BOOK QUICK PROFITS..ON ANY RISE OR FALL IN PRICES..DONT STRETCH YOUR LOSSES..

Good morning to all my readers. I am really very sorry that I did not have my article last week, as I was at the Gold convention at Goa. The scene at the conference was bullish, bullish and more bullish…so they would simply love to see the gold prices to rise with not even the clouds in sight. I mean, does something have an end to it?? The claims were simply unbelievable…$1000 to start with then $ 1200 and then $1500. I must say that with such prices we are talking like that we would be consuming all the gold in the world...and even eat and drink gold... As I hade mentioned in my previous articles that the major driver of gold prices in India is the rural market. If the farmers do not make money from the crops that they have sown, they won’t come in the market and buy gold as they have already lost their money in sowing their crops twice or thrice. I bet that many of the readers are farmers themselves so they will be the right people to give me this answer.

The presentations were decent enough with analyst from all over predicting the prices to reach sky high and the analysis were unique in their own sense. There was a presentation that said that in all the odd years in the month of September gold prices were at their peak highs but what surprised me is that the time period was limited to only to 5 years. What about the period before 5 years. If the analysis has to be made then at least a historical view of 10-15 years should be taken into consideration. All I would definitely say, that if you are trading gold, whether long or short side of it, make sure that you book your profits at regular intervals rather than holding the position for a long time. And I hate to say this but long time means only a day or two. Because gold is such a commodity that it will show the investor the sky with its price but will also pull the carpet below the feet at the same time.

Another commodity that is still the fancy of most of the investors- natural gas is showing some signs of recovery. Now I am really very sorry about the investors loosing their money in their natural gas trades and I tried my level best in helping them by setting up stop losses that could have saved them from huge losses that they have already made. Now that the prices are up for the time being, I still wont be comfortable to trade in it. If you tell me that I am scared of trading natural gas then I won’t deny that fact, because natural gas is a risky commodity and I do not rely on my luck to try to make money in it if I am not convinced with my analysis. Natural gas is still in wait and watch situation and now is not the right time to pull out your swords and rush into buying. Wait for the clear signals to come in and let the charts speak for themselves then it will be the right time to enter into it. There are investors who call me that they see an opportunity in natural gas because the price gap between every contract month is more that Rs. 50. If that is the case then there are so many commodities that have price gaps in their contract months then why are their prices falling? Natural gas is an internationally traded commodity which has global presence like crude. Is anyone aware of the fact that there is a country (I do not wish to name the country in this article for some reasons) that produces natural gas and has a cost of $0.90 per mmbtu? Now even if the prices of natural gas in the international market is around $3.233 per mmbtu then why would that country be bothered to have high prices where it is already making more than 3 times its cost? Now I guess it is time for you to think that why the prices of natural gas has come down so drastically. I do not wish to put forward the reason why the market expected the prices of natural gas to go up, because there is a reason to it and I know it very well. All I will say that it was simply a guess work that if such and such even would have occurred then the prices of natural gas would have gone up.

There are chances that the prices of most of the commodities would take unexpected turns around 15th September. It is a possibility and my analysis is based on lots of factors and any one not in favor then it may not even happen. So I would only say to my investor to please be careful with your positions and if you see any unusual movements in the prices during that time try not to hold the position for long. Happy trading week to everyone…

RAIN CREATING PANIC SELLING IN ALL COMMODITIES CREATING A TIME GAP...SE A BUYING OPPORTUNITY

Good morning to my readers. As I had mentioned last week that the markets will be volatile it indeed was. Now this volatility is what most of the analyst would say is in their favorite language “Overbought” and “Oversold” which now has become a very common word among investors in the market. But what most of the people fail to realize that overbought and oversold conditions can prevail in a market for a long time and waiting for reversals is far much better than taking a position and hoping for a reversal. Hoping for reversal will cost you margins and even losses on expiry of contracts. But taking a position after the confirmation of reversals is far more recommended. I do not wish to hurt the sentiments of my readers who indeed had put in their hard earned money in the markets, but what has really surprised me that even after my requests to people to exit their positions and book their losses they went ahead and continued holding their positions which caused them huge losses. I really appreciate my readers calling me and asking to give them a future direction in their positions. But I also had said earlier that all I can do for you is to give you a stop loss so that I can minimize your losses because most of the times I receive calls from people who are caught on the wrong side of the market. Of course I want my readers to make money in this market, but if you do not follow the stop losses in a disciplined manner how can I help you.

In the month of august we witnessed the commodity prices rising to unprecedented heights. But I would not like to call it overbought, I would rather call it panic buying, and believe me those who had buy positions in this panic buying are now in panic selling situations. The rains have indeed turned the situation for all the crops and the physcology of the markets have now turned to higher crop output. But what I need my readers to understand is that even if the rains have come in late the crops that were sown earlier have already suffered. Now that the new wave of rains hit the country the farmers are again going in for fresh sowings which obviously creates a situation of late harvesting. Now in this situation if the crop arrivals are delayed then this panic selling will automatically turn into new buying opportunities. I do not say that the prices will simply shoot up to new heights but they will again rise up to meet their resistances at older highs. What investors need to watch now is not the opportunity to sell in this market but wait for confirmation of reversals and then buy for smaller profits on the buying side. If you wish to sell any commodity now at these prices you will be looking at very small profits against big stop losses.

India is not facing any drought situation lets be very clear on that, because if a drought situation has to be declared then the country should have only 25% rains in the whole monsoon season. That is the right definition of drought. So if the news channels keep on flashing drought all the time, you need not panic but what is really a sorry state that the news channels create such a hype of anything without even cross-verifying any details. The race is simply on to be the first to flash the news. The country has till now received 70% of its rains and we still have time till mid September. The perfect time to take any position will be after 9th September because by then the rains will be all over and the real crop situation will be in front of you. At that time you won’t be caught on the wrong side of the market. There are very few commodities have the selling potential so please be cautious in selecting those commodities. Have a happy week trading…

THE VOLATILITY WON'T STOP FOR THIS WHOLE MONTH...

The volatility in the market is giving everyone sleepless nights. With commodity prices hitting upper and lower circuits on the same day it is very difficult for anyone to catch a perfect trading trend. I know since last two weeks I have saying the same thing that the markets will be volatile and to trade carefully. But if it is the case then I cannot change the truth of it, the markets are volatile and they will remain till mid September and by gods grace if you are lucky you will make money. Believe me it is your luck that is giving you money in this volatile markets because it is very difficult for any analyst to predict moves in this market on intraday basis. How much ever they try the stop losses will be hit. Let me put a very hard fact in front of you, not everyone can afford to make money in this market. It is only a few who follow a discipline can make money, because if you do not have control on emotions you cannot make money. Till the time an investor does not learn to book losses they won’t learn to make profits in a disciplined manner. I have learnt this lesson myself because when I started in this market even I was making the same mistakes. The general physcology of the investor has not changed as yet so they cannot hold any position for a long time as they know that if the prices of commodities are rising they will buy it but will not have the conviction to hold on to it because it is expensive and there is a scare that their positions are very risky to hold at such high levels and they will sell off and book their profits. I bet most of the investors are doing this in the market.

Coming back to rains as I had mentioned last week that if we do not receive rains by this week then we will be having only withdrawal rains. But now that the rains have come in they have come in with a bang and I am a bit scared that maybe Bihar will be facing floods again. You have already seen the devastation in China with the typhoon and I won’t be surprised that east coast of India will have some heavy rains and winds which means Orissa, west Bengal and Bihar. And the funniest part is that in the past history of India when Vidharbha region in Maharashtra had received the drought relief funds after that the same region had floods immediately. That’s why I have never been dependant on our MET department when they come to predict the rains. The MET department has never been right in their prediction because it is not their mistake but the infrastructure is not enough to allow them to predict the rains accurately. They are really in a very sorry state.

