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.