as trillions of Dollars will be printed with
any physical Gold being kept as a collateral. We feel global
equity markets and US Bond markets will be shut for trading in
Q4 2020. We predict this bear market could extend to 2025-2030.
Bear markets do not end in months.
Let us
first see what happens to COVID-19 in April 2020 ? Will it
completely vanish from the planet earth by April 2020 ?
Crude Oil
was battered in the past seven trading sessions. BRENT Crude Oil
May 2020 futures tested a 18 year of US $ 24.12 pbbl. American
Shale Oil industry will shut soon as they need a price in excess
of US $ 50.00 pbbl. Russian economy can collapse as they also
need a base price of US $ 60.00 pbbl for new wells. Saudis need
a price of US $ 80.00 pbbl to balance their annual budget. But
these are wishful numbers. Even if Trump and Putin agree to be
partners – one will not see prices in excess of US $ 40.00 pbbl.
I am convinced that we will see a price of US $ 20.00 pbbl for
BRENT Crude Oil within December 2020.
Physical
Gold target is US $ 2400 pto for December 2020 as mentioned in
our last post.
We are posting yet again a special update dated today –
3/20/2020 Friday. Prime reason is that all global equities
except ^SSE COMPOSITE China and ^IXIC NASDAQ COMPOSITE
USA have now broken their December 2018 lows. Some key global
equity indices are trading below the December 2018 lows. Details
are presented as under in this update.
What next now in the
coming weeks or months ? Where do global Equity Indices go from
closing levels of today ?
Please refer to our
Special Update dated 3/13/2020 with reference to COVID-19.
COVID-19 pandemic is
showing no signs of being contained worldwide except China from
where it originated. China has reported a handful of fresh
infected cases outside of Hubei province. But data from China is
not reliable. We cannot say with certainty that China has only a
few fresh cases in the past couple of days of COVID-19. Chinese
Ministry of Health has declared that there have been no fresh
infections in Hubei province since the past three days. We do
not believe Chinese Govt claims.
COVID-19 is creating
havoc in Iran, Italy, Spain, France and USA. Netherlands and
Belgium have reported first deaths. The situation is really bad
in Italy and Iran. Record number of deaths, record number of
fresh cases, shortage of medical staff, deaths of medical staff,
extreme shortage of medical supplies, extreme shortage of ICU
Beds and Ventilators. Lockdowns have been announced in four
states in the United States and in some parts of EU. Italy is
under total lockdown.
All the measures mentioned in our last update by governments all
over the world have been put into action very aggressively -
Liquidity injections ( Bonds and CP purchase ), Fiscal stimuli (
Tax breaks for both Corporates and Individuals ), Cut in
Interest rates, Corporate bailouts, Hard Cash dole outs etc.
Global equities continue to fall on account of COVID-19 crisis.
Crude
Oil – BRENT Crude May 2020 Futures crashed to US $ 24.97 pbbl on
3/19/2020, lowest level since the year 2001 ? BRENT Crude is in
deep bear territory. We are not in a position to predict Crude
prices as suddenly one can see Russians and Saudis agreeing to
sleep together and cut production aggressively respectively.
Some Crude Oil pundits are predicting prices of BRENT Crude to
be in the band of US $ 15.00 to 20.00 pbbl by June 2020. This
can only happen if Saudis and Russians are not bed partners.
Spot
Gold prices corrected further as predicted in our last update.
Spot Gold tested a whopping low of US $ 1440.00 pto on 3/16/2020
in New York. Gold Spot NY closed today at US $ 1500 pto
levels. We feel the worst is over in Gold. Gold will explode
back to $ 1650 - $ 1780 - $ 1920 - $ 2400 pto levels from April
through December 2020.
Please
note
that our predictions on a few global equity indices as under :
1. ^NSEI NIFTY India :
October 2018 low of 10005 has been breached as predicted. Even
the all-important level of 9300 has been breached. NIFTY
crashed to fresh new 52 week low of 7832 on 3/19/2020.
It closed today at a level of 8745 level. From the yearly high
of 12430 to low of 7832 – NIFTY is down nearly 37 % from its
peak. BSE SENSEX is also down by nearly 37 % from its peak of
42274. FIIs have been heavy sellers in Indian and Emerging
Market’s Equities and Bonds and putting funds in safe haven - US
Sovereign Bonds and US Dollar. Yields on US $ Sovereign Bonds
tested life time lows !
The
key supports of S1 8624 S2 8555 were breached within this week.
NIFTY is in deep bear territory. The next support and resistance
levels are S1 7830 S2 7500 S3 6300 S4 6215 R1 9300 R2 10005
R3 10500 till June 2020 or earlier
2. ^N225
Japan : December 2018 low of 19084 has been breached. It
tested a fresh multi year low of 16358 on 3/19/2020 and
closed today slightly higher at 16552. This index is also now
in deep bear territory. S1 16690 was breached. ^N225
is down 32 % from its peak of 16552. ^N225 can test a level of 12000
within June 2020 or earlier
3. ^HSI Hong Kong : October
2018 low of 25125 has been breached. ^HSI tested a fresh multi
year low of 21139 on 3/19/2020 and closed today at 22805. ^HSI
is now in deep bear territory. S1 22519 was breached. ^HSI
is down 30 % from its peak of 30280. ^HSI can test a level of 15140
within June 2020 if not earlier
4. ^TWII Taiwan : October 2018
was 9400 finally breached on 3/19/2020 and ^TWII crashed to a
multi year low of 8523. It closed today at 9234. This index is
also now trading in bear territory and is down nearly 30 % from
its peak of 12198. S3 9400 was breached. ^TWII can test a
level of 6100 within June 2020 if not earlier.
5. KS11 KOSPI South Korea : October
2018 low of 1986 has been breached. KOSPI crashed to a multi
year low of 1439 on 3/19/2020. It closed today at a very bearish
level of 1566. KOSPI is down 37 % from its peak of 2277.
KOSPI is deep in bear territory. S1 1680 was breached.
KOSPI can test 1138 within June 2020 if not
earlier.
6. ^SSE
COMP China : October 2018 low of 2449 still has not been
beached. ^SSE COMP tested a fresh 52 week low of 2646 on
3/19/2020. It closed today at 2745. ^SSE COMP is down nearly 20
% from its peak of 3288. S1 2685 was breached. ^SSE
COMP can test 2449 or even 2300 within June 2020
if not earlier. It is a most resilient equity index in Asia.
On
3/16/2020 – these major EU Equity indices crashed to test fresh
their 52 week or multi year lows. COVID-19 is creating havoc in
Italy.
7. ^GDAXI DAX Germany : December
2018 low of 10800 has been breached. DAX crashed to its fresh 52
week low of 8255 and closed today at 8928. DAX is deep in bear
territory and it is down nearly 40 % from its peak of
13795. S1 9060 was breached. DAX can test a level of 6900
within June 2020 or earlier.
8. ^FCHI CAC 40 France : December 2018 low of
4615 has been breached. It crashed to its fresh 52 week low of
3632 and closed today at 4118. CAC is in deep bear territory and
its down nearly 40 % from its peak of 6111. S1 4025 was
breached. CAC 40 can test a
level of 3055 within June 2020 or earlier.
9. ^FTSE 100 UK : December
2018 low of 6592 has been breached. ^FTSE crashed to its fresh
52 week low of 4898 and closed today at 5190. This index too is
in bear territory and is nearly 32% down from its peak of 7227.
^FTSE can test a level of 3615 within June 2020 or
earlier
10. ^IBEX Spain : December 2018
low of 8286 has been breached. ^IBEX crashed to a multi year low
of 5184 and closed today at 6443. This index too is trading in
very deep bear territory with ^IBEX down nearly 49 % from its
peak of 10100. S1 6347 was breached. ^IBEX can test a level
of 5050 or even 4040 within June 2020 or
earlier.
11. ^FTSE
MIB Italy : December 2018 low of 18152 has been breached. This
Italian benchmark equity index crashed to a multi year low of
14153 and closed today at 15732. ^FTSE MIB is trading deep in
bear territory and is off 36 % from its peak of 22166. It can
test a level 11100 within June 2020 or earlier.
American equity indices were bearish in this
week 12 period of March 2020. Twice there was a trading halt ( down 7 % )
in ^DJIA in the said period.
12. ^DJIA USA :
December 2018 low of 21712 has been. ^DJIA tested a fresh 52
week low of 18917 and closed today at 19174. ^DJIA corrected to
a low 20116 on 3/16/2020 and was down by 2997 pts ( -
12.3 % ) on a daily basis. This was the
single largest daily fall in ^DJIA in absolute terms and
percentage terms since October 1987. In this period US Fed
cut key interest rates by another 100 basis points and with this
cut - The US Fed Funds interest rates are near zero percent.
Plus further QE of US $ 1.00 trillion including US Commercial
Paper. There was a sharp pull back in ^DJIA but this rally was
sold into. COVID-19 is spreading fast in USA. New York and three
other States in USA are under total lockdown. There are acute
shortages of Medical supplies, ICU Beds, Doctors and Nurses in
USA. Testing Kits are also in short supply. USA it seems is
behind the curve by two weeks as per health experts. The flight
bans should have been implemented two weeks back. Testing should
have been more comprehensive. USA is struggling like Italy to
fight COVID-19.
US
Dollar Index tested new highs of 102+ and 10Y benchmark yield
tested a record low of only 0.311 bpts on 3/18/2020
^DJIA
is now trading in bear territory and its off by nearly 36 % from
its peak of 29568. ^DJIA can test a level of 14800
within June 2020 or earlier. Trading curbs could be in place
shortly and maybe trading could be suspended in US Equity
markets if this level is tested.
13. ^GSPC S & P 500 USA
: December 2018 low of 2347 was finally breached. S & P 500
tested a fresh 52 week low of 2280 and closed today at 2305.
This index too is trading in bear territory and is nearly 33 %
down from its peak of 3393. S & P 500 could test a level of
1696 within June 2020 or earlier.
14. ^IXIC NASDAQ COMP :
December 2018 low of 6193 has still not been breached. NASDAQ
tested a new 52 week low 6686 and closed today at 6880. This
index is also now trading in bear territory and is off by nearly
32 % from its peak of 9836. NASDAQ COMP will breach 6193
and may test a level of 5000 within June 2020 or
earlier.
Trading
curbs could be in place in global equity markets in the near
short term and if the above levels are tested – then trading
could be suspended globally.