The crop figures have not come in as yet and there are many doubts in the market of what the crop figures going to be in future. The last whole week sugars has been in focus and believe me the investors in India are definitely cursing the government of banning that commodity, because they could have made some good money trading on the long side. But my dear readers I have a strong feeling that by September you will see the sugar prices falling like a pack of cards, because the prices are overvalued and there is no way that anyone will consume such expensive sugar. I feel by now the consumers of sugar will start having diabetes with the shock of hearing sugar prices forget consuming it. I am still of the opinion that I do not have any commodity to trade or suggest to any of my readers as I had said earlier I cannot challenge the rain gods and take any risky position in this market only to loose money. All I would say is try your luck trading but do not stretch it by having large quantities.

RAINFALL IS DEFICIENT TILL NOW...WITHDRAWAL RAINS IN SEPTEMBER OUR LAST HOPE...

The rain gods have not been very soft on us this year. Now is the time that we can say that the rains are deficient. If by end of this week we are not receiving some good rains then the only rains that we will be experiencing now is the withdrawal rains in September. The effects of these can be already seen in the prices of the crops. I had some researcher from South Korea who sent me the report regarding the rains being less in India this year. They have been saying that India has problem and the clouds are not entering the landmass. Most of the pressure is being directed towards china as they are facing the trouble of typhoons. It is clearly evident that the pressure zones have shifted towards china and there is a possibility they may be facing some floods. The government had tried its hands with cloud seeding over Madhya Pradesh and Maharashtra but they did not help much. But such is the dilemma of our system if a permission of cloud seeding has be obtained then the process takes 1 month of total approval from all the authorities. One thing is for sure that the government was very late in taking the decision on cloud seeding program, or by now we would have not faced the situation that we have been facing now of no rains.

Cloud seeding is a procedure where in a chemical silver iodide is released in the environment which will make the clouds rain. When we had sufficient amount of clouds the MET department did not take any action and waited for the natural action of rains to take place. It simply does not make any sense now because cloud seeding works only when we have clouds over our heads. Without clouds even cloud seeding does not work. It is really a very sad situation where our own weather experts have to subscribe to international agencies to predict our rains where it is so well known that India as a country is highly dependant on rains.

The worst affects can already be seen in Gujarat, Rajasthan, Uttar Pradesh, Madhya Pradesh, Haryana, Punjab and most of the northern parts of our country. Maharashtra has been a bit lucky along with the southern states that have received the initial rains. The commodity prices have already been sky rocketing with no end in sight. Now the biggest problem that the commodity prices are facing is that most of the commodities have reached their all time peaks and now the markets are in a wait and watch situation as where will the prices head now. The skepticism can be clearly seen as the prices hit the upper circuit and the very next day lower circuits as the speculators are scared to hold any long term positions. They simply do not wish to carry their positions overnight.

The weather conditions that we are having now can turn directions for various commodities.Commodities that will take their direction up due to deficient rains:
Guarseed
Guargum
Sugar
Castor
Wheat
Rice
Commodities that will take their direction on the downside due to high prices and lack of demand, as they are very much driven by consumption and these commodities do not perform well as they are not considered essential for survival. A cut in consumption in these commodities does not pinch a lot.
Crude oil
Gold (if the farmers do not make money they wont have money to buy gold as gold is the only investment they believe in)
Silver
Spices

Now as far as trading is concerned I have been very cautious with certain commodities as I had mentioned earlier that the rains by the mid of august will help me analyze which commodities to trade. Now I am very much clear in my research and I am ready to trade. I urge my readers to make sure that even if you feel bullish or bearish of any commodity make sure that you trade in small quantities because I still would like to warn you that the volatility will not end till the end of September. Wishing you happy trading and a profitable week.

MAJOR PRICE LIMITS ARE HIT. MARKETS TO DECIDE WHICH WAY TO MOVE...

The markets have been quite volatile last week and many investors have been caught on the wrong footing after the major fall in prices of most of the commodities. The biggest dilemma has been that when the prices came down everyone went short and the very next day the prices recovered back. If you have guessed it by now then good, yes I am talking about crude oil. It fell from the high of $68.99 on 27th jul to make a low of $62.70 on 29th jul and the very next day it was again up to give a close of $66.94. usually if the prices of any commodity fall so drastically and the other day if the prices do not fall with the same intensity then it is advisable that you book your profits and exit the market. If not profit book a minimum loss and simply exit and watch the prices. Do not hold the position with a rigid mind, because believe me having a rigid mind for a position can make huge losses.

I have been receiving calls from many readers asking me about natural gas. To much of my surprise investors have been holding natural gas position as if it is a replacement of gold. They ask me what is going to happen in natural gas and my answer is simply to give them a stop loss as I know all of them have bought at unbelieveable prices and have been holding it with huge margins being debited to their account. Why would someone make a mistake of buying natural gas when the fundamentals are not in its favor?? I am really very sorry to say but I request the investors not to mix up my opinion or figures if they have taken a position with the opinion of others. If anyone is suggesting you to take a position it is but obvious that the same person will give you a stop loss. If you try to match up my stop loss with the stop loss given by any other analyst there is bound to be a difference and it will confuse you as you are the one who is investing your money in that particular position. I can only try to minimize your losses but cannot turn that position to a profit making trade as it is not possible.

The markets are going to remain very volatile and I request you to trade in very small quantities. The bulls and the bears have been fighting it out in the market and you really do not know who is going to win. Let’s put this in a simple manner that most of the commodity prices have hit their higher limit prices and some of them their lower limit prices. Believe it of not the solar eclipse has reversed many prices in the market if you really want to cross confirm then match the dates of the eclipse and the price movements in the commodities. You will see major reversals around those dates.

The metal prices had also fallen down drastically on Wednesday and it scared everyone to a major sell off in the markets. Even the Chinese stock markets were down, but what is interesting to know that if you look at the charts of the Chinese stock markets they have rallied from the low of 2037 on 3rd march to a high of 3453 on 29th July. The prices have rallied for 5 continuous months without a single correction then it is quite expected that the prices will fall. Then this fall is actually a correction and not a collapse. There is no reason to worry as hyped by the TV channels.

For all the investors who are still short in crude then your stop loss will be 3250 on closing basis. If the prices close above 3250 then exit your positions the next day. I am writing this article on Friday so if by Monday the prices have closed above 3250 then I request you to please exit your positions and book your losses. If you have your position in gold then wait for the prices to close below $909. if the prices of gold have to fall then they have to close below $909 for two continous days. If they do not then exit your position and wait for the prices to close below $ 865 to sell further but make sure you have your stop losses confirmed. In Indian prices right now your stop loss in gold is 15375, which is equal to $960 more or less in the international markets. Silver will have a stop loss of 22911. natural gas as most of the investors are long your stop loss will be 171.65 on closing basis.

HERE ARE THE STOP LOSSES FOR YOUR TRADES...

What I had feared that really was the case. After last weeks article the number of calls that I received was overwhelming. My readers had actually taken the positions on the wrong side and were really curious to know now what?? And believe me the positions were really very big to hold and not worth the risk. People have been acting on their instincts which I feel is really dangerous in this market, because the way this market is moving and the way the moves are coming in I request you to please trade with caution and please trade in small quantities. Do not be in a hurry to recover your losses that you made in the past trading the equity markets. The markets are going to be volatile till the end of august till the rain spells have not ended. So please do not make the mistake of holding huge positions quantity wise as you will not be able to catch the reversals easily with the speed that is needed in the market.

The rains have been lashing Gujarat , Rajasthan, Madhya Pradesh and Uttar Pradesh. The way the satellite images are showing the cloud formations it is quite obvious that they won’t be stopping soon. The rains are going to be good and there is no need to worry. As I had said before do not make your conclusions that the rains are less simply by seeing the news channels. They are always on the lookout to give out hot news without even checking the authenticity of the matter. I had also said till the end of august you will be in the right position to conclude if the rains were satisfactory or no. I don’t think you will be having any doubts now.

