Short-term wave counts show that there could be minor pullbacks next week, which will be small counter-trend rallies to correct for over-sold conditions. says Sonali Ranade Continuous Commodity Index [CCI Index]: The weekly chart shows the price trend of an equal weight index of 17 commodities comprising metals, energy, soft and agri commodities. The index has been in a downtrend from March 2011 and shows no sign of having bottomed out.
The most likely wave count indicates that we may be in the terminal C part of the correction in commodities, which could take the CCI index from its current level of 560 to about 510. That's about a 10 per cent correction from current levels. Note that on the oscillator charts, the downtrend has just been confirmed. While a strong support can be expected in the 500 region, there is no guarantee that the correction will stop there. Short-term wave counts show that there could be minor pullbacks next week, which will be small counter-trend rallies to correct for over-sold conditions.
Gold Index: The weekly chart above for gold is really a no-brainer. The metal's price behaviour hasn't quite followed the CCI Index discussed above but the pattern is analogous. The main difference between gold and other commodities lies in the failure of the fifth sub-wave of the third wave down that led to huge pullback from the $1530 region to $1800. However, the long-term trend has not changed and has reasserted itself again.
Gold closed the week $1677 in a rather sharp one-day fall. Barring minor pullbacks the downtrend is likely to continue over the next few weeks. A bounce from the 200 DMA in the $1660 region can be expected but is likely to be transient. The wave counts favor a much deeper correction and might involve a retest of $1550.
Silver Index: Silver effortlessly pierced through it 200 DMA at $31.27 to close the week at $30.89. The metal presents an extremely bearish picture and we can at the very minimum expect a retest of the last low at $26 in the current correction over the next few weeks. Unlike in the case of gold, the prospects of the floor at $26 being held appear slim. A minor pullback may be in the offing early next week. It won't last very long though.
WTI Crude: Crude is unlikely to defy the general trend in commodities all by itself. It closed the week at $84.86 just a nick below the trend line running up from January 2009 lows. A retest of $78 is almost certainly on the cards, at which point crude would be a great buy. Crude is one commodity where one could see a failure of the terminal wave 5 down. So be alert for a buying opportunity.
US Dollar [DXY]: The $ has been in a counter-trend rally from its recent low of 78.62 which may be nearing completion. The DXY Index has a strong overhead resistance at 81.20 level. The dollar's correction down from its high of 84 in July of this year is far from over and trend down may reassert itself shortly. In fact the thrust of the $ through its 200 & 50 DMAs in the 80.40 region is almost certainly a head fake that is unlikely to last. Bulls should be very wary of the 81.20 overhead resistance and watch out for a bull trap.
Euro$: [EURUSD]: The euro has been in a downtrend since its recent top at 1.31 in September 2012. It made an attempt to rally up which failed at well below 1.31 and is now in a wave 3 fall. First support lies 1.28 followed by more robust support at 1.26. Euro$ closed at 1.2836. Minor pullbacks apart, a breach of 1.28 will accelerate the downtrend. However, expect a small bounce early next week to correct the oversold conditions created last Friday.
USD-INR: The $ confirmed the onset of a fresh downtrend against the INR by turning down from INR 54.30. The correction in the $ from 57.30 has not quite met the criteria from full-fledged impulse wave down. If it were an impulse wave then we would be in the terminating wave 5 that could retest 51.40 again. However, if the correction down wasn't an impulse wave as I suspect, then we are in a Wave b down for the rally from 51.40 to 54.20. In that case the correction now underway could terminate much earlier than 51.40.
First support for the $ lies at its 200 DMA at 53.40 followed by a deeper support at 53 and 52.50. It is too early to tell if a retest of 51.40
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is on the cards. The trend though is unambiguously down for the dollar.