Investors
as advised to stay away from Equities till further advised as
COVID-19 is creating havoc globally. Investors can buy physical
Gold
This is a special post dated 3/13/2020 Friday
as certain predicted levels of global indices have been breached
in Q1 2020 itself after WHO declared COVID-19 virus outbreak as
global pandemic as EU counties, USA and Iran reported
large number of cases. In EU – Italy followed by Spain are very
badly hit. In Asia – South Korea is the worst hit. India as of
now has only a few hundred cases.
We were spot on regarding massive correction
in global equities led by ^DJIA in March 2020. This correction
will spill over into Q2 2020 as predicted in our last month’s
post. Global equities corrected in first two weeks of March 2020
led by ^DJIA. But a few global equities corrected much more than
^DJIA in percentage terms in the first two weeks of March 2020.
Week 11 of 2020 ( 9th to 13th March
2020 ) was historic as global equities indices cracked in this
week and tested multi-year lows. In fact major EU equity
indices fell the most in percentage terms in their history.
Crude Oil and Gold also tested multi-year
lows. Investors were reminded of global equity crashes of the
years of 1987, 1991, 2001, 2008, 2018 which we have been
through. Details are posted as under in this post.
We have been saying since the past 12 to 15
months that global equities will correct by 25 to 35 %. We
mentioned that the said correction will be led by ^DJIA and
other global equities will follow suit. We mentioned this again
in our January 2020 update that ^DJIA will correct by 25 to 35 %
in Q1 and Q2 2020. The said corrections were based on our
proprietary tools which include Astro inputs. Anyway we were
BINGO !
We feel the ten year ( 2009-2019 ) dream bull
run of equities is over and we are in for a bear phase in
equities from date till 2025.
This update is being posted specially as some
important levels of global equities have been breached
convincingly and we feel that the correction will further spill
over into April through June 2020. Prime reason is the impact of
COVID-19 virus globally going ahead till June 2020. No one knows
that with the onset summer globally, will the impact of the
COVID-19 virus will taper off due to temperatures exceeding 30
deg Celsius or not ? In the past viruses of this family in Asia
have been decimated on account of high temperature. Scientists
globally hope that COVID-19 will also not survive June 2020
temperatures globally and this pandemic will be over. If this in
fact happens – there will be a massive rally in global equities
led again by ^DJIA in Q3 2020 ( July – August 2020 )
But by June 2020 if the COVID-19 does not
respond to higher temperatures then the global equities will
correct till Q4 2020. The reason is that the first COVID 19
vaccine will be ready for final human administration by April –
June 2021 if not later. Markets discount the future so a rally
will start by early 2021, if there are positive developments on
the vaccine front. Very tricky months ahead for global Equities,
Crude oil and Gold. We do not track other commodities.
There could be very savage pull backs in
global equities in March- June 2020 on account of Government
interventions around the globe in their respective economies by
way of – Liquidity injections, Fiscal stimuli, Cut in Interest
rates, Hard Cash dole outs and other measures. But all these
rallies will be sold into. Hence please stay away from global
equities till June 2020.
We will review the situation in June 2020 or
earlier as per the situation.
Crude Oil – we mentioned in our last month’s
post that it is very difficult to predict crude oil prices on
account of Saudis and Russians. Exactly the same happened. In
early March 2020 in the OPEC+ met in Vienna – Russians did not
agree to sleep with Saudis and did not agree for production
cuts. Saudis were shell shocked and decided to chug along solo.
BRENT Crude May 2020 Futures crashed to US $ 31.18 pbbl on
3/9/2020 – down by nearly 30 % in a day. Worst daily fall since
January 1991 ?
BRENT May 2020 Futures closed today
marginally higher at US $ 33.72 pbbl. Now we are pretty sure
that till Russians agree to production cuts – BRENT Crude Oil
prices will be in the range of US $ 28.00 to US $30.00 pbbl due
to sluggish global demand on account of global economic
slowdown.
Spot Gold prices corrected to as predicted to
US $ 1504 pto levels after testing US $ 1690 pto levels in early
March 2020. Gold prices can correct further to US $ 1450 levels
in March 2020 due to liquidity issues as investors booked
profits in their Gold holdings to pay for their massive losses
in equity markets ! But remember will Gold will explode back to
$ 1650 - $ 1780 - $ 1920 - $ 2400 pto levels from April through
December 2020.
Please note that our predictions on a few
global equity indices as under :
1. ^NSEI NIFTY India : October 2018 low was
10005 was breached as predicted. Even the all-important level of
9300 level was breached today – but on an intra-day basis. NIFTY
and SENSEX crashed in early morning trade today by 10 % to hit
the first daily down circuit limit. This was for the first time
since 2008. Trading was on halt for thirty minutes. NIFTY
crashed to 8624 levels – down 966 pts and SENSEX crashed to
29684 level – down 3090 pts. These are the single largest daily
falls for both these Indian Equity indices in absolute terms.
Post resumption of trading after the cooling period - the Indian
Equity markets fell further but for a brief period and NIFTY
tested a fresh intra-day low of 8555 and SENSEX tested 29388.
The next 5 % down circuit level was not tested and NIFTY closed
at a slightly bullish level of 9955. Global equity markets
including Indian markets are in a highly “over sold” territory
and a relief rally is expected but the same will be short lived.
Traders have to be very nimble footed as markets as very
volatile in India and around the Globe.
It is of paramount importance that
NIFTY sustains level the important support level of 9300
on closing basis for at least five trading days in a row. If for
whatever reason NIFTY cannot sustain – then the next S1 8624
S2 8555. R1 10005 R2 10500
2. ^N225 Japan : December
2018 low was 19084 and was breached as predicted but the time
frame was shorter ! Savage correction in Asian Equities led by
KOSPI in South Korea. ^N225 tested a multi-year intra day low of
16690 today but closed slightly higher at a very bearish level
of 17431. This index is now confirmed to be in deep bear
territory. The next major support for this index is S1 16690
R1 19890
3. ^HSI Hong Kong : October 2018 low was 25125
was breached and so was 24900 breached as predicted but in a
much shorter time frame ! ^HSI tested a fresh yearly low of
22519 today but closed at 24032. Even this index is very close
to entering bear territory. S1 22519 R1 24224.
4. ^TWII Taiwan : October 2018 low was 9400.
Predicted level of 10180 was breached as predicted. We predict
9400 level will be breached in Q2 2020. This index tested a
fresh yearly low of 9636 on an intra-day basis but closed at
10128. This index is also close to its bear territory. S1
9760 S2 9636 S3 9400. R1 10360
5. KS11 KOSPI South Korea : October 2018 low was
1986 was breached as predicted. As mentioned KOSPI is one of the
weakest equity indices in the world due COVID-18 and other
reasons. It crashed to an intra-day low of 1680 which is also
it’s fresh year low but closed at 1771. KOSPI is deep in bear
territory. S1 1680. R1 1800 R2 1820
6. ^SSE COMP China : October 2018 low was 2449
was not breached. This index showed resilience which is beyond
our understanding. May PBoC or its proxies were supporting this
most important equity index in Asia. It tested a low of 2800 and
closed today at 2887. It did not breach its existing 52 week low
of 2685. S1 2685 R1 2900
On 3/12/2020 – these major EU Equity
indices suffered their worst daily loss in their history
in percentage terms. COVID-19 creating havoc in Italy and
spreading fast in Spain :
7. ^GDAXI DAX
Germany : December 2018 low of 10800 was breached in a shorter
time frame than predicted. It crashed to a low of 9064 but
closed today at 9232. DAX is deep in bear territory. S1 9060
R1 11000
8. ^FCHI CAC 40 France : December 2018 low of
4615 was breached in a shorter time frame than predicted. It
tested a low of 4025 and closed today at 4118. CAC is in deep
bear territory. S1 4025 R1 4800
9. ^FTSE 100 UK :
December 2018 low of 6592 was breached. FTSE tested a low of
5237 and closed today at 5366. This index too is in very deep
bear territory. S1 5237 R1 6180
10. ^IBEX Spain :
December 2018 low of 8286 was breached. It tested a low of 6347
and closed today at 6629. This index too is in very deep bear
territory. S1 6347 R1 8080
11. ^FTSE MIB Italy : December 2018 low of 18152
was breached. This index is the weakest equity index in EU. It
tested a low of 14984 – down 17 % on a daily basis on 3/12/2020.
This is the single largest drop in percentage terms in the
history of MIB. It closed today at 15954. MIB is deep in
bear territory. S1 14984 R1 17730
American Equity indices were very volatile in
this two week period in March 2020. Twice
there was a trading halt ( down 10 % ) in ^DJIA in the said
period.
12. ^DJIA USA : December 2018 low of 21712 was
breached. It tested a low of 21154 and closed today at 23186.
DJIA corrected to 21154 on 3/12/2020 and was down by 2352
pts on a daily basis. This was the single largest
daily fall in DJIA in absolute terms since October 1987.
We were reminded of - Black Monday of October 1987 ! In this
period US Fed cut key interest rates by 50 basis points and
decided to buy US Bonds to the tune of US $ 1.50 trillion. This
caused the DJIA to rally by 1985 pts on 3/13/2020 – single
largest daily increase in DJIA on a daily basis since 2008 in
absolute terms. In the same week such wild movements in
DJIA. This benchmark index is trading close to its bear
territory. S1 21154 R1 23655
13. ^GSPC S & P 500 USA : December 2018 low
of 2347 was not breached. It tested a low of 2478 on 3/12/2020
and closed today at 2711. This index too is trading close to its
bear territory. S1 2478 S2 2347 R1 2752
14. ^IXIC NASDAQ COMP : December 2018 low of 6193
was not breached. It tested a low of 7194 on 3/12/2020 and
closed today at 7875. This index is too trading close to its
bear territory. S1 7194 S2 6890 S3 6193 R1 7930
Investors as advised to stay away from
Equities till further advised as COVID-19 is creating havoc
globally. Investors can buy physical Gold.
MARCH 2020
The week ended 28th February
2020 was a horror show for global equities with very sharp
cuts. It reminded us of September 2008 when Lehman crisis hit
US equity markets and later global equity markets. COVID – 19
which started in China is now on the radar of WHO as it is
spreading across all the continents on earth.
We were bearish for global equity markets
including India in Q2 2020 as mentioned in our January 2020
post. The COVID-19 virus outbreak starting from China and
spreading all across the globe spiked the global equity
markets in February itself. Gold spiked and Crude Oil tanked
in February on account of safe haven status and doomed global
demand respectively.