This week I would again make an exercise the way I had done previously. I know many of my reader have been caught on the wrong side of the market and that’s why I decided to help them out by setting in stop losses for most of the commodities irrespective of which side you have taken the position. I am going to mention only the commodities that I feel most of the people are stuck in and they are their hot favorites.

If you wish to follow these figures make sure that you follow them on closing basis. If the prices close above or below these figures exit your positions.

Crude – stop loss for long position 3105 and stop loss for short position 3325.
Gold – stop loss for long position 13960 and stop loss for short position 16375
Silver- stop loss for long position 20001 and stop loss for short position 24735
Zinc- stop loss for long position 72.35 and stop loss for short position 83.75
Copper- stop loss for long position 241.25 and stop loss for short position 272.65
Nickel – stop loss for long position 722.50 and stop loss for short position 805.75
Natural gas- stop loss for long position 171.65 and stop loss for short position 215.65

I had very few callers who had any position in the agri commodities. That’s the reason why I am not giving any calculations for them. What I have noticed that most of the traders are interested in trading metals and energies as they give quick returns. But please keep in mind that they too follow fundamentals and they are more dependant on fundamentals that are based on international market and not Indian markets. With the end of the solar eclipse lots of commodities have already shown their reversals. This week the prices will show the effects of eclipse. I wish you a happy trading week and a profitable week.

CAREFUL WHILE TRADING YOU MAY END UP ON THE WRONG SIDE

The rains have been arriving steadily to the other parts of the country. It has been quite a relief that the rains have come in even though they have been late. As and when the rains are hitting the parts of the country the prices are going for a wild ride. Let that be spices or oilseeds or any other commodity including gold and silver. And not to forget the equity markets and the rupee-dollar. The investors of commodity markets are already in a fix which side they have to be? The moment they are on the buying side the market reverses and the moment they sell the prices shoot up. Even though the fundamentals are in your favor it is not necessary that the prices too will be in your trading position’s favor. This week we will be experiencing a solar eclipse which will make a lot of impact on the prices of commodities as well.

Last week when I had put in the article about crude a lot of investors had misinterpreted what I had said. I had clearly mentioned that there is a possibility that crude prices may simply crash from the levels without giving a pullback. And if the prices come up a bit then they will come up to levels of $63-$64. Those levels would have been a good level to sell again. But with the calls I received from my readers I was completely surprised that they had actually bought crude oil contracts rather than waiting for a reversal to sell. This physcology of trading will make you end up making losses. If the price of certain commodity is on the downtrend then if the prices come up a bit that does not mean that you should be buying in the market because you may never know from which levels the prices will turn and you will be completely unaware when such a thing happens. Then how much ever you try you will end up making losses forget coming out of your position at cost.

The prices follow a certain trend and a discipline which if we honor then the prices will honor us and give us the desired profits. Taking position in haste will make your capital wiped off which makes you completely handicapped because you won’t be able to enter the markets again without capital. Make sure when you are trading initially make some decent profits that will cover your future loss making trades. Do not risk your capital on the trades instead risk your profits.

Gold right now is stuck between the fight of the bulls and the bears in the market. Which way it will end up you never know. It is when this fight happens in the market small investors suffer to great extents. If we look at the chart of gold on 8th July the prices had actually breached the bottom of $911 but the other day itself the prices reversed and the shorts in the market were beaten heavily. The price shot up and has created a bit of panic in the market. If the bulls can manage to pull the prices from here they can take the prices to any extent. The equity markets world over have bottomed out. Investors in the market have money now that they can divert their funds to buying gold now. The dollar index has bottomed out and it will shoot up any moment now. The dow jones has reversed and given a break out on the higher side. Now question is will this take the prices of gold sky high or rock bottom. Right now the magic figure in gold is $939 if the prices close above this price for one week then there is a possibility that the prices will go higher. But to be very honest I will not be on the buying side neither be on the selling. I will be simply watching the movement in gold like I watch a movie and when I am completely comfortable I will make my move in it. I will advice my readers the same if you are planning to take a position in gold on either side let that be a buy or a sell, intraday or positional you may end up on the wrong side. Keep yourself away from gold and silver for the time being. There is a reason why I have been keeping myself away on writing on any commodity extensively for sometime as I had mentioned earlier I am still waiting for the rains to complete their course which will give me a better idea to analyze the market. I do not wish to mislead my readers by simply writing false information on any commodity and make them trade for no reason and end up making losses.

THE FALL IN CRUDE HAS NOT ENDED YET....

The rains have been giving everyone a shiver now with its constant delays. Even the government is scared now and no doubt they have made provisions in their budget if the rains fail to set in the country on their normal course. The rains have been delayed but we still have 2 months to wait and watch. It may so happen that the rains may completely surprise us after entering in mid or late July. It does happen and it has happened in the past history of India before that the rains have entered in mid or the last week of July and has completed its quota to the satisfaction of everyone. Right now what we are facing is a high pressure zone over the land mass which means the clouds that are being pushed back towards the sea. There does not seem to anything to worry till 20th of July. But yes if the rains do not come in by then, that means we are facing a big problem wherein the rains would be 60% of the normal rains that the country receives annually.

For last 15 days it would have been a good time for traders who had been short in their crude oil positions. I remember mentioning in one of my articles that, be prepared for a fall in crude oil prices and I hope I have kept my words. Crude had finished its rise at $74 on 11th June. After that no doubt it did try to again rise to that level from the low of $66.37 to make a high of $73.38 on 30th June. That day itself it gave up and ended up closing at $69.89 down $1.65. And after that I doubt the crude oil price have seen the rising sun. It was setting down and further down for 7 continuous trading sessions to end up at $59.25. The question that now arises is- has the fall in crude prices ended? I would say not yet, it still has to continue its fall. But what needs to be seen is will it simply fall down from here onwards or will it give a slight pullback and then take a reversal. Remember crude prices have almost fallen down by $15. So as far as the physcology of the market goes it should take a break, let the prices rise a bit further and then fall again. And this will be the last phase of its fall, because after this my dear investors, crude will never see these low prices again for a long time to come which I would say long long years to come. This week it will be the time when we will have to observe till what prices does crude give a pullback and then we decide if we really want to sell further. Because when the prices are in the last phase of their fall it is will be very difficult to know when the prices will take a reversal. As I see it, they should be around the price range of $55 and $48 for next 2-3 weeks or maybe 2-3 months.

By the end of august the hurricane season in the USA will hit the country and we will have to wait and watch if anyone of it hits the country and what kind of damage it may cause. Because august and September are the months where crude oil is at very wild rides and a slight here and there in the weather out there can take the crude prices to any heights. But for that reason I said it may range between $48-$55, which I feel maximum may go up to $60. Trading during those times is a bit risky as the prices are simply news driven and not the fundamentals. To be put in a very simple manner now is actually a wait and watch time in crude and if the prices give a pullback then it would be the last opportunity to sell again in the market. If the pullback does not come in then it is better to stay away and not sell as the stop losses will be at really high levels which do not justify the targets. Incase if the pullbacks come in then it may come to the levels of $64 and at such levels it may be advisable to wait for a day or two and if the price of $64 is not breached for 2 continuous days then a risk of selling can be taken with your stop losses limited to around $ 66.35 on closing basis. Please do not tempt yourself to taking a buy position if the markets are showing a sharp rise in the prices. Have a happy week trading and a happy week making profits.

VOLATILE MARKETS...TRADE SMALL QUANTITIES TO MAKE MONEY

Markets are very volatile since last week. The reason is quite simple; there is a continuous fight between bulls and the bears in the market. There is continuous fear in the market as investors are confused, is the economy really picking up or is it going to simply turn and start falling again? Is the question asked by everyone. During fear desperate trades are made to recover all the losses made in the last year. If you have made losses and I mean huge losses then do not be in the rush to recover everything at one go, because I assure you one thing that you wont be able to do that. You will end up adding up your losses rather than making money. I know it is a hard truth to accept that investors have made losses in the past and the best thing to do right now is to simply accept the mistakes of the past and trade now with certain discipline and at a very slow pace. It is quite disturbing to know that even in these good markets investors are still making losses. If the markets have fallen down to such extents that it wiped out wealth’s of investors then I can guarantee one thing that it wont give you back that wealth so easily. That is the basic rule of nature and basic rule of market. It is better to learn from our mistakes of the past rather than making the same mistake again.

