Reality Check on some of my older Posts - Stock Market Rally, Gold and Crude Oil

When we stop and are thinking, we often miss an opportunity. That is what has happened with many of us in recent market rally.

S&P touched a high of 1100, a rise of 62% from its March lows. I did mentioned this in my article dated August 18th . This was the first leg of the bullish trend, and if someone says that because he is smart so he did not invested and that smart guy should answer me, on how can 62% rise was just a test phase. Investor or Trader if good can not miss 62% move and should be part of atleast half of the first leg of the new trend.

Crude Oil:- On June 13th I mentioned that Crude Oil is in bullish Uptrend, however just be cautious. It was trading in the range of $65-70 and recently it touched the high of $82. Now that is an enough move to confirm the point I was making. From here if Crude closes above $83, then it possess a strong chance of entering the triple digit zone in the next upmove.

Gold is a story in its own peril. Perception is that gold is being bought as an hedge against inflation. However the major reason is, emerging economies are considering parking their reserves in something other than USD and Gold to them seems a valid and tested option. Proof of it came when last week India bought 200tons of Gold from IMF. I mentioned this on July8th, that if by any chance Gold crosses $1000 level, then we can see new era of Gold prices. I currently see it taking a shot at $1300 levels. It might take months or a year, but those levels are quite evident.

Once again I would say, that " When we stop and over think, we often miss an opportunity"

Market mood and current scenario! A perfect text book picture of doing exactly they have done before!!!

Around a month ago in one of the discussion I talked about S&P range of 1010 and that is where it got tested!

I love to talk in numbers, however sometimes its better to speak logic and not just the numbers. I would like to share few points which have indirect or may be direct relation to market movement and can help us analyze the current situation where we stand and what should we do???

1. Mean Convergence is something that can never be ignored. S&P in its recent rally had gone far ahead of its mean (which ever you follow, I follow Mean Overshoot beyond moving average). So it needs to cool down and we are seeing the cooling effect.

2. First leg of any positive movement (from times immemorial) start in such kind of extreme panic. First correction is seen as a caution by most people as thoughts of recent meltdown still are fresh in minds of everybody. This factor is also proving true. 3. USD, everybody is speaking against it. (Only 5% people are bullish). So logically it is forming a base and I think may be a long term bottom. We should see strength in USD. 4. Gold, the channel its moving in, if you see the chart is getting narrower and narrower, which indicates that it need to chalk out its new course very soon (may be Oct), and things should work against it if USD rises and thats a possibility.

5. Sugar went into correction much before the rest of the things and whatever reason we say (Excessive rains in Brazil or less rains in India), it is bouncing and bouncing hard. Will other commodities follow, take your call.

6. China, and other Asian tigers once again have proven their metal. They are roaring and roaring hard, not dependent solely on Western Consumption. Now if you add a bit of Western recovery, then expect much better numbers.

7. Baltic Dry Index which was at $700 in December is now close to $3000 and is more or less close to rates where world trade and ship usage start getting normal.
8. Recent good set of numbers by so many companies (yes quality of numbers can be debated), expect numbers closer to these in coming quarter as well and that can contribute to lowering PE multiples, as its always easy to climb from lower base.

9. For the time being inflation argument has been thrown out of the window and central banks need not to worry about raising interest rates just to control inflation, the most common step they take. It seems that inflation will be normal.

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10. After all it is the money flow that will drive the market, scenario right now is, we all (investors, traders etc) are deploying the money to stocks, brought the market to these levels, now all of us want to book some profit, we talk of hitting bottom again, but are we pulling out completely, I think, "no", Actually we are cautiously looking for an opportunity to enter the market as very few people took the benefit of recent rally to an extent they can feel satisfied.

So to conclude, please sit back and take a overall look, I am seeing this a perfect example of "Fear Overplaying+Markets Outplaying+ Smart guys doing exactly what they need to do, be fearless but diversified and watchful".