As per our understanding COVID-19 virus
should be contained in the next 12 to 18 months as Big Pharma
globally will develop a vaccine in this time frame. But the
problem is that till the time a successful vaccine is
developed – the virus could cause more damage globally. People
who have the virus and who will be infected further due to
“community spread” run the risk of fatalities till the vaccine
is developed. These kind of “Black Swan” events occur once in
a few decades.
COVID-19 as of date has the signs of being
declared a global pandemic by WHO. This will have serious
global health and economic implications. Poor countries in
Africa and South Asia do not have the infrastructure to handle
a virus epidemic like COVID – 19. This will be a very big
challenge for the health authorities in these poor countries.
Some other developing countries also have poor hygiene
conditions and will not be able to contain the spread of
virus.
The fears of global economic implications
have already manifested in February 2020 itself by way of
global equities correcting. Commodities which China imports
have also seen corrections. In other parts of the world –
supply chains have been disrupted, which is leading to
factories being shut globally as Chinese factories are
shutting. Due to this fear of further disruptions – global
equity markets can correct further till the spread of virus is
contained globally.
The global equity markets in 2020 will
correct not only account the said virus outbreak but due to
already existing issues – global recession fears,
unsustainable global debt, inverted US yield curve and
fears of banking crisis in EU. COVID-19 was a trigger from
nowhere.
Crude Oil prices will correct further on
account global economic slowdown. We are not in a position to
predict the Crude Oil prices from date to next 12 to 18
months. If Russians decide to sleep with Saudis – production
cuts could be severe. At current levels of BRENT at US $ 50.00
pbbl – the US Shale Oil producers start to lose money. US may
not be able to export Crude Oil if frackers are forced to shut
operations. Hence we are not in a position to correctly
predict the prices of Crude Oil for the balance months of
2020. Based on fundamentals - BRENT crude oil prices
could test US $ 45.00 ppbl or lower in the next 12 to 18
months.
Gold raced past our target of US $ 1650 pto
on 26th February 2020 and tested a high of US $
1689.00 Spot. It closed however lower on Friday 28th
February at US 1586.50 pto Spot. Gold could correct further in
Q1 2020 but we are extremely bullish on Gold till end 2020.
Gold will see levels as mentioned in our January 2020 post. On
the charts Gold is explosive for the next 12 months.
Fundamentally Gold is the safest bet for the next 12 to 18
months.
We are presenting a snapshot of a few
important global equity indices and our predictions for the
next couple of months. The closing date is today – 28th
February 2020.
1. ^NSEI NIFTY India : October 2018 low was
10005. It closed today at a bearish level of 11202. Intra
month low was 11175. The current 52 week low is 10637. There
could be a sharp rally in the coming week as global equity
markets including NIFTY are highly oversold. This global rally
will be sold into. We predict this level of 10637 will be
breached in March itself. The next crucial support level for
NIFTY is 9300. Bull market is over in India if NIFTY cannot
sustain 9300 in Q2 2020
2. ^ N225 Japan : December 2018 low was 19084.
It closed today at 21143. Intra month low was 20916. Current
52 week low is 20111. We predict that 20111 will be breached
in the short term and 19084 will be tested in Q2 2020
3. ^HSI Hong Kong : October 2018 low was
25125. It closed today 26130. Intra month low was 25989.
Current 52 week low is 24900. We predict that 25125 will be
breached in the short term. In Q2 2020 – even 24900 will be
breached.
4. ^TWII Taiwan : October 2018 low was 9400.
It closed today 11292. Intra month low was 11274. Current 52
week low is 10180. We predict that 10180 will be breached in
the short term. In Q2 2020 – even 9400 will be breached.
5. ^KS11 South Korea : October 2018 low was
1986. It closed today 1987. Intra month low was 1980. Current
52 week low is 1980. We predict that 1980 will be breached in
March itself. KOSPI ^K11 is one of the weakest equity indices
in the world. It can slide to 1940 levels in Q2 2020
6. ^SSE COMP China : October 2018 low was
2449. It closed today at 2880. Current 52 week low is 2685.
This index is being supported by the Chinese authorities. Huge
liquidity has been injected by PBoC in February in the economy
to contain the economic rot. But we are pretty sure to see a
level of 2685 in Q2 2020. Chinese authorities will try to
support their equity index. Some analysts are predicting a
level of 2449 or even 2100 in Q2 2020. Fundamentally this
index is the weakest index in the world. Let us watch the
first support level i.e. 2685 and then study charts and
fundamentals if the same is breached.
7. ^GDAXI DAX Germany : December 2018 low was
10800. It closed today at 11890. Intra month low was 11724.
Current 52 week low is 11266. We predict that 11266 will be
breached in the short term and 10800 will be tested in Q2
2020. One of the weakest indices in EU.
8. ^FCHI CAC 40 France : December 2018 low was
4615. It closed today at 5310. Intra month low was 5230.
Current 52 week low is 5152. We predict that 5152 will be
breached in the short term and 4615 will be tested in Q2
2020.
9. ^FTSE 100 UK : December 2018 low was
6592. It closed today at a very bearish level of 6580. Intra
month low was 6460 which was a new 52 week low. We predict
that 6460 will be breached in Q2 2020. Breach of 6460 – very
bearish situation for this index
10. ^IBEX Spain : December 2018 low was 8286.
It closed today at 8723. Intra month low was 8583. Current 52
week low is 8409. We predict that 8583 will be breached in the
short term and 8286 will be tested in Q2 2020. Very weak index
on the charts.
11. ^FTSE MIB Italy : December 2018 low was
18152. It closed today at 21984. Intra month low was 21680
which was also a fresh 52 week low. We predict that 21680 will
be breached in the short term and 18152 will be breached
in Q2 2020. One of the weakest indices in the world – both on
the charts and fundamentally.
12. ^DJIA USA : December 2018 low was 21712. It
closed today at a very bearish level of 25409. Intra month low
was 24680 which was also a fresh 52 week low. We predict that
24680 will be breached in the short term. The next very
important support level is 22180. If this support level for
this index is breached in Q2 2020 – the level of 21712 will be
tested within a matter of a couple of weeks and then the index
may crash to a level of 20700. Please keep a very keen eye on
^DJIA.
13. ^GSPC S & P 500 USA :
December 2018 low was 2347. It closed today at a very bearish
level of 2954. Intra month low was 2856. Current 52 week low
is 2722. We predict that 2722 will be breached in the short
term. One of the weakest equity index in the developed world.
This index will follow ^DJIA with a higher beta in the
correction in Q2 2020 and feel it will correct to 2347 levels.
14. ^IXIC NASDAQ COMP : December 2018 low
was 6193. It closed today at a very bearish level of 8567.
Intra month low was 8264. Current 52 week low is 7292. We
predict that 7292 will be breached in the short term. This
index will follow ^DJIA with a higher beta in the correction
in Q2 2020 and can correct to 6193
levels.
Investors globally and in India are advised
to cut exposure to equities to 25 % if not done already.
Balance in CHF Debt or physical Gold. Physical Gold will give
the best returns in 2020.
Dear investors and friends - globally and in
India : I wish you all a very happy and prosperous 2020.
This year i.e. 2020 is the year for Gold.
Our first target is Spot US $ 1650.00 pto which
should be tested in Q1 2020. After Gold has breached this
figure of US $ 1650 - it will test US $ 1800.00 to 1980.00
pto in a matter of 4 to 6 months.
If US $ 1980.00 pto is sustained in Q1 2020 -
then our year end 2020 target for physical Gold is around US
$ 2400.00 pto
We are around zero % invested in Stocks in
India and will start buying sector specific in India when
NIFTY is below 10000 mark. We will buy select Indian Stocks
in Pharmaceuticals, Bio Pharmaceuticals and Defence Stocks
at NIFTY at 10000 levels. At present NIFTY is 12000+
Global Stocks we recommend - Big Pharma (
specific to Diabetes Management ), Bio Pharma, US Defence
Stocks and US listed Gold Stocks. Start buying these Stocks
when ^ DJIA has corrected by 25 to 35 % from current levels
about 29000. We expect a major correction in global equity
markets in Q2 2020 or earlier led by ^DJIA.
One will see global equity indices at levels
October 2018 lows or lower by June 2020 ?
We are also bullish on Crude Oil as mentioned
in our last year's posts. Average price for Q1 2020 should
be in excess of US $ 69.00 per bbl for BRENT Crude. Analysts
were talking of BRENT prices in the range of US $ 30.00 pbbl
and we said that average in 2019 would be around US $ 65.00
pbbl levels !
Please be very careful with your exposure to Stocks in 2020
NOVEMBER 2019
We
did not update since July 2019 as we do not understand the
reason behind US Equity and Indian Equity markets testing
new highs !
This
is a classic bull trap. Please take all your profits off the
table.
Allocate
50 % of your funds to Corporate Debt and Equities.
Balance
allocate 50 % of your funds to physical Gold. Prices of Gold
are sustaining US $ 1450 pto level and as per our last
update - the next level would be US $ 1620 to 1650 pto.
These levels one can see by 12/31/2019.
Please cut your exposure to global equities
JULY 2019
We did not update since January 2019 as we were
not able to understand the bullish nature of global equity
markets including India. None of the risks and fears
mentioned in the January 2019 update have mitigated or
vanished. Still the global equity markets were bullish and
Indian markets testing new lifetime highs on account of
political reasons.
In India - the incumbent Government was
returned to power after a thumping majority after the
general elections in April - May 2019.
We are bearish on global equity markets
including India for the quarter July thru September 2019. We
might see equity indices globally at lows as tested in
December 2018. We are only a handful of analysts globally
who are bearish on global equities in balance months of
2019.
Gold will zoom past US $ 1450 pto in the said
quarter. Spot Gold tested US $ 1440 pto in June 2019 and
corrected to US $ 1385 levels today as we are printing this
update.
If Spot Gold prices can sustain a level of US $
1450 pto level in the said time frame as above - one might
see Gold prices shoot upto US $ 1620 to 1650 pto level. We
are bullish on Gold till the year 2025. A fresh 10 year bull
run from 2015 to 2025 !
We have mentioned our predicted levels for
Physical Gold at around US $ 4500 pto in the year 2025. By
the year 2030 - the levels could be even higher. One can
allocate about 50 % of investible funds in physical Gold at
these levels of US $ 1385+ pto. Balance 25 % to Debt
and only 25 % to Equities after massive correction in
balance months of 2019.
Please book your profits in equities as one may
not see current levels again in the balance months of 2019.
Allocate only 25 % of one's fund to Equities. Keep your
powder try for investing in Debt funds and physical Gold
We wish investors and all our
associates a profitable 2019 !