Rains have entered the country with some decent showers. Though people have been complaining that the arrivals of rains are late, but people skip the fact that the world is facing climate change and this phenomenon is going to be very common now. If we look back in the past years then the summers in the country are getting hotter and the winters are getting very cold. The only reason is global warming and that is resulting in climate change. People have to get used to this fact and stop worrying about it. The media has been scaring the people every minute that the rains are bad there is going to be shortage of water in the country, agriculture will be affected. Why speculate so much rather than wait till the end of July and then gauge if the rains are actually deficient. I have strong feeling that by the end of July the rains will be sufficient enough to satisfy the people and as well the news channels. When I switch on the TV today I am really amazed by the number of news channels in the market and all of them giving the same news of rain shortfall every 15 minutes. This itself creates a panic among everyone.

Rains form the backbone of the agriculture in India and if the rains fail the government will be in deep trouble handling the economy. The government is aware of these things and it will create artificial rains and save the crops. It is completely possible and India has done it in the past. This time the government cannot take the chances of risking its hold of power in the centre. The agri commodities are also getting a bit risky to trade right now. No major trends can be set for next 15 days to come in the market. The agri commodities are at the mercy of the rains and I will be seriously concerned if any of the investors are trading big quantities of agri commodities in the markets. You have to calculate your risks prior to taking any positions and it will be wise enough if you take the advice of people who have the experience of investing in the commodity markets.

In this week’s article I only intent to give you this message that you trade in a disciplined manner and make money from the market. Think of it as a hen giving golden eggs but do not kill the hen to have the maximum. Small calculated profits are always better then big losses. I am not giving any analysis in this week’s article because how much ever I try to predict the market at this point of time Mother Nature will be against my prediction. Rather than misleading my investors into taking wrong positions I would rather wait for the monsoon to give me the answers for the questions that I have for predicting the market.

As far as gold and silver is concerned there are high speculations in the market and the prices are being held up artificially for reasons well known to the people who are holding the prices. If I refer to my previous article, I had mentioned that with the economy starting to recover, Dow Jones recovering, our own markets are recovering there is no reason why would anyone be investing in gold? I am convinced that at these levels new shorts are being created in the market in the background. There is no possibility that gold is going to be bullish until it closes above $1015 for one week continuously. At that point of time even if the prices are high there is no harm in buying gold as an investment. The gold prices are overvalued in India even considering the rupee value. With the gold prices at these levels the right price of gold should be around Rs. 13900 levels and below Rs.14000.

If you can really hold on for sometime then my advice to investors is to wait and watch and you will see it yourself how the markets change their course without even a warning. Have a nice week and a profitable week.

ELECTIONS OVER..TIME TO CHANGE THE FORMULA

Inflation calculation had been a joke since the very beginning. The government has used this tool so easily to mislead the common people. Last week the inflation or I should say the deflation was -1.61%. This has been the second time that India is facing deflation since 1977. On 21st Aug 2008 inflation was at the high of 12.63%. I have been stressing in many of my articles in the past that the inflation calculation system is completely flawed. I seriously fail to understand the joke played by the government of tactfully changing the basic rules for inflation calculation. They simply keep jumping from one commodity to the other and replacing them with so ease that a common man is simply unaware of it. How can it be possible that crude prices are at $70, petroleum minister talking of increasing the prices of petrol and the country facing deflation? Are you seriously convinced that such a thing is possible?? The government is still not ready for free market price discovery system as yet. The government is so scared of even futures trading that it has still not taken the decision on options trading in commodities market. Commodity futures markets are still in experimentation stage to be very true.

There are very serious reasons for it. India is an agricultural country and with agriculture ruling most of the parts of India, the government has to keep the farmers happy to keep their vote banks full all the time. The commodity markets claim that they are a free market price discovery system, then why do they ban certain commodities? Take the example of wheat, when they were sure that the prices of wheat will go up due to shortage of crops they banned trading in it, because- now read this carefully “wheat was one of the components in inflation trading”, which obviously was removed from the inflation basket later saying that common man cannot afford to buy wheat so remove it from the inflation basket. The other best example is of the recent ban of sugar futures. Two months back sugar prices were rising as if there was not tomorrow saying that the crops are going to be less. But as soon as they realized they were wrong in their estimates that the crops are going to be huge they banned it fearing that the prices will fall and hurt the market which again hurts their vote banks. Now do you really feel there exists the concept of “free market discovery”. Sugar again is a part of inflation calculation basket, or not now you simply don’t know. The government has simply not been consistent of the basket of commodities forming the basis of inflation calculation.

The equity markets used to react with the inflation figures so the government changed the time that the inflation figures come in. initially the figures used to come in the afternoon during market trading hours then they changed it to the evening so that the equity index do not take ugly turns during the day because of the inflation figures. Now they are talking about changing it to monthly rather than weekly. It will be really good if the government does not give out the inflation figures at all. I guess that the common people have become smart enough to guess the inflation figures with the prices that pay in the supermarkets now.

The rains have been delayed this year, which I don’t think so is cause of worry for the time being. Of course the city of Mumbai is scared because then we face the shortage of water supply. As far as the farming sector is concerned there is no worry as the rains are setting in this month itself. The MET department has been saying that the rains would be coming in by 25th of this month, which I feel is going to be earlier than that. The satellite images show a strong probability of rains by this week itself before 25th. I am talking about Maharashtra so by the end of month Gujarat too will be having rains coming in with a bang.

This week my focus is going to be on base metals. Right now base metals are at such a turning point that it will the last stage of their corrections. What I am trying to say that very soon the fall in base metal prices will start getting over and they will turn to start their new runs very soon. Now I do not want you to be mislead by my saying that the prices will shoot up in a very short period of time. They will go up systematically and at their own pace. All I will say that there won’t be a mad rush in the demand nor supplies but they would be balanced to much of the extent. So the climb will not be steep but stable returns can be guaranteed in holding long positions. Do not make the mistake of buying them now as they will still take more than a month to give their first confirmations of getting into the bullish phase. The reason is very simple and is very much visible in the market. I have been quoting this in my previous articles and also this time I would like to say that “the American economy is getting better day by day” and in no time soon we are seeing that the economy is getting better and that is quite visible with the stabilized Dow Jones. Dow jones has risen from the low of 6469 to the high of 8877 within 14 weeks continuously without a break. If you can have a look at the weekly chart of dow jones then it is clearly visible. Now do expect some correction in the index which is not a concern of panic anyways. It will be a normal correction for a new stabilized rally. The same is the scene with the Indian markets too. If you look at the weekly chart of BSE sensex too then the markets have risen from the low of 8047 to the high of 15599 in 14 weeks again. Now that is quite a similarity in both the markets. There is a gap in the weekly chart as far as the sensex is concerned so I do not rule out the possibility of sensex reaching somewhere close to 12300. The fall that we are experiencing now is just a correction. Lots of people have missed the opportunity to buy at the lowest levels as there was constant fear in the markets that the rise may not sustain. New investments will start coming in soon in the recent correction and it is also very much visible with the mutual funds coming out with new issues in the markets. The SEBI has even scrapped the entry load fees on mutual fund investment which is also going to help the investor save some investment cost. I do not know if you had observed it or not the brokerage house have again started off with their advertisement on the TV which was not visible during the market fall period. Don’t be surprised that in the near future American economy comes out with interest rates hike. job layoffs have come down and may companies have started hiring back new staff, though they have not being making the same mistake of over-staffing but they are filling up the spaces now. As the demand starts picking up in the market the base metal demand will also see a stable rise. There won’t be any mad rush by china anymore for metals as they have over stocked their quota of metals. So do not expect china to come in the market now and buy as they won’t make the mistake of buying at rising prices. Then the concept of cheap Chinese goods does not hold strong. I would suggest that you need to keep an eye on base metals prices now, as this will be the last stage that you will be seeing a correction in the prices. They will be stabilized in a month or so and then they will start rising.

