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Indian Gold Demand Picks Up

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Indian Gold Demand Picks Up

The love for gold has been reignited in India, according to the World Gold Council (WGC) in its Gold Demand Trends for the third quarter of 2012. India regained its title as the strongest performing market, overtaking the greater China area, as the country experienced a bounce-back in demand due to improved sentiment during the festival season.

Compared to the third quarter of last year, Indian gold jewelry demand grew by 7 percent while gold bar and coin demand rose 12 percent. Total consumer demand was 223 tons, compared to 205 tons this time last year. The second largest market was Greater China, which consumed 185 tons in the third quarter of 2012. This was less than the 201 tons consumed in the third quarter of last year.

Together these markets in the east made up 55 percent of the world’s jewelry and investment demand, according to the WGC. indian-gold

Although India experienced a setback earlier this year when gold shops boycotted a proposed tax on the yellow metal, imports recovered by July “as inventory levels were bolstered (aided by a well-timed dip in the local price) and the market adjusted to the customs duty,” says the WGC.

The third quarter has historically been a strong seasonal time for the Love Trade to come alive in the east. Monsoon rains and the festival season in the fall are generally associated with the buying and giving of gold. Still, for the year, don’t expect the Love Trade in India to be as strong as it was in 2011, as gold demand remains subdued with the ongoing weakness of the rupee.

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ETF (GOLD & US Dollar)

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On its way down from 168, GLD broke its first support level and came to rest on the second (200-DMA) from which it had a bounce. Last week, I suggested that it might find some resistance on the small horizontal red trend line, which it has, and which caused it to pull back three points. It’s difficult to see how it could have much more of a decline right away if the market is going to have a mid-correction rally, so we can probably expect the near-term trend to turn up again, perhaps reaching the top channel line (blue) before rolling over again.

Gold Etf

If GLD does not have much of a rally from here – especially if the market does rally – it will be an indication that some decent weakness can be expected into the cycle low. In any case, subsequent action should form a P&F pattern which will help us determine the extent of the decline into the 25-wk cycle low.

UUP (dollar ETF)

UUP normally goes against equities and gold. The index appears to be extended short-term and eady to pull-back. This can be seen in the indicators, one of which is very overbought and the other beginning to show some negative divergence. If a short-term top is forming, this should help the market to find a short-term low.

US Dollar ETC

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S&P 500 Weekly Update

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Last Friday I suggested that price was involved in unfolding a terminal pattern: “Maybe price is unfolding a Triangle that should establish a bottom with the last thrust down, who knows if at the 0.618 retracement the PPT will step in.”

Instead of a Triangle price traced an Ending Diagonal, some good news came form Washington and price after testing the 0.618 retracement reversed to the upside, leaving in the daily chart a bullish hammer.

Therefore the wave structure off the November 6 peak is most likely over. This down leg, if my preferred count is correct, is the wave (A) of the last Zig Zag from the September 14 high. Therefore I am expecting a multi-day bounce followed by a lower low that should complete the corrective EWP (Recall that I am working with a Triple Zig Zag) from the September 14 high with positive divergences.

The internal structure of this bounce at the moment suggests that price may unfold a Double Zig Zag, in which case the common extension targets are:

1 x 1= 1369
1 x 1.618= 1380

A counter trend bounce always entails risks since the EWP can easily morph into something else, so next Monday I would like to see follow through to the upside or at least price should not breach the initial higher low at 1351.06.

In order to keep the ball running to the upside, bulls need price above the 50 wma = 1366.85 by next Friday, theoretically it looks like an easy task.

sp 500 chart

Therefore the extreme oversold readings of breadth & momentum Indicators + logical level for a short-term bottom (0.618 Retracement) + reversal pattern are the “ingredients” that should allow a multi-day rebound.

sp 500 weekend chart

In the daily chart below I highlight the target box for the assumed wave (B) countertrend bounce with a range 1382 – 1402.

A weak bounce should fail at the 200 dma while a strong one will go deeper inside the box and two trend lines resistance could come into play.

sp 500 weekly update chart

So the good news for the short-term bullish case is that there are enough technical reasons that auspicate a larger rebound.

But the negatives are still more overwhelming, since in addition to an incomplete EWP there is no sign of a major bottom from breadth-momentum indicator, VIX and sentiment.

Bulls also have the bullish seasonality of a shorter Thanksgiving week, while volume is expected to shrink.

In any case we know the two potential catalyst that are needed for the resumption of the intermediate up trend:

  • US political agreement of the “Fiscal Cliff”
  • Spanish Bailout

In addition since the Operation Twist ends in December, the next FOMC meeting on December 12 will be a major risk event and could be another detonator for a Major Bottom of the equity market.

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Flag Trendline SP500 Update

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We’re hearing much talk about the potential Bear Flag pattern on the S&P 500 Daily Chart.

Let’s take a mid-week update on the pattern and note the current key price boundary levels to watch for clues.

First, here’s the S&P 500 Daily Chart trend-lines structure:

SP-500-Daily-Chart

Moving from right to left, we see the current “Bear Flag” consolidation pattern stretching from early June to present.

The lower rising trendline resides near 1,340 while the upper rising trendline continues near 1,390.  The 30-min chart below emphasizes these trendline levels.

Now, moving to the left of the chart, the last time we saw a similar Daily Chart ‘flag’ struture was from August to October 2011.

While price did break the downside trendline, the full downside target was NOT achieved due to a power-rally which developed off the 1,100 Index level.

From there, price structure continued to trade mostly in a “Creeper” uptrend, bound by the prior “flag” trendlines until the breakdown of May 2012.

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Dow Jones Compated to Nifty Future

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dow-jones-denifition

Dow Jones, Just Watch above Chart

Support: 12992 level around

Suppose to not breaking or close below it… then Dow Jones will test 13300 and 13400-422 very soon

In case, Dow Jones will breach to 12988-13000, then buyer will enter with heavy quantities but keep in mind… ”It should not good if close below it”.

Compared to Indian Nifty:

Buyer will act 5240-5258 and they intend will be 5348-5356 and also 5412-5448 above

In-case, Nifty close below 5240… then Targets 5176 and 5089

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