We are printing this update
today 03.01.2019 at closing of Indian stock markets.
We were correct in our
prediction that global equity markets will correct very
severely in December 2018 ! BINGO !!! We were spot on. All
global equity markets corrected in December 2018 led by
^DJIA. Some renowned global equity analysts are now
mentioning that the current ongoing correction in global
equity markets will be more severe than market corrections
of 1987, 2001 and 2008.
Analysts are now comparing
this December 2018 correction to the corrections witnessed
in global equity markets in 1929-31. Please refer to our
July 2018 post. We mentioned that the corrections in the
global equity markets would be more severe than in 2008 and
that recovery from the bottom would take more than two and a
half years !
We feel global equity markets
will correct further in January 2019 and make fresh lows.
Recovery from the said lows will be a slow and painful
process stretching to July 2021. There would rallies from
low of 2019 through Mid 2021. All rallies will be sold into
from date to Mid 2021.
No analyst in the globe is
mentioning that recovery will be as late as Mid 2021. Almost
all the analysts are mentioning fresh lifetime highs for
global equities in 2019. We are in complete disagreement
with the said equity market analysts or pundits. We have
said earlier and repeat – global equities saw their highs in
2018.
Major economies of the
developed world have serious problems. USA – Fear of Bond
Market crash and burgeoning Federal Budget Deficit. The US
Budget deficit by September 2019 could be in excess of US $
1.20 trillion. How does US plan to fund this huge deficit ?
In the US Bond markets the
INVERSE YIELD CURVE between 2Y and 5Y US Bonds has to
REVERSE, failing which US equity markets will test lower and
lower levels till September 2008 levels are tested. Another
factor is - friction between Oval Office and US Fed Chief’s
Office on account of hike in interest rates in December 2018
by 25 bpts to 2.5% pa. Ongoing fears of Govt shutdown in USA
on account of funding frozen by US Congress for building the
wall along the US-Mexican border. US-China trade tensions is
another fear looming large on the US Financial markets.
Another fear in US economy is –
likelihood of rising interest rates by US Fed. The higher
interest rates further slows down the US economy. Bond
yields will rise in USA which leads to price correction in
Bond prices. This puts pressure on investors who hold US
Bonds as an investment. China holds US Bonds worth US $ 1.18
trillion out of its total forex reserves of US $ 3.06
trillion. Second largest holder of US $ Bonds is Japan’s
Central Bank – BoJ. It holds US Bonds worth US $ 1.03
trillion out of its forex reserves of us $ 1.25 trillion.
China has been slowly selling US Bonds since 2016 and off
late is selling 2Y and 5Y US Bonds. Some point in time ( our
prediction is June 2021 onwards till 2025 ) Chinese
and Japanese will start dumping US Bonds. Almost all other
Central Banks in the world – Switzerland, Russia, South
Korea, Saudi Arabia etc will follow suit. This will lead to
higher US Bond yields ( in excess of 15 % pa on 10Y ) and
serious correction in US Bond prices. Our forecast is the
imminent US Bond Market collapse by 2025 – 2030.
China – slowing down of the GDP
growth. EU – Fear of Italian Banking Crisis. Japan –
deflation and slowdown in exports. It is a sea of red around
the globe in financial markets.
Italy is bankrupt. German
Banks hold Italian Debt worth more than Euro 500 bn. Italian
Budget is not sustainable nor is its Debt. The next economy
to file for bankruptcy could be Italy ( Debt to GDP ratio
nearly 130 % ) , Greece (Debt to GDP ratio is more than 175
% ) or Spain ( Debt to GDP ratio nearly 100 % ).
Time frame is difficult to predict as we do not know when
will the Euro printing presses stop further printing of
Euros ? ECB is still following easy monetary policy to save
these struggling members
Japan is in trouble with its
Debt to GDP ratio exceeding 250 % in calendar 2017. It
is staying afloat becoz it is an export oriented economy and
also most of US $ 11.50 trillion is domestic debt owed to
its citizens. Secondly the interest rates on its Sovereign
Bonds are too low ( 10Y is at 0.024 % only ). So Japan
can service its Debt with comfort. How long it can sustain
this status is difficult to forecast as since 1999 – the
Japanese economy is in a deflationary state. ^N225 tanked
5.1% on 25th Dec 2018. In fact what correction
^N225 has witnessed in December 2018 was - its worst
December since 1958.
Germany – its largest
commercial bank is struggling to stay afloat. DB was quoting
near Euro 85.00 per share in June 2007. DB is quoting at
lower than Euro 8.00 share at Frankfurt Stock Exchange as I
print this update. Nearly one-tenth its price over a decade
plus. This is not a good sign for DB. This bank can implode
in the future if there is a “Black Swan” event in EU. DB has
exposure to derivatives in excess of Euro 4.00 trillion.
This is a very dangerous level of exposure to various
derivatives that DB holds in its books.
Global GDP is US $ 70
trillion versus 2000 trillion of Global Debt – this debt
figure is about 30x the Global GDP. No amount of money
printing can save the impending explosion. This is the time
to shift away from Equities and Bonds slowly and shift to at
least 50 % of one’s funds to physical Gold. Balance one can
remain in AAA rated Corporate Debt or cash in CHF.
Chinese Debt is not
sustainable. Chinese economy is slowing down – weakest GDP
numbers announced on 13.12.2018 since 2003. Asian markets
tanked on 14.12.2018
We are now in a bear cycle as
regards global equities is concerned. The global equities
have topped out in 2018. We see a bear market in global
equities till July 2021. This bear market could even extend
to the year 2025 as mentioned above. Global pundits do not
agree with our prediction.
The only silver lining is
physical Gold held in private vaults in Europe or
Singapore.
In India – there are issues
between the Finance Ministry and Central Bank- Reserve Bank
of India ( RBI ) for the past few months. RBI Governor
resigned on 10.12.2018 with immediate effect.
The RBI's board meetings have
come under the spotlight in recent months since the
government started putting pressure on the central bank to
ease lending curbs on PSU Banks and hand over more of its
reserves to fund India's fiscal deficit. This is not good
economics. India should fund it’s fiscal deficit by FDI and
not by reserves from its Central Banker – RBI. This will be
a bad precedent for the times to come. Fiscal Deficit is not
generally funded by cash reserves from a country’s Central
Bank. It is funded by FDI into the country. The new RBI
Governor should put his foot down. We learn that the new RBI
Governor will the toe the Govt of India line and give into
the pressures – allow Fiscal Deficit to be funded from RBI’s
reserves. One will see massive withdrawal of funds by FIIs
from Indian Equities if Govt of India funds its fiscal
deficit from RBI’s cash reserves and not from FDI.
In addition – the excess RBI
cash reserves could also be used for providing fresh loans
to ailing PSU Banks under PMA list of RBI. Even this is not
good economic governance of the ailing Indian PSU Banking
Sector. The weak PSU Banks should be merged with large
profitable PSU Banks. The first merger was announced in 2019
today – Vijaya Bank and Dena Bank will be merged with giant
Bank of Baroda. This is a good move by the Finance
Ministry – Govt of India. Job cuts will lead to more
synergies and cost control thereby boosting profitability.
This will lead to India having ten large PSU Banks and not
21 PSU Banks.
Out of 21 PSU Banks in India –
11 are under PCA ( Prompt Corrective Action ). Banks under
PCA – cannot lend anymore till they are off this list. The
Indian Govt wants RBI to relax the Banks under PCA and ease
lending curbs imposed on the said PSU Banks. There is a
liquidity crunch in the Indian financial markets. There have
been three large scale bank frauds in the Indian PSU basket
since the last three years. This forced RBI to be restrict
with PSU Banks lending norms. India ranks poorly at 81 out
of 180 countries in global Index of Corruption of Berlin
based M/s. Transparency International. It is a common
practice in India to get loans from PSBs with kickbacks.
That is the reasons you have bankruptcies reported by
companies in India in the core sector – Steel and Airlines
especially.
But with the election year in
2019 – the Finance Minister and Prime Minister will use some
percentage of excess RBI cash
(about US $ 50 bn ) for funding FDI or bolstering ailing PSU
Banks. Both are not good practices. This was the reason the
RBI Governor resigned. The new RBI Governor – will toe Govt
of India dictat.
GoI plans to re-capitalize a
few PSU Banks with fresh capital injection of about US $ 4.0
bn. It needs this cash – either from a stake sale in PSUs or
from RBI’s surplus cash reserves. GoI also has to keep the
Budget Deficit at 3.3 % of its GDP for the current fiscal
FY2019.
1. ^NSEI NIFTY India - October
low was 10005. As I print this update NIFTY
closed today 3rd January 2019 at a level of
10670. We feel NIFTY will breach the level of 10005 in Q1 January 2019. The
next levels are R1 9400 R2 9000 which
will be tested in Q1 2019. ^NSEI has not fallen by the
similar percentage falls in the past three months - as the
other mentioned equity indices. It will now fall to be in
level with its peers in the global equity markets. India is
the fastest growing economy in the world and hence its
equity markets did not fall as its peers in the correction
in December 2018. Almost all equity markets in the world
tested their yearly or multi-year lows except Indian
equities in December 2018. In the coming months Indian
equities will align with other global equity indices. We
will see NIFTY testing its 52 week low level of 9400 in
January 2019 or latest in Q1 2019.
2. ^N225 Japan - October low
was 20347. As predicted this low of 20347 was breached on 20th
December 2018. ^N225 corrected to a fresh 52 week low of
19084 on 26.12.2018. We predict ^N225 will test fresh low of
R1 18300 R2 17110 in Q1 2019
3. ^HSI Hong Kong - October low
was 25125. We predict we will again see the level of 25125
or lower in Q1 2019
4. ^ TWII Taiwan - October low
was 9400. It tested a low of 9479 on 25.12.2018. We predict
we will again see a level of 9400 or lower in Q1 2019.
5. ^KS 11 South Korea - October
low was 1986. It closed today 03.1.2019 at 1994. We
predict that we will see again the level of R1 1986
or lower in Q1 2019.
6. SSE COMP China - October low
was 2449. It corrected to 2463 in December 2018. We
predict that we will see again the level of 2449 or even
2000 in Q1 2019. Chinese industrial firms reported
drop in profit – first time in three years.
Japan, Hong Kong/China, South
Korea and Taiwan are very closely linked to the US economy
as this US Market is their single largest export market. Be
it - Consumer Products, White Goods, Cars, Semi-Conductors,
Telecom Equipment or other Electronic Components including
Memory Chips etc.