CRUDE IS GOING TO TAKE A UGLY REVERSAL...BE PREPARED

Good morning to all my readers from Chicago again. This will be my last article out from America as I will be back to India by Tuesday. The city is fantastic and so was the CBOT ring. I spent almost an hour on the CBOT ring and it was an experience of a lifetime. It is a pity that India does not follow the outcry trading anymore. As far as the Indian pits were concerned they were really chaotic but a fun place to be in. the shouting and the execution of trades are something that cannot be enjoyed on electronic trading. Well the difference now is that now that we any big moves on the screen we start shouting. The whole concept of “diya”, “liya” is gone. I guess the last time a pit was shown in a movie recently was the “Bombay cotton exchange” in the movie guru. But the pit in indore the NBOT is still active to some extent. There you still have open outcry trading going on. Someone is still running the tradition. But I did not see a lot of people trading or lots of contracts being traded. The way it seemed even that may close down due to lack of volumes that ncdex and mcx generate. Coming back to the CBOT ring, the place is quite huge and every commodity is traded in a different pit which is on the same floor.

Now looking back at the last weeks movements in the market, the precious metals prices have been falling down over all week. Starting the week with the high of $966.70 it has closed at $940 making low of $936. the whole week the prices did not make any great moves and they were in a narrow range of $30. Every time the prices tried to fall they were pulled up at the end of the day. One thing that has to be noted that gold will give a small pullback in prices if it has to continue its down trend. There will be some profit booking at the beginning of the week and then it will take a reversal with fresh shorts coming in the market. Dow Jones have been trading in narrow ranges too. Showing some signs of American economy trying to stand on its feet back again. I will again like to mention that do not be under the impression that the American economy will not revive. Because if anyone it telling you that it wont happen then you are being misguided. For your information the economy is already on revival and it is now just a matter of time that you will be seeing the economy booming again. The pain days are almost over so start counting the days now for a big moves to come in the market. Well as far as gold is concerned it will go down eventually. Because it cannot happen that the equity markets and the gold prices go up together. As the plain logic goes when the equity indices start rising the investors start diversifying their income towards equity and they no longer have the interest to trade gold as now they will first try to make up for their losses in the equity market and when they have made somme profits they will be investing that extra income in gold and property. If I am not mistaken the property prices have stopped falling and no longer you will be able to get any discounts on any property you buy. I do not say that the pices have started risig but they have stopped falling for sure. It is basic economics. Will you be really interested in buying gold if the you know that you will make some quick returns in equity rather than gold in a short period of time? Gold is a long term investment and should not be mistaken as a short term trading commodity. So start planning your investments now and start looking at the equity markets now as they are the ones that will give you the return that you wont even imagine till 2014. obviously I expect you to take your steps cautiously. Do not make the mistake of putting in all you money in one stock and playing the gamble on it. Do you research be convinced and then invest. If you are seriously looking at sectors to invest then alternative energy, auto ancilliaries, coal and metal sectors are good avenues to invest in.

Now crude the black gold investment. The last whole week crude prices had been rising. The investory rpot that came in on Wednesday were not encouraging enough and there was great panic created which made the prices to run on the higher side. Well let me say one thing this possibly will be the last time that you will be hearing of any reductions inn crude inventory levels in America. You may have reductions in inventory but not to large extents. Reason is quite interesting to know. In my recent visit to Brazil I met petrobras one of the largest oil companies inn brazil. Petrobras has discovered a huge reserve on crude oil off its coast of brazil which is as big as the crude oil well of Saudi Arabia in terms of oil reserves. Now they are not any far from declaring that once they start pumping inn the oil from there. Second thing to note is that the demand of crude oil has been the lowest in last 10 years but the supply has been the highest inn last 10 years. For last 3 months traders had been holding some large shipments of oil to be sold inn the market when the prices cross $70. these were the traders who had bought crude around $38-$40 and they have been holding it since long time. Now if they do not sell this crude in the market they will be stuck in the market with their stocks. They have almost doubled their investments and it does not make any sense to hold back the stocks. Even they are aware of the fact that huge supplies will be hitting in the markets now so they will be simply letting go their stocks and book their profits. Besides that china and India have finished buying their reserves of crude oil and they no longer will be buying any extra inventories as the time of cheap dollar will no longer prevail. If you remember I had mentioned inn the article of rupee that it will get weaker now against the dollar and the stop loss of Rs. 46 /- has still not hit in since the article was published.

My advise to you now is that if you wish to take long positions inn crude make sure that you do not hold them for long and exit them when you have made some decent profits in it. I will be waiting for the right time to sell crude rather than buy. I am waiting for the right chart formations to come in and once I am convinced I will be selling heavily in the market.

FOLLOW THE SPECULATOR PHYSCOLOGY...AND MAKE MONEY..

This article I am writing today is all the way from Chicago in America which is the hub of the commodity trading markets in America. Yes I am talking about Chicago board of trade- the CBOT. And Monday evening when you will be viewing the live prices of international market I will be standing on the floor of the ring of CBOT witnessing the live market and the live trading. Before this that I was in Brazil for more than a week’s time I came across a strange thing. The people in Brazil are crazy for Indians. You will be happy to know that Brazil has a local version of saas- bahu serial where they have the local actors dressed in complete Indian dresses and it is a story of a house where there is clash of culture, because an Indian gets married to a Brazilian woman. How they try to adjust to the Indian culture is the main story. Now this serial runs at the prime time of 9.00 in the night which itself is the proof that how popular that serial is in Brazil. All the people I met asked me about the Indian culture, the clothes we wear the food we eat. The most popular words that the people out here have learnt in hindi is “ arre-baba” and “theek hain” so now our Indian women have the complete right on the TV remote as they have a new chapter to add to their addiction of saas- bahu serials. They can very well proudly say that Indian serials are not only popular in India but also on the other side of the world. By the way they do have Indian restaurants but they simply cannot beat our Indian taste.

Now going back to our addiction of markets, as I have been looking at the markets the last week the prices were in a very confused mode I should say. Most of the commodities started with a bang on Monday and they started the rally on the higher side but somehow they could not keep the trend going up to the end of the week. As I had mentioned in my last article that the rally will be a trap and if you are on the buying side then there is a possibility that you may be stuck with your long positions. Let’s take some examples here that will explain my theory in a bit more precise manner.

Take castor for instance, it started the week at 486.6 made a high of 490.20 but could not sustain to break 492.85 which was mentioned in the daily technical call that I had given last week. The prices turned around at the price of 491.60 and on Friday made a low of 471.60. Now a bottom of 480 has been breached and the target of 476 hit making a low of 471.60. The next example will be of natural gas which started the week with a rise to make a high of 208.30 and turned to make a low of 177.60. But as I had mentioned that if the prices close below 185 then it will be safe to sell. But the market the day it made a low of 177.60 it never closed below 185. It actually closed at 188.70. That’s the reason why I had mentioned only a close below 185 is a safe level to sell. Natural gas had been simply riding on crude oil. Closing of prices below or above a particular level is very essential, or you will be stuck in the position if you have taken a step in haste.
The last week’s article was on crude oil. In the article the levels that were given have been achieved and if you had taken a long position then I guess you must have made the money that you deserve to make by taking such positions. Last week crude did start with a bang and started to rise except for Wednesday that it came down by $2.43. But the prices were still far away from the stop loss that was mentioned of $62.25. Well I admit that the prices reversed from $70.32 on Friday which is $0.33 before the target price that I had given of $70.65. Well I am sorry for that but I hope I can have some concessions with my calculations from my readers. The rest of the commodities that have mentioned inn the daily calls may not have moved as had calculated them to be, but I still feel that till the time certain figures are not breached if will be very risky to take any positions. Let’s take copper for example again. As I had mentioned that if the prices close below 226.50 it will be safe to sell. The prices rose to the high of 246.45 on Tuesday and then fell down to the low of 232.50 exactly to the same price it had started on Monday. Now how can you still say that the prices of copper will rise where it cannot even sustain a rise for two days?

Now why the prices of crude oil reversed? The threat of North Korea is still active and live, then why did the prices reverse on Friday? I know very well that you will be asking these questions to yourself. If you remember that I had mentioned in the last week article that it is a trap rally. But you still made your money in the move right?? You will read the English newspapers then you will get the headline that President Obama made a speech in Cairo in Egypt that’s why crude oil prices reversed. Will you really now believe that reason for the reversal of crude prices?

Let’s look at this from a different angle. When crude prices started its rally it took a break on Wednesday where in the speculators booked their profits. Had the Obama speech been the real reason then the prices would not have reversed the other day on Thursday. It is a very simple logic of trading where in you take your position and take your profits where you feel comfortable. The price movements are merely reflecting the physcology of the speculators and not the fundamentals. As I had mentioned the fundamentals have to set in right if the prices have to move up. The fundamentals did not support the rally that’s why they did not sustain the move on the higher side. Now Monday will be a new beginning in crude and similarly inn all other commodities. So let’s wake up on Monday and witness a new physcological game of the speculators.

THE RALLY WAVE MAY TRAP YOU..TRADE CAUTIOUSLY..BUT WORTH THE PLAY

For all my readers I would like to send a good morning all the way from Brazil in South America, as I am here to attend some work. I am sorry I won’t be able to attend the calls of my readers as I won’t be back before 15th June because after Brazil I will be off to America for some other work. The weather out here is cloudy and it does rain heavily which I suppose is still not the case in India till now. After the cyclone hit Calcutta the clouds have dried out a bit as the satellite images show. But that does not seem to be the case to worry as of now. Rains have already hit south of India as Karnataka has been experiencing some showers everyday. The initial rains that had hit India all over were because of the heat wave and they were not the actual rains that mark the beginning of the monsoon.

Now as far as the world situation goes, North Korea has again started testing their nuclear weapons, which does scare America the most. Even tough America will deny the fact that they are scared they will always try to put it very diplomatically that it is dangerous for the world, that if North Korea or Iran have nuclear weapons. North Korea is supposed to be the most secretive country in the world. It is ruled by a dictator and such a situation is dangerous for any country in the world. Many journalists have secretly shot videos of the situation of the people staying in North Korea and how they suffer the miseries as the country is completely cut off from the whole world.

This news has no doubt given crude the well needed vitamin shot in the arm and after that the prices have been shooting up like a missile. In the beginning of this month crude prices were at the low of $51.55 and after that it has made a high of $65.25. The charts have shown a breakout in the prices which were at the price of $62.65. now when you will be reading this article it will the beginning of the new month of June which means if the crude prices have managed to close above $62.65 in the month of May then this marks the beginning of a new rally in the prices of crude. This rally will continue to the prices of $70.65 which may be a point where crude prices will take a break and show a slight reversal of prices for profit booking. But this can also be a trap rally as I call it because the prices are rallying because of the current geo-political scenario and not because of the fundamentals that are supposed to be the right factor to look into. Historically crude prices have made huge rises when wars have broken out in any part of the world. If there is any geo-political disturbance in any part of the world, crude prices will always run at a premium of $15 to whatever were the prices of crude in normal situation. This means that crude right now is at $65 and is $15 higher than its nominal prices. And when such a situation is settled down the prices gradually retrace back to their nominal prices. There is a possibility that the prices may come back to around $55. This situation is quite unlikely till the prices touch $70.65. To trade in this wave of higher prices is a risky game but some good money can be made out of it. Now if you wish to trade in crude then your stop loss will be a close below $62.25 for two continuous days. If the prices manage to close below $62.25 for two consecutive days then exit your positions but do not make the mistake to selling then. Then it will be better to stay away form it. In this rally the weakening rupee will also act in you favor as when it starts getting weaker and the crude prices rise it automatically gives more return in Indian crude prices due to the price valuation of the rupee.

Now as I am in Brazil the other commodity that comes to my notice is soybeans and sugar. Both the crops are huge in Brazil as far as the figures go. Remember when America had declared that this year they will encounter fewer crops of soybeans. But what I want you to know is that the figure that America declared were only the projections that they may sow less crop of soybeans, which does not mean that the actual sowing will be less. Logically at such prices that have been running in the markets which farmer will decide to sow fewer soybeans? The actual sowing figures will only be in after the month of June. That will be the deciding factor for the prices of soybeans. There is a huge crop of soybean hitting the international markets as far as Brazil and America is concerned and the demand is more or less the same as last year. So do not expect the prices of soybeans hitting sky high but expect them to be on the down run in the coming future. The prices are overvalued so having a long position will not give you any decent returns.

The same is the situation in sugar as in soybeans. So if investors are in any way deciding on taking long positions in sugar and soybeans you need to review you decision.

RUPEE IS IN YOUR FAVOR NOW...BUY DOLLARS IT IS AS GOOD AS GOLD!!!

We have the good news that at last we have a government with a single party majority and that it cannot be threatened by any other party of pulling out support for its survival. The UPA government has formed the government after getting a total seat tally of 322 and most of the parties that have given the support are unconditional support. This means that no one can hold the government at ransom of pulling out the support which 5 years back was a reality. The last government was holding on to its clutches to stand and walk forget running. It is the second time in history of Indian politics that after Nehru, Dr. Manmohan Singh has become the prime minister for the second time consecutively after serving full 5 years in service. If I am not mistaken he is also the most highly educated prime minister that we have since our independence. Also one thing is worth noting that this time we have many young ministers in the cabinet which no doubt the efforts of Rahul Gandhi.

Strong rumors have been circling in the market now that the petrol prices will be raised by Rs. 2. which I am had mentioned in my previous articles that the government will do it. The reductions were one of the tactics used by the government for the coming elections to be in the good books of the people. Now wonder what will happen with the inflation?? History has been created in lot of things when the new government was announced. The sensex shot up by 2000 points and in the whole day it traded only for 1 ½ minutes which itself is history and above that it has so happened that the markets hit upper circuit which will be mentioned in bold letters for years to come. The optimism of the investors was quite evident with this. Now the only regret all the investors are facing is that they missed the opportunity to invest at the lower levels as they were scared of doing so which is quite reasonable. The rain gods have been showering on us now. The first initial rains have hit most of places in India. But these rains are not the onset of monsoon as yet as they are just because of the extreme heat conditions. The clouds are heading in time and there does not seem to be any reason to worry as of now.

One thing that also has to be noted that the day the markets hit plus 2000 points the rupee went from 49.48 to 47.33 which is good news for the importers but not so encouraging for the exporters. Infact surprising thing was that even if the rupee strengthened to such an extent Infosys which is a major exporter of software was up by Rs.200. the next support levels that will be coming through will be at around 46.70 to 46.50 levels. Suddenly the demand for dollars from the FII’s came in with the optimism in the market that it is getting difficult to get dollars in the market. Infact the premium are running around Rs. 1.5- Rs. 2 on every dollar purchased in cash.

Lot of adjustments had to be made in the prices in most of the commodities too with this rise in the rupee. International crude prices were up by $2 but it was the rupee that did not allow it to go up on that day. Gold came down from the high of 14719 to 14180 in a day itself. That fall in price cannot be attributed to the fall in gold prices as on that day the prices of international gold were down by only $15 which does not equate to a fall of Rs. 500 in the prices of Indian gold. It was because of the rupee we witnessed such a huge fall in gold prices. It was the euphoria that made most of the commodity prices to come down as the prices had to adjust with the international prices with respect to the rupee. The fundamentals are not yet in place for the commodity prices to react as of now. As I said earlier that when the rains set in the new fundamentals will be in place then. But please do not be under the impression that the dollar has weakened. The dollar is still holding strong against all the other currencies. The movement in the rupee was plainly because of the demand from the FII’s to make fresh investments in India. It does not make a major impact on the dollar. Dollar itself is giving a new opportunity now to trade and make some money out of it. If you can trade dollars on mcx then I can suggest a trading strategy of buying dollars with a stop loss of 46.01 on closing basis and keeping targets of around 52.10 to 54 which I guess can fetch some good money with a minimum loss. If you cannot trade on mcx then you can buy dollars in cash too. It may take some time for the rupee to make this movement but it will be worth the wait. However disturbing it may be that the rupee will weaken but the fact cannot be ignored completely. It will be the dollar that will be making a turnaround at that time and hence this will affect the rupee too along with all the other world currencies.