^DJIA, ^IXIC NASDAQ and
^GSPC S & P 500 – corrected severely in December
2018. On 26.12.2018 :
a) ^DJIA – tested its fresh 52
week low of 21712 on intraday low basis. ^DJIA recovered
very sharply from this yearly low to close at 22878 – up
1086 pts ( 4.98 % ) from its previous day’s close. This is
the largest single day percentage gain – 4.98 % in
^DJIA since March 2009. It is the single largest absolute
numeric gain in ^DJIA in its history – up 1086 pts in a
single day at close. Any correction to 21560 will push
^DJIA into bear territory. If 21560 is breached – it
will enter bear territory. The next resistance levels for
^DJIA are - R1 21000 R2 20200 R3 18860 in
Q1 2019
b) ^GSPC S & P 500 – tested
its fresh 52 week of 2347 on intraday basis. S & P
entered a bear market but recovered from this yearly low to
close at 2468 up 117 pts ( up 4.96 % ). This is the single
largest daily percentage gain in the history of S & P.
If 23351 is breached S & P 500 will crash to R1
2200 R2 2058 in Q1 2019.
c) ^IXIC NASDAQ COMP – tested its
fresh 52 week low of 6193 but closed up smartly at 6554 up
5.84 %. NASDAQ COMP entered bear territory after it breached
6500 but recovered from bear territory today to close at
6554. If 6500 is breached - next levels are R1 6100
R2 5690 which will be tested in Q1 2019.
We feel all the above three
benchmark US Equity indices will re-enter bear territory in
January 2019 or latest Q1 2019.
7. ^GDAXI DAX Germany - October
low was 11459. As predicted – level of 10800 was breached.
^GDAXI is in now in bear territory. Next level is R1
9520 which will be tested in Q1 2019
8. ^FCHI CAC 40 France -
October low was 5095. Tested a fresh 52 week low of
4615 on 27.12.2018. ^FCHI has just entered bear territory.
Next level is R1 4250 which will be tested in Q1
2019.
9. ^FTSE FTSE 100 London -
October low was 6867. Tested a fresh 52 week of 6592 on
27.12.2018. Next level is R1 6320 which will be
tested in Q1 2019
10. ^IBEX Spain - October low
was 8849. ^IBEX tested a fresh 52 week low of 8286 on
27.12.2018. ^IBEX is now in bear territory. Next levels are
R1 7980 R2 7450 which will be tested in Q1
2019
11. ^FTSE MIB Italy - October
low was 19167. ^FTSE MIB tested a fresh 52 week low of
18152 on 27.12.2018. ^FTSE MIB is now in bear territory.
Next levels are R1 17920 R2 16720 which will
be tested in Q1 2019. This is the most bearish Index in the
Eurozone as we fear a full blown banking crisis in Italy
2019. Banca Carige, headquartered in Genoa, Italy is in
trouble looks like. It denied a cash call from one of its
largest shareholders on 27.12.2018.
Brent Crude breached US $
57.00 ppbl as predicted and crashed to US $ 50.66 on
25.12.2018 - which is yearly low level for Brent Crude Oil
price. Fears of a global economic slowdown gripped the Crude
Oil markets. Hence this massive correction from US $ 57.00
to nearly US $ 50.00 pbbl in matter of a few trading days in
end of the year.
Brent should find support at
US $ 50.00 pbbl. If this level of US $ 50.00 pbbl is beached
– there will be blood bath in Crude Oil prices in Jan to
March 2019. Expect a price of US $ 45.00 pbbl in Q1 2019 if
US $ 50.00 pbbl level is breached. It looks that US $ 50.00
level will not be breached in January 2019. OPEC and Russia
wish a price level of US $ 65.00 pbbl for BRENT as an
average price for 2019.
Gold spiked to US $ 1290+ pto
level today on 03.1.2019. We expect prices in excess of US $
1360.00 pto or even higher in Q1 2019.
We
were correct in our prediction that global equity markets led by
^DJIA will correct further in November 2018. Almost all global
pundits were saying by end Nov 2018 that global equities will
recover from their October 2018 lows and retest yearly highs.
There was recovery but short lived and fresh downward journey
started in the three trading days of December 2018 led by ^DJIA.
We
feel global equity markets will correct very severely in
December 2018. As mentioned earlier - the spillover effect may
lead us to January 2019.
Global
equities had a smart recovery from October 2018 lows on account
of various factors including Brent Crude Oil prices correcting
from US $ 72.00+ levels to sub US $ 58.00 pbbl levels - the
recovery was short lived.
As
I print this update Brent Crude Oil Feb 2019 Futures are quoting
at around 60.40 levels. Brent Crude Oil Futures - Feb 2019
Contract could test a level of US $ 57.00 in December 2018 or
maybe even lower. It is very difficult at this juncture to
predict short term Brent Crude Oil prices. For the year 2019 -
we feel average would be around US $ 65.00 ppbl for Brent Crude
Oil. At this price both OPEC and Russia are happy.
US
- China trade war is still un-resolved. The time window has been
extended by 90 days. It does not mean that the issue is
resolved. This postponement of the decision also led to the
above mentioned recovery. This fear remains unresolved.
Italian
Budget crisis - still looms large on EU Equity markets. This
fear remains unresolved.
A
new fear has added to the US financial markets within the last
couple of days - US Bond Market yields. The yields on the 2Y
Sovereign US Bonds turned higher than
the
5Y Sovereign US Bonds. This phenomenon in US financial markets
is called - INVERSE YIELD CURVE.
The
gap between 5Y and 10Y is also closing up. This is as per
technical analysts is a signal of US economy slipping into
recession. We are not experts on this phenomenon.
As
per our understanding - this ( development of INVERSE CURVE )
phenomenon fundamentally indicates that investors in US Bonds do
not have faith in the long term US Sovereign Debt. A very very
bearish sign for the US Financial markets and US economy.
We
might be proven right that global equity markets will be bearish
till June 2021 !
We
mentioned in our July 2018 post that we see a two and half year
bear market forward in global equities !
We
feel
for the past few years that total US Federal Debt is too high
and is at un-serviceable levels as
mentioned as under. US Bonds could lose their AAA+ rating once
again before 2020.
We
are bearish on the US economy for two prime reasons :
a)
Total US Federal Debt is approx US $ 17.00 trillion. We feel
this figure will touch US $ 20.00 trillion by the year 2020. US
will have to raise its Debt Ceiling. We are sure on this
happening before December 2020.
b)
US Budget Deficit could be in excess of US $ 1.20 trillion by
end September 2019. How does US Fund this Deficit ? Again issue
fresh Bonds or print more US Dollars ?
Markets
discount the future. So we feel we will see ^ DJIA at levels of
around 23350 or lower in December 2018 through Q1 2019. If
^DJIA breaches 23350 - we will issue a fresh update. This is a
very crucial support level for ^DJIA = R1 23350
^DJIA
is trading currently at 25000 levels down from yearly high of
27000 level. As of date ^DJIA has corrected by only approx 7.5 %
this calendar year from its high of 27000. A correction to 23350
- will translate to a correction of approx 13.5% from the high
of 27000.
A
brief snapshot of major global equity indices as per my
understanding is as under :
1.
^NSEI NIFTY India - October low was 10005. As I print this
update NIFTY closed today at a level of 10600. If the level of 10005 is breached - we
predict NIFTY will crash to level of 9950 in December 2018. For
NIFTY to breach 9950 level will be very bearish. It will crash
to a level of 9000. So 9950 should hold - failing which there
will be a panic in Indian Equity markets.
2.
^N225 Japan - October low was 20347. It closed today at 21502.
We predict that we will see again the level of 20347 or lower in
December 2018.
3.
^HSI Hong Kong - October low was 25125. It closed today at
26156. We predict we will again see the level of 25125 or lower
in December 2018
4.
^ TWII Taiwan - October low was 9400. It closed today a bearish
level of 9685. We feel we will again see a level of 9400 or
lower in December 2018
5.
^KS 11 South Korea - October low was 1986. It closed today at
2069. We predict that we will see
again the level of 1986 or lower in December 2018.
6.
SSE COMP China - October low was 2449. It closed today at
2605. We predict that we will see again the level of 2449
or even 2000 in December 2018 through Q1 2019.
Japan,
Hong Kong/China, South Korea and Taiwan are very closely linked
to the US economy as this US Market is their single largest
export market. Be it - Consumer Products, White Goods, Cars,
Semi Conductors, Telecom Equipment or other Electronic
Components including Memory Chips etc. Any severe correction in
^DJIA or ^IXIC NASDAQ or ^GSPC
S
& P 500 will have a severe impact on the above said Equity
Indices in - Japan, Hong
Kong/China, South Korea and Taiwan.
The
key Equity markets in EU also correct when ^DJIA or ^IXIC NASDAQ
or ^GSPC
S
& P 500 correct though the beta maybe lesser than the above
Asian markets as above.
7.
^GDAXI DAX Germany - October low was 11459. Currently trading at
a level of 10936 as we print this update. This is a fresh 52
week low. Further correction is expected till levels of approx
10800 levels or lower in December 2018.
8.
^FCHI CAC 40 France - October low was 5095. Currently
trading at a level of 4811 as we print this update. This
is a fresh 52 week low. Further correction is expected till
levels of approx 4525 levels or lower in December 2018.
9.
^FTSE FTSE 100 London - October low was 6867. Currently
trading at a level of 6732 which is a fresh 52 week low. Further
correction is expected till levels of approx 6320 levels or
lower in December 2018.
10.
^IBEX Spain - October low was 8849. Currently trading at a level of 8884.
Further correction is expected till levels of approx 8620
levels or lower in December 2018.
11.
^FTSE MIB Italy - October low was 19167. Currently trading
at a level of 18829 which is a fresh 52 week low. Further
correction is expected till levels of approx 17900 to 16720
levels or lower in December 2018 through Q1 2019. This is the
most bearish Index in the Eurozone as we fear a full blown
banking crisis in Italy in the said period.
We
suggest to all investors - in India or around the globe to start
buying physical Gold. Currently trading Spot @ US $ 1238.00 pto
in the European markets. We have already mentioned our short
term and long term targets for physical Gold.
Investors
to only allocate 15 % of their funds for Equities. Around 35 %
for AAA Rated Corporate Debt and balance 50 % to physical Gold.
We understand that this 50% allocation at present seems too high
but wait and see 2020 onwards !
NOVEMBER
2018
We
all saw what happened in October 2018 to the global stock
markets. We were correct in our predictions !