MARKETS RANGE BOUND TRADE SWIFTLY..AND OFCOURSE SAFELY...

With elections over now when you will be reading this newspaper you will be experiencing the game of seats tally and parties hopping from one party to another and the mad scramble to form the government. What is really interesting to see that all the parties are so confident of forming the government as if each of the party is the last straw that can save the ship to wreck? The whole situation will be like a box of crabs wherein if anyone tries to go out of the box it will be pulled down by another. But what will be the last decision will obviously be seen when the new government is formed. Whoever forms this government pray that it stays and runs for another 5 years.

As far as the trading goes right now the hot market is the betting on the politicians of who will win or loose, who will become the prime minister or who will quit politics. Bets have been running high and who says that speculation is only limited to share and commodity markets only.

Today when I picked up the pen to write the article I faced the dilemma of which commodity to pick up as there is no major commodity that can be written on as the fundamentals that I put in will not be valid for a long time to come. A rain here in there and all the fundamentals hold no ground.

Right now the prices have been in a very narrow range as no new tops or bottoms are being breached. With prices in such narrow ranges positional calls can be decided only after the first rains hit the country. This week I have decided to put in the ranges of most of the commodities and will let you decide which way you want to trade. With the highs and lows that I will put in if either one of the figures are breached and if the prices close above or below that figure for minimum of two days then the trend for the next 3 months will be in sight.

Ncdex :
Chana (jun-09) high 2536 low 2258
Castor (jun-09) high 525 low 486.20
Chilli (jun-09) high 5015 low 4750
Guargum (jun-09) high 4015 low 3641
Guarseed (jun-09) high 1935 low 1745
Jeera (jun-09) high 12615 low 11480
Maize (jun-09) high 975 low 838
Pepper (jun-09) high 13925 low 12565
Soy oil (jun-09) high 530.50 low 478.90
Rapeseed (jun-09) high 554.50 low 508
Sugar (jun-09) high 2651 low 2272
Soybeans (jun-09) high 2882 low 2570
Turmeric (jun-09) high 5796 low 5113

Mcx:
Aluminium (may-09) high 82.95 low 64.50
Cardamom (jun-09) high 767 low 685
Copper (jun-09) high 250.80 low 210.15
Crude (jun-09) high 3025 low 2496
Gold (jun-09) high 16053 low 13906
Lead (jun-09) high 83 low 61.50
Nickel (jun-09) high 676 low 542.50
Silver (jul-09) high 24325 low 19951
Zinc (jun-09) high 83 low 62.65

For those following the equity markets
Nifty will range between the high of 3829 and low of 3168 which depends on the new government coming in power and their stability and the rains?

All the fundamentals will now change as the moves that had to come till now in the prices are over and the new trends will be set in another 3 months time. One thing that has to be observed is that all the agri-commodities have their open interest set in the month of June which itself is evident of the fact that all the commodities are waiting for their moves after the first round of the rains set in. Commodities apart, even the equity markets have their eyes on the rain which will also decide how the sensex and nifty will move. God forbid if the rains are not good then even the new government that will be formed will face tough times with the inflation and also risking itself to a fall.

I have been looking at the satellite images since last one week and the way the cloud formations are coming in the rains are coming in at the right time with a maximum delay on 1 week from the normal time. After the first rains are set in I will be visiting the places to have an idea of how the crops are and what is the flow of crop sowing in the villages. This itself will be a process of minimum 2 months but that will give the concrete idea of the crop situation. Because no trader will take the risk of taking a position and risking it against the rains to take a big hit with stop losses it will be advisable to currently shift to very short term trading instead of positional trading. Intraday will be very volatile so please be careful with your stop losses. There is no harm in getting scared as it will save you lot of money.

WINNING STRATEGY NOW- SHARPEN YOUR WEAPONS….

First to give you some news which no doubt is old but something that is important to know. The President of America Mr. Obama has declared that companies in America will no longer enjoy tax benefits if they outsource their jobs to Bangalore. This is a big reason to worry which the call centre owners say that they are not worried, but why would the American companies outsource their jobs in India anymore if they do not receive any tax benefits for it. The call centre at a time was the biggest employer of the youth population in the country. They have no doubt revolutionalised the job market, and infact they have given the opportunity to even the people who even being so qualified did not have a hope of getting a decent job and supporting their families. But this announcement will definitely create some panic in the job markets as well.

Coming back to the commodity markets now let me start with this, a loser is someone who puts down his weapons in a fight, but a fighter is the one who is ready to attack when the right time is in and wins the battle. Something similar is happening in the markets now. The markets have become very volatile for the time being and I have been seeing people really getting shaky with their current positions. Even though they are on the right side of the market they have been taking big hits with their stop losses being hit first and then the targets coming in sight. But I would say, that do not even think of putting down your weapons for now as there is a major battle to be won. Such a person is called a strategist. This is the time to take some rest, sharpen your weapons and be ready to battle out in the market. The right thing to do now is hold still wait for the right opportunity and then make your move. Have you ever seen a lion catch its prey? It waits for hours together and keeps a constant eye on its prey and when the right time comes in it strikes and has its food. The commodity markets are in the same situation now.
Let’s look at few commodities and let’s analyze the situation of what fundamentals they have and what moves they have made. First, the sacred obsession of the Indians- GOLD.
There is a rumor going on that China has been buying gold to increase its reserves. There had been certain newspapers carrying the news that the gold reserves of China have reached to 1054 tons from 600 tons. Now for you to know China has not been importing any gold and whatever reserves that they have been building up is from their own production. Believe me China is in no position to afford gold at these prices and China’s economy is in trouble but it never shows that it really is. Going by plain logic any person with a simple knowledge of basic economics can say that a country which is so dependant on exports cannot progress with the same speed if it does not have demand for its goods. Had the economy been good in China, they would not have faced loss of employment at all. Even a country like India that is an agricultural economy has faced job losses and economic growth slowing down, and then China cannot be an exception. China has become a hot favorite of the bull players who really want to ramp up the prices and blame it all on China demand; let that be gold, silver, copper, zinc, nickel, soybeans or even corn. Look back in articles of last 5 years you will realize that whenever any major moves have come in the prices of any commodity, the first reason that you will have is “China is buying”. The actual reasons may come in later on after days, saying that this was the real reason why the prices of that commodity shot up. Question is has any of the analyst really given a concrete evidence of how the economics of China are moving? The answer is a big “NO”. China has been the most secretive country and it will not reveal that they have problems because if it does then the whole world will panic, because China today is at no.1 position as far as the BRIC (Brazil, Russia, India, and China) nations are concerned. No country will like to portray that they are weak. Take the example of North Korea, which is facing such of economic turmoil and their people suffering but yet they display their military might and say they are strong.
The next commodity to look at is cardamom. Has anyone realized why cardamom prices have shot up so quickly for no reason? There is a reason behind it and I guess very few people are aware of it. First thing India does export cardamom but that is to the extent of only 5%- 8%. The crop in India is not damaged at all, but does anyone really know that cardamom is a major crop of Guatemala which is situated in South America close to the border of Mexico. Guatemala accounts for 60%-80% of world cardamom exports. There had been a major earthquake last week with the intensity of 6.1 on the Richter scale, which is quite big but none of the Indian TV news cannels reported it, except for the international news channels. This had created a panic in the market that India will now receive export demand for cardamom. But the real reason was much before the earthquake. The crop in Guatemala is damaged badly not because of earthquake but due to the weather conditions out there. Now which reason will you stick to take a long position in the market, the earthquake or the real crop damage?? Information is the key to trade the commodity. If you have the right information and have made your confirmations then stick with that commodity and you will end up making money. Following a rumor will always make you end up with losses because you will know when the player will enter the market but you will never know when they will exit and you will never be informed when they do. Trading on panic is profitable for a very short span of time, and if you are lucky enough you will make some profits.
The rains will be the deciding factor now for the commodity prices to have a perfect trend now. The rains should be in by the end of may and that should decide what is going to be the status of the sowing. I would urge the investors that if you are looking at taking some major positions in the market then the right strategy will be to hold on to your weapons wait for the trends to set in take the right positions. I know I have been saying this a lot to hold on and then take a position, but I do not want you to loose money if there is no trend in the market. I believe that the market is very volatile now and trading now will be based on your strong luck and not on strong fundamentals.

SWINE FLU ON COMMODITIES

Vote for your future…vote for safe trading …vote for profitable trading…

Voting is taking place all over the country now, and I have voted for the right party that I think will make my future secure in this country and even my hard earned money. So I wish that even you make a wise decision and vote for the right party and make your future secure and even the future of your dear family. Here we have the elections running in our country and the cricket IPL going on in South Africa. What is interesting to know that we Indians out here are watching the IPL on the TV and the NRI’s out there are watching the elections updates on their TV? So even the Indians sitting out of our country are concerned of which government is going to come into power, because even they are worried of how their hard earned money is treated in India.

That no doubt is a cause of concern, but what is new concern now is “SWINE FLU”. This year the first swine flu outbreak was reported in Mexico with 159 already confirmed dead. And it is being spreading very rapidly. This is actually the 4th outbreak of swine flu in the world. The first outbreak was in 1918-19 which affected 1/3 rd of the world population which was around 500 million people and caused around 50 million deaths. The second outbreak was in 1976 in America which was controlled not immediately but with a delay of 9 months by vaccination where almost 40 million Americans or 24% of the population was vaccinated. The third outbreak was in 1988 again in America but that was not a major outbreak as such. And now in 2009 we again have this coming in and it starts from Mexico and the earliest known case was of a 5 year old child.

This pandemic has created a sort of panic in the world markets. As soon as the news hit the TV screens the commodities were the first to react. Soybeans on CBOT collapsed during the electronic trading session collapsed from the high of 1057.50 to the low of 975.25 within 3 days. CBOT corn collapsed from the high of 395 to make a low of 375 in 2 days itself. CBOT Wheat in 1 day itself made a high of 550.4 and a low of 519.4. Because all these commodities some or the other way are connected to the pig farming industry. But what about crude? Let me mention that too it came down from the high of $51.75 to a low of $48. Now why would crude react in such a manner is a good question. Crude oil is indeed connected to all this panic. When a major pandemic breaks in any part of the world there is always a general fear among travelers to go to any part of any country. When such a thing happens the first industry to be affected is the airline industry which is a major consumer of crude oil. At these times all the commodities get a bit wild and become a bit directionless. The tops and bottoms that are formed are completely illusionary and there is a high possibility that you may be tempted to trade these moves but let me tell you they are actually traps which may cause you major losses with your stop losses being hit bad. That’s why I will advise you to stay away from the market for sometime and wait for a week’s time for the swine flu paranoid to end and then start trading.

This week it would be a bit difficult to give any levels for trading any commodities. What ever levels I give the stop losses levels will be very high and the risk involved would also be big. If you have the patience of holding on for sometime and wait for clear trends to come in it will make you comfortable, as you will not loose money by not trading.

GOLD

A lot is being said about gold this month. If you pick up any newspaper for last one week you will see all of them saying the same thing in a different manner on different day. Let’s run through the headlines.
“Gold prices rise as India starts importing gold again”
“Gold prices shoot up Rs. 400 because of buyer’s interest coming in again”
“Gold prices rise because of demand of festive season of Akshay Trithiya”
“Gold rallies for another day again”

With so many headlines making news everyday, I could not come up with a decent headline, so I said to myself why not allow my readers decide what headline to have for gold? I am pretty sure that when you read those articles there would not be any difference in the matter of the article. It would be like some daily update saying that the prices of gold have shot up but no one to give a decent reason why?

For last two months India did not import any gold as there was no demand for it. Well I would say that India did not import any gold because India being the largest importer of gold was actually selling scrap gold in the market. By scrap gold I mean the gold that is fabricated into jewellery. Indian’s were simply not comfortable with the prices and they are of the belief that gold prices are too expensive to be bought at these prices. I would like to ask you this question, are you ready to buy gold at these prices? I guess most of the answers will be a big “NO” except if you have some marriage in your family you will be forced to buy it. Even if you think of buying gold on the day of Akshay Trithiya, how much will you buy at these prices? I bet if you would be going out to jewellery store and pick up gold it won’t be more then 10 grams. Believe it or not we Indians are the biggest bargainer in the world. I know that is an exaggeration but even if it is, isn’t it true. Wouldn’t you like to buy anything at a discount? Don’t we go to any store and start bargaining to even save a rupee and squeeze the maximum for the hard earned money that we make? And why not if we make the money with so much of efforts then why not bargain? Go to any store that has discount more than 50% and it will be the most crowded place, because it is always the mentality of the buyer that he is always paying a higher price for whatever he is buying.

Coming back to gold now, there has been lot of confusion in the markets right now of where are the prices heading. How much ever anyone tries, you cannot catch the prices of gold at its rock bottom or sell it at the peak. For last two weeks gold has been in the range of $865- $905. As I had mentioned in my previous article of gold that the level of $885 is a very crucial level for gold prices and this was broken on 6th April to make a low of $865. Now if we go with the physcology of the market once a major support is broken in the market the market gets a bit panicky and the market looks to settle down with the shock of it. Once the bulls and the bears of the market settle down then the prices start a new move which give the market a new environment to decide the prices. Right now the prices are within a range of $905 - $865 and it will take time for it to give a break out. I guess a little patience at this point of time will be highly profitable.

Right now a lot is being speculated that India, China and Russia are planning to increase their gold reserves. But that is not something that can be believed. With the current economic situation it is not possible for any of this country to buy gold. It is basically a panic that is being tried to be created in the market to support the prices of gold as there is no other reason that can now get the prices of gold shooting up, except if any war breaks out in any part of the world. There are people who compare the crude oil and gold ratio to make their analysis. But tell me something would anyone really trade both crude and gold based on the ratio. Crude itself is still struggling to find a bottom so where would you get a ratio out of it. Russia financially is not in the position to buy gold as they are already facing it difficult to run their economy with crude prices at such low levels. Crude oil and natural gas is the major foreign exchange earner for Russia. Do you think china is in such a position that its economy is not affected by any of this economic turmoil? Of course it is. China is dependant on the US economy to run its economy how much ever they deny this fact. If that was not the case then china would not have faced any economic trouble at all. But India is unique in itself. India is still an agricultural economy. So it should not be affected by the economic crises that badly the was china or Russia was. It was only the panic that had made the stock markets in India to crash and not the fundamentals. This was the same statement that was made my Mr. Anand Mahindra in a TV interview about the Indian economic situation. India’s economy is very much dependant on monsoon, and believe it or not even the international markets follow Indian markets based on the monsoon situation in our country. India does not need to increase its gold reserves because if you look at the cash reserves of the RBI you will be completely surprised.

The gold prices are going to take time to find a proper trend as of now. I would say it is still not the right time to buy gold, as it has to find a proper bottom to settle down. Hold on to your money for now and wait for it to give a sure signal. Till the time the chart does not show a decent reversal pattern it is better to stay away from buying gold. Once the pattern is confirmed then even if you buy gold at a bit of higher prices you will be rest assured that they will be stable and rise further. During depression gold is the last commodity to fall and that is what is happening. It will take time to stabilize but it will for sure.