In
October 2018 - there was a sharp correction in global
equity markets, led by sharp declines in the US Equity markets
and European equity markets - as predicted ! A lot of equity
markets around the world tested yearly or multi-year lows. Some
indices while correcting reminded us of 2008 !
Our
view for November and December 2018 remains unchanged as none of
the following fears have left the markets :
a)
Interest Rate hikes by US Fed
b)
China - USA Trade Issues. Iran sanctions.
c)
Italian Banking crisis
We
might have a temporary pull back in global equity indices led by
^DJIA and ^GDAXI but we will see fresh lows in almost all the
major equity indices in November through December 2018. The
spillover could be till January 2019.
As
of now just start buying physical Gold. We could see a level of
US $ 1400.00 pto in the coming months.
Brent
Crude
Oil futures could see a sharp spike from the current US $ 72.45
pbbl levels in the coming two months.
Investors as advised to stay away from equity markets for the next couple of months.
OCTOBER
We were bearish on the global equity markets
including India. We still are bearish for global equity
markets till end December 2018. Emerging market equities and
currencies were hammered in September 2018.
We will now see equity markets in developed
economies get pounded in Q4 2018.
As predicted Brent Crude Oil tested US $ 84.00
pbbl level in September 2018. Our next level for Brent Gold
price is US $ 90.00 pbbl within December 2018.
Indian Equity markets were down in September
2018. We predict NIFTY to test its 52 week low of 9850 in
October 2018. We also predict NIFTY to test 9500 or even 9000
level by December 2018. As I print this update NIFTY is
quoting at 10900.
Same hold true for BSE SENSEX. It will test its
52 week low of 31500 in October 2018. It will further slip to
28500 or even 27000 by December 2018. BSE SENSEX is trading at
36250 as I print this update.
INR has depreciated against the US $ from a level
of 64.00 to a level of 73.61 as of today. All emerging market
currencies have depreciated against the mighty US Dollar. We
feel we will see a level of INR 75 to a US Dollar in October
2018.
US Dollar cannot keep rising against the world
currencies the way its has rallied since May 2018. US Budget
deficit and money printing will have its effect in Q4 of 2018.
US Dollar will correct in December 2018. In December it would
be the right time to buy physical Gold.
Investors are advised to limit their exposure to
blue chip equities to around 25 % of their investible funds.
Balance in Debt instruments and physical Gold.
Global Equity markets and Indian markets can
correct from the current levels by 15 to 20 % from date till
end December 2018. Limit your exposure to equities.
Invest in Debt instruments and physical Gold till
the equity markets bottom out in Dec 2018 or Jan 2019.
Investors might be thinking
the reason why I did not update the India web page since Feb
2018 ? I was not clear as to why the global equity markets
including India were still bullish since Feb 2018 to June 2018
with so much negative indicators around the world ? But
markets have their own reasons to move up or down.
I am clear now for the
journey forward from July 2018 through December 2018.
Global and Indian investors
are seriously advised to prune their exposure to Equities and
Mutual Funds to the tune of 75 % or even 90 %. Sit on cash or
buy physical Gold Bars and keep under the bed in one's bedroom
!
Please do consult your CFAs
and act accordingly.
I am predicting a 25 to 30 %
correction in Global and Indian Equities in July through
December 2018. The correction could be worse in EU and Asian
Markets. Brent Crude Oil could spike beyond US $ 84.00 pbbl
due to geopolitics and Iran situation. There could be a
massive public revolt in Iran which will be crushed by the
clerics. About 3.00 million barrels a day supply of Crude Oil
may be off the market due to - Iran, Venezuela, Libya and Iraq
outages over the next six months through December 2018.
The global equities situation
could be worst than in September 2008. The recovery in
September 2008 through March 2009 was spectacular. This time
the recovery will take about two and a half years and will be
very painful for the bulls.
The reason of this global
correction will be from a banking crisis in Greece, Italy
and/or Spain. The trigger may not be from the US economy.
Banks in Italy and Spain are not in
good health and may need bailouts. Greece will again be
bankrupt for the third time since 2011. Venezuela is bankrupt.
Argentina is on the verge of bankruptcy. Chinese and US
exports will further dip. Correction possible in the prices of
Agro Commodities - Soybeans, Wheat and Soybean Oil.
The best way forward has to be
capital protection. Cash or physical Gold is the only
savior for the impending/predicted correction.
Gold could jump above its
year high of $1380 and potentially beyond US $ 1450.00 or
even US $ 1650 pto during the next six months or so.
Global equity markets are on fire
including equity markets in India with BSE SENSEX crossing
36,000 levels and NIFTY crossing 11000 levels. We advise
equity investors to take profits home and start allocating 10
to 20 % of investible funds into physical Gold over a 10 to 15
year holding period. We could see levels of Gold at US $ 6000
to 9000 pto by 2035 to 2040.
First Bull Run in Gold was witnessed
when Prez Nixon scrapped Gold peg to the US Dollar under
advise of then Chairman US Fed Reserve on 15th August 1971.
Gold prices moved from US $ 35 pto US $ 850 pto in 1980. 1800%
plus returns !
Second Bull Run from 1999 to 2011
when prices touched US $ 1920 pto in September 2011. 666 %
returns !!
Third 20 year Bull Run started in Gold as per our estimates in Dec 2015 and will run till 2040. We expect prices to be near US $ 6000 pto in 2035 and near 9000 pto in 2040. 570% returns expected in the 20 year period !!!
NOVEMBER 2017
It will be close to a year that India
witnessed de-monetization ( 8th Nov 2016 ) and GST was rolled
out in India a few months back in 2017.
Both these events were historical in
the Indian economy since it's independence in 1947. Indian GDP
growth is highest in the world till date in 2017 inspite of some
initial hiccups due to slow implementation of GST and slightly
lower GDP forecast for 2018. For 2018 - also @ 5.80 % India will
be the fastest growing economy in the world. Chinese GDP figures
we dont trust. They are all stage managed !
BSE SENSEX and NIFTY traded near their
life time highs since the last six weeks. Today 30.10.2017 - BSE
SENSEX and NIFTY closed at their life time highs - 33266 and
10360. Since both the indices are in uncharted territories -
only extrapolation or trend analysis is the tool for prediction
in the next two months of calendar 2017. Trend lines indicate
further bullishness but sharp corrections are possible in bull
markets. In fact these corrections are a healthy signs.
We expect a sharp correction in the
global equity markets over the next eight weeks and Indian stock
market will also correct but with a lesser beta. On sharp
corrections we advise Indian investors to start buying the
following stocks for a period of two to three years perspective
:
1. LARSEN & TOUBRO
2. TATA POWER
3. ASTRA MICRO
These are military hardware related
stocks in the Indian scenario.
HAL will come out with its maiden IPO before 31.3.2018. We will advise accordingly.
APRIL 2017
We are back and apologize to
investors that our prediction regarding Ms. Hillary Clinton
was incorrect. We can only say - To err is human !
Indian stock markets are near their
52 week and lifetime highs since yesterday/today i.e. 3rd
and 4th April 2017. BSE SENSEX tested 29927 and NIFTY tested
9245. Indian stock markets will be in bullish phase and
benchmark indices may test new life time highs in April
2017. Time to take profits home at these life time levels !
We advise Indian investors to book
profits in Indian Stocks as SW Indian Monsoon may be
deficient in 2017 i.e. June to August 2017. There is this
underlying risk in June 2017.
We are recommending a very old
favorite stock of ours for medium term investment - around a
year. The stock is a profit making Defense PSU stock -
BHARAT ELECTRONICS Ltd. Buy at dips around Rs. 150 to
Rs.153.00 levels. Currently trading at Rs. 160.00. This can
be a multi-bagger over the next three years. One year target
- Rs. 245.00.
We were incorrect in our prediction
regarding Hillary Clinton.
We said that Gold prices will dip
below US $ 1190.00 pto and that at sub US $ 1200 levels - it
is a good level to start buying physical Gold in small lots.
Gold prices Spot NY tested a low of $ 1178.00 on 11/25/2916
and closed at $ 1178.00 pto.
Investors can start buying physical
Gold at these levels of around $ 1180.00 till $ 1050.00 pto.
One could see this level of $ 1050.00 in December 2016
or January 2017 - if Indian Government announces a total or
partial ban on import of Gold Bars in order to control the
deprecating Rupee parity with US Dollar.
The demonetization of INR 500.00 and
INR 1000.00 denomination currency notes w.e.f. 11/9/2016 has
rattled the Indian grey market economy. Slush money due to the
tune of INR 14.20 trillion ( US $ 210.00 billion ) was in
circulation in India as per GoI estimates as on 11/8/2016.
With one master stroke - this money has become worthless
paper. Huge blow to the un-accounted cash economy. Now with
loop hole plugged by the GoI - Indian Banking system will be
flush with funds and there will be huge surge in taxes
collected by the GoI over the next six month or so. Interest
rates will come down in India. Personal income tax rates may
come down in India. Only 1.30 % of Indian population pay
taxes. Imaging 30.00 % Indians start paying income tax in the
next one or two years ? India could have a Budget Surplus
!!!
Property prices will correct
seriously for another six months in India. Auto and White
Goods sectors will also correct In India. 2018 - a golden year
to buy property in India and 2017 - a golden time to buy Gold
in India.
Indian GDP will contract by 1.50 % (
annulaized basis ) over the next 6 months. Indian GDP will
start to pick up by April/May 2017 onwards.
Out of a population of 1200 million
Indians - less than than 530 million Indians have access to
banking sector. With the demonetization drive the Indian
Government under the reformist Prime Minister Modi wants the
Indian economy to be ridden of corruption and cash-based
economy.
Banking sector in India will be
flushed with funds over the next months as the Indian economy
becomes more dependent on bank transfers and less cash
transactions. There will be pain in the economy for the next
six months as service providers and traders will be paid by
Cheques and Bank transfer and not cash. The new 500 and 2000
INR denomination currency notes will be in the banking system
in sufficient numbers over the next six months.
It will take Indian consumers about
six months or so to change their purchasing habits from paying
cash to paying by cards and over the internet/mobile
phones/payment banks/payment apps etc
Indian equity markets also corrected
as predicted. BSE SENSEX and NIFTY are trading below their 200
DMAs - 26750 and 8130. I expect BSE SENSEX test January 2016
lows of 22500 and NIFTY 6800 over the next three to four
months.
INR is trading at 68.70 to a USD. We
could see a level of 71.00 or even 72.00 over the next three
months - if FIIs pull out about US $ 50.00 to 60.00 billion
from the Indian equity markets. I feel these will be very good
levels to buy Indian equities for a two year time horizons. We
will mention sectors to buy into at these levels. Individual
stocks - we recommend to our clients in our paid
service.
Indian
Central Bank under the new Governor cut the key benchmark
lending rate by 25 bpts to a record low of 6.25%. The Repo Rate
now stands at 6.25% and the Reverse Repo rate is pegged at
7.25%. Indian stock markets cheered this development as cut in
Repo rate will push Indian Banks to cut lending rates to Indian
consumers in Home sector and Auto Sector borrowing. This is good
news for Indian consumers who have access to banking !
There
is tension between India and Pakistan over international borders
and this could escalate. In view of this we advise Indian
investors to book profits in the stock markets and buy Gold at
sharp dips. Gold is now trading at US $ 1270.00 pto.
If
US Fed indeed increase interest rates - one could see Gold
correcting to sub US $ 1200.00 pto levels. At sub US $ 1200.00
pto levels - it is a good opportunity to start buying physical
Gold in small lots.
We
are predicting a historic win for Ms. Hillary Clinton as the US
President in the forthcoming US Presidential elections. She will
get 51.3 % vote and will be the first woman US President at 69
years of age.
There
are serious problems with the banking sector in EU. DB in
Germany now trades below Euro 10.00 per share. If DB collapses -
there will be chaos in the banking sector in EU and across the
Atlantic. This will be moment bigger than Lehman.
Advise
investors to prune their exposure to European equities due to
this banking sector chaos in EU which could snow ball. Gold is a
sure bet for the next 5 to 6 years.
Hold Gold in physical form outside the Banking system in all parts of the world.
SEPTEMBER
10 2016
The
update is late as we were waiting for the trend to be clear for
the Indian equity markets. As predicted GST Bill as passed by
both houses of the Indian Parliament after much political debate
and some concessions. Our prediction was BINGO !
We had predicted
that BSE SENSEX would test 30,000 and NIFTY 10,000. BSE SENSEX
is near 29,000 and NIFTY 9000. Our targets will be tested in
October 2016.
We are bearish in
the long term for Crude Oil even if Saudis find a new bed
partner in Moscow.
Gold prices will be bullish in the near term.
JUNE
2016
Global
markets have recovered to pre BREXIT event levels but British
Pound Sterling has been battered. Gold and Silver have rallied
smartly with latter clocking better percentage gains than the
former precious metal. Gold and Silver will rally further till
end of this year. Our December 2016 target for Gold is US $ 1450
pto
Indian
equity markets will be on fire in July 2016 as the much delayed
GST Bill will be cleared by Parliament. BSE SENSEX should breach
30,000 level and NIFTY could break past 10,000 level in July.
For traders this is a good opportunity to buy front line
momentum stocks and make a quick buck.
Cheers
to the Indian Equity markets for July 2016 !
JUNE 2016
BSE
SENSEX closed today 3rd June 2016
at a bullish level of 27000 nearly an eight month high and so
also did NIFTY at 8250. Indian equity markets from here on are
contingent on the progress of SW Monsoon.
Since our last post
the RBI cut Repo Rates by another 25 bpts to 6.75 %. The
Indian economy grew at 7.60 % in the fiscal 2015-16 – highest
annual GDP growth rate. The fiscal situation was also in
control with fiscal deficit at INR 5320.00 ( US $ 79.40
billion ). The next trigger for the Indian economy and equity
markets is the position of the SW Monsoon. A normal SW Monsoon
is bull trigger for the economy and the equity markets. FIIs
will pump in money in July and August 2016 – if the Indian SW
Monsoon is normal or above normal.
We still stick to
our prediction that global markets will be bearish in 2016 as
^SSE COMPOSITE in Shanghai will test 2000. Chinese economy is
sluggish and huge amount of stimuli by PBoC has had little
impact on the economy. Brazil continues to contract. Japan is
in “de-flation”. USA and EU are growing at below 2.50 % per
annum.
Gold is the best bet
as an investment class for the balance period of calendar
2016.
BRENT Crude Oil
could at best US $ 60.00 pbbl.
APRIL 2016
We
are not posting a detailed report for April 2016. We are waiting
for ^SSE COMPOSITE Index in Shanghai, China to test 2100 or
2000. We predicted that we will see these levels for ^SSE
COMPOSITE in Shanghai in Q1 2016, but we only saw a low level of
2656 in January 2016.
^SSE
COMPOSITE Index closed today 3/31/2016 at 3000. We still stick
to our prediction that ^SSE COMP will test 2100 or lower at 2000
in April or May 2016
MARCH 2016
BSE SENSEX closed today 3/2/2106
at 24243 down marginally from the last reference close of 24455. NIFTY also closed
marginally lower at 7369 against the last reference close of
7427.
SSE COMP closed today at
2850. We have predicted a level of 2100 or 2000 for ^SSE
COMPOSITE WITHIN Q1 2016. Let us see how does this index move
in the month of March 2016 and ho close are we to our
prediction?
Union Budget was
presented in India on 2/29/2016. Union Budget was pro-farmer
and pro-poor man’ budget with high allocation to the sagging
Agriculture Sector in India.
We had predicted that
global equity markets will test further lows in February 2016
and we were accurate. The following indices tested fresh 52
week lows in the month of February 2016.
1. ^N225 15429
2. ^BSESN 22525
3. ^NSEI 6823
4. FCHI 3951
5. DAX 8773
6. FTSE 5596
7. NASDAQ 4213
8. FTSEMIB 15849
9. IBEX 7862
10. AXJO 4707
These indices after
testing their fresh 52 weeks lows rebounded but the rally may
not sustain because of the situation in China and low Crude
Oil prices.
Gold is bullish as long
as it trades above US $ 1140.00. Spot Gold NY closed today at
$1239.00 pto. The prices tested a high of $ 1260.00 pto in
February 2016.
WTI Crude oil is trading
near a very critical support level of US $ 34.00 pbbl. Last
trade at CME was at US $ 34.80 pbbl for April contract.
If prices of WTI Crude Oil fall back to the recent lows of
about US $ 26.00 pbbl - then expect global equities to test
further lows. Even lower than February 2016 and August 2015
lows. If WTI Crude can sustain US $ 34.00 pbbl level - then it
can rise to US $ 38.00 per bbl. Geopolitical - If there is war
in the Middle East - Iran and Saudi conflict then prices can
zoom to US $ 60.00 pbbl.
China will spook the
global equity markets and Gold prices will zoom to $ 1290.00
to 1320.00 pto. Keep a very close on the Chinese equity
markets and price of Crude Oil.
We
repeat the perils in the equity markets are linked to economic
situation in China and Crude Oil prices. Investors to keep their
powder dry and buy in deep cuts.
We had mentioned in
our last update that Chinese equity markets will correct and
will play a spoil sport for bulls. ^SSE COMPOSITE corrected from
2900 levels as of 15th January 2016 to test a fresh 52 week low
of 2656 as of today 2/1/2016 ( near 10 % correction ). FIIs have
pulled out approx. US $ 600 billion since the past six months
and the trend continues the same way.
PBoC has devalued
the Yuan further and it is felt that they will let it devalue to
a level of 7.00 Yuan to a US Dollar. The Chinese banks still are
struggling with NPAs. The next support levels to watch for ^SSE
COMPOSITE are : S1
2250 S2 2050 S3 2000
We have mentioned in
our last update that we predict a level of 2000 for ^SSE
COMPOSITE. This level will create a chaos in global equity
markets with a sharp cut.
Investors are
advised to keep a very close watch on the extremely volatile
^SSE COMPOSITE Index and plan their investment strategy.
Gold was bullish and tested a high of US $ 1130.00 pto NY SPOT on 2/1/2016. Gold will be extremely bullish if it trades above its 200 DMA of US $ 1140.00 pto. Investors can buy Gold if it sustains US $ 1142.00 pto for two weeks or so.
We wish all our investors,
associates and partners in India and around the globe a
prosperous and profitable 2016 ! This December 2015 post was
skipped as we were waiting to see the impact of interest rate
hike by US Fed on 16th
December 2016. Interest rate hike by US Fed @ 25 bpts had no
impact on the US and global financial markets.
January 2016 is delayed as we
waiting for the start of correction in global equities. The
large correction we were anticipating in Q4 2015 is in fact
underway as we post this update. Most equity indices around the
globe are near their 52 week lows and a few are now in bear
territory as they trade below their 52 week lows.
BSE SENSEX closed today Friday -
1/15/2016 at 24455 down 6.50 % from
the last reference close of 26155. NIFTY closed at 7427 breaking
the September 2015 low of 7546. We are bearish on Indian
equities except Sugar stocks for Q1 2016.
^DJIA, NASDAQ and major European
indices are also in the correction mode. They will correct
further and re-test lows of August/September 2015.
Crude Oil prices tested 12 year
low today. WTI March Futures 2016 tested US $ 29.13 pbbl and
BRENT March 2016 Futures tested a low of US $ 29.72 pbbl. This
is not a good news for global financial markets and economies.
This level of crude over-supply shows a deep malaise in world
economic system. Brazil is having a negative GDP growth.
Resource based export economies – Russia, Australia, Latin
America, Africa and GCC are all having budget deficits.
Commodity indices are at record lows with levels close to the
year 1991. More pain to come in 2016.
China will spoil the party and the
undergoing correction will cause further pain with our target of
^SSE COMP at around 2000 for Q1 2016. ^SSE COMP closed on
1/15/2016 in bear territory at 2884.
A stronger US Dollar may mitigate
losses in ^DJIA but this leads to further lower prices of
commodities and also Gold. We advise investors to allocate 15 %
of funds to Gold, 15 % to Equities and balance in pure debt
funds. When the global equity markets bottom out in Q1 ( we will
advise ) – investors should re-enter the equity markets.
We advise investors to stay away
from investment in Gold till further advise.
We are not publishing a detailed post
for November 2015 as we expect a correction in global equities
lead by ^DJIA in Q4 2015. This was mentioned in our last
month's post.
The trigger would be the US Debt
ceiling - which will need to be hiked by US Congress as we
feel that in November or December 2015 - US Fed will be "out
of funds". US Fed will request US Congress to raise the Debt
ceiling from the current cap of US $ 18.10 trillion.
US Fed would request the US Lawmakers
to hike the Debt ceiling from US $ 18.10 trillion to US $
20.00 trillion till 2020. This is our estimate.
If this Debt ceiling request is
indeed made to the US Congress with Q4 2015 - we will witness
a serious correction in global equities.
Economic activity is further slowing
down in China and India. All other countries are also having
GDP growth issues. Gold prices have again been hammered down
by speculators on the back of strong US Dollar.
We still stick to our prediction that
US Debt ceiling will be hiked in November or December 2015.
Hence we are bearish on global equity markets including India.
Gold may spike if what we have predicted does happen within Q4
2015.
SEPTEMBER 2015
BSE SENSEX closed
today on 31st August 2015 at 26283 down 6.52 % from the
last month’s reference close of 28115. BSE SENSEX closed
below its 200 DMA of 27680. This is bearish signal for the
near future. NIFTY closed today at 7971 down about 6.00 %
from last month’s reference close.
The levels to watch
for BSE SENSEX and NIFTY are as follows :
BSE SENSEX
R1 26680
R2 27180
R3 27680
S1
25800 S2 25000
NIFTY
R1
7810 R2 8080
R3 8230
S1
7800 S2 7580
We were
correct in our predictions that Global
Equities including Indian Equities will be
bearish in the month of August 2015. China and
Brazil spoilt the party !
We are
reproducing excerpts from our 5th
October 2007 – webpage as under :
“Quote
I
am advising investors to exit from the
equities. Investors
who hold blue chips for “keeps” can sell the
same in the ‘F & O’ window so as to avoid
erosion of capital. Invest in Gold and/or sit
on cash
WE
ARE AGAIN ADVISING GLOBAL (INCL – INDIA )
INVESTORS WELL IN ADVANCE THAT THEY
SHOULD TRIM THEIR EXPOSURE TO EQUITIES TO AS
LOW AS 10.00 % to 15.00 % AND BALANCE SIT
TIGHT ON CASH. WE PREDICT A MAJOR CRASH IN
GLOBAL EQUITIES IN A PERIOD FROM SEPTEMBER
THOUGH DECEMBER 2015.
We
predicted a major correction in global equity
markets on 5th
October 2007 for 2008 and advised
investors much in advance. We advised
investors to invest in Gold or sit tight on
cash. We all know global equity markets
corrected by about 25 % in January 2008. Then
the markets corrected from July 2008 to
September 2008 ( Lehman Bros crisis
)
We were
also partially correct on Greece political
scenario. PM Tsipras resigned after getting
Euro 86.00 billion bail out from ECB and EU.
IMF did not participate in the third bail out
as it feels Greek Debt is
unsustainable. There is a
political chaos in Athens with no Govt in
place till 20th September 2015 when there will
be fresh elections. FITCH feels that with the
new Govt without Tsipras as PM – what is
the guarantee that the new Govt will honour
the terms of the Euro 86 billion bail out ?
Very difficult to answer this query from FITCH
?
The
monthly high for BSE SENSEX and NIFTY were
28316 and 8592 respectively. On 24th
August 2015 global equities markets crashed
including India. Traders called it a “BLACK
MONDAY”. BSE SENSEX tested a
intraday low of 25625 and NIFTY tested a low
of 7769. At close on 8/24/2015 BSE SENSEX had
lost whopping 1624 pts and NIFTY lost 490
pts. SENSEX and NIFTY fell by nearly
5.90 % each at close. It was the worst daily
fall in BSE SENSEX and NIFTY since
2008.
Intra day
lows on 8/24/2015 and 8/25 for some
important indices were as follows :
^N225 =
17747
^HSI =
20,865
CAC 40 =
4230
DAX =
9338
FTSE =
5768
MIB ITALY
= 20,158
IBEX
SPAIN = 9502
^DJIA =
15,379
S & P
500 = 1867
NASDAQ
COMP=4292
BSE
SENSEX = 25298
NIFTY 50
= 7667
^SSE COMP
= 2851
The first
trigger for correction in the global markets
was Chinese Equity markets. This had worldwide
impact. Chinese Govt could not stop the
crash in the Chinese equity markets even with
direct purchase of equities through PBoC and
Pension Funds. The latter is hara-kiri as per
our analysis. In mid August PBoC stunned the
world by Devaluing Yuan – three times against
the US Dollar to fix the peg at 6.3306. The
PBoC devalued the Yuan by 4.50% against the US
Dollar in three consecutive days. There was a
global impact on currencies and commodities
including Crude Oil as they further corrected
to new lows. The US Dollar soared in August
2015.
^SSE COMP
lost another 8.49 % on 8/24/2015 at close-
this was the single largest daily fall in ^SSE
COMP in its history – to close down by 8.49 %.
Black
Monday – 24th
August 2015. Again ^ SSE
COMP closed on 8/25/2015 at 2965 down 7.63 %.
There was a panic in China and global equity and
commodity markets –serious cuts were witnessed.
Details of levels of some important global
equity indices testing their multi-year lows is
as per above. PBoC panicked to calm down Chinese
Equity markets.
Even with
the devaluation of Yuan - the ^SSE COMPOSITE
was not buoyant. ^SSE COMP breached the
important 3000 level and tested an intraday
low of - 2851. The
PBoC swung into action on 8/27/2015 and
announced – cut in interest rate for one year
tenure, cut in RR ratio and announced
liquidity induction of US $ 200.00 billion
(equivalent Yuan ) through two main Chinese
Banks. There was calm at the Shanghai and
Shenzhen equity markets today as ^SSE COMP
closed today at 3206 after recovering from a
whopping monthly low of 2851.
Chinese
authorities may let CNY slip to these levels
of 6.45 to 6.66 to a USD. The might US $ moved
up almost against all currencies in the world
specially currencies of EMs.
On Black
Monday (8/24/2015) ^DJIA also tested an
intraday low of 15379 – down whopping 1081 pts
on 8/24/205, but recovered to close today at
16528 (down 3.94 % ). S & P 500 also
corrected to a low of 1867 but recovered to
close was 1893 (down 5.48%). NASDAQ COMP
tested an intraday low of 4292 but recovered
to close at 4526 (down 3.82%).
Foreign
investors pulled out US $ 190.00 billion in
the last 7 weeks from China, primarily from
the Equity markets. US $ 90.00 billion were
pulled out in July 2015 and in three week
ending 21st
July 2015 – US $ 100.00 billion have been
pulled out by the FIIs. They are a bit
disturbed over authenticity of Chinese data
especially on the annual GDP growth figures.
China announced its GDP growth for Q2 2105 at
7.5 % but global economists feel that China is
growing only at 4.00 to 5.00 % only. Plus the
devaluation of Yuan gives an indication of
pressures in China.
Three
major European Equity markets fell by about
5.00 % at close ( CAC, DAX and FTSE ) on
8/24/2015. Europe STOXX was down by 7.33 %.
These indices recovered at close today.
GD.AT in
Athens opened for trading on 8/4/2015 and the
index crashed to a new decade low of 615
and was down 22.93 % at the opening of trade
after a five week break till the close of the
trading hours. This was the biggest daily fall
in GD.AT after Greece became a member of EEC.
GD.AT corrected again on 8/24/2015 by 10.67 %
to a multi year low of -568 but
recovered to close at 624 today.
South
African Rand crashed to 13.80 to a USD on
8/24/2015. Rand was worst performing currency
in EMs after Brazilian Real. Brazilian Real
was hit today to test a low of 3.6823 level
against the US Dollar -which is a multi year
low. Brazil is now officially in recession.
There is a threat to its Sovereign Bond rating
be cut to junk status by global rating
agencies as Brazil faces a tough fiscal
imbalance. Plus there is the China effect also
in play – as Brazil exports iron ore and other
metal ores to China. Chinese imports are down
as its economy is slowing down.
INR
tested to a low of 66.7325 of closed at 66.645
on 8/21/2015. This is fresh one year low for
the Indian rupee. INR recovered to close today
at 66.4487
Gold
moved up to USD 1171.10 pto at NY Spot on
8/24/2015. This was a 5 week high. Gold closed
today at US $ 1135.40 up 3.58 % from the last
month’s reference close of US $ 1096.20 pto.
We remain bearish for Gold in September.
Unless Gold starts to trade above US $ 1183.00
pto it will be bearish. Hence Gold should be
bought only is it sustains US $ 1183.00 pto
Crude Oil
prices corrected about 27.00 % in August 2015.
ENT Crude
Oil February 2015 futures tested a six year
low of $ 45.19 pbbl on 1/13/2015 at
London ICE – lowest since April 2009. October
2015 futures tested a low of $ 42.23 at ICE on 8/24/2015.
BRENT can test a level of US $ 40.00 pbbl in
the next few months. BRENT October futures
closed today at 53.97 pbbl
WTI Crude Oil April 2015 futures tested
a six year low of $ 42.51 pbbl on
3/18/2015. This was the first time since April
2009 that WTI Crude Oil futures were trading
at levels of below $ 50.00 pbbl. March 2015
levels were breached in August 2015. October
2015 futures tested a low of $ 37.75 ppbl
at CME on 8/24/2015. A fresh 6 year low. WTI
and BRENT have fallen for 8 straight weeks in
the international markets – at CME and ICE
respectively. This is biggest losing streak
since 1986. WTI can test a level of US $
35.00 pbbl in the next few months. October
2015 futures closed today at 47.30 pbbl
India’s
corporate sector had one of its worst years in
the fiscal year that ended in March.
Industrial output grew by a modest 3.2%
year-on-year in the quarter through June 30
compared with 4.5% in the same period last
year. GDP data for the quarter is due Aug. 31,
but on Aug. 17, Moody’s Investors Service
reduced its GDP growth forecast for the
current fiscal year to 7% from 7.5%, citing a
near 10 % deficient SW Monsoon season and
slowing momentum for reform. The Indian Govt
announced its GDP growth figures Q1 FY2016 at
7.00 %.
We are
again cautioning global investors to take
profits home in equities or even book losses
in equities and sit on cash. There will be a
“tsunami” in the global equities and commodity
markets in September through December 2015.
The above lows mentioned in the update will be
breached and one will see much lower levels.
We will advise accordingly when to start
buying equities.
Investors
are advised to square their long positions on
all commodities including Gold. We will advise
via special updates when to start buying
physical Gold.
Global
equity markets (including India) will correct
savagely from 1st
September 2015 to 14th September 2015 and so
also commodities. Hard Commodities are already
near their six or seven years low. Gold may
rally in the said period but will again be
hammered down by global bear cartel.
PLEASE BE PREPARED TO SEE ANOTHER BLACK MONDAY ON 14th SEPTEMBER 2015. TRADERS TO TAKE POSITIONS ACCORDINGLY ON THE FORTH COMING TSUNAMI.
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