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Commodities technical analysis Adam Smith Associates

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Dollar Index

The Big Fight

The US VIX has been in the news in the last few days. So right after the India VIX made its lowest reading on record, the US VIX has dipped to a low that touches the trendline of the low in 1993 to the low in 2006. In the long term history of the VIX these low points did not mark major market tops. At the same time it maybe noted that the US VIX rises higher much before such an event. So volatility was already rising into the 2007 S&P top before it happened.  On the other hand shorter term lows in the VIX have been associated with near term market corrections and therefore we may still pay attention to it. The recent low is also on the trendline of the lows of the last two years. So a rise in near term volatility from here when it happens would give us a near term correction is all we can say with this. Adam Smith Associates offers trade & commodity finance related services & solutions to its domestic & international clients. Views

Dollar Index The dollar index has formed a 5 wave decline that is overlapping like a wedge. This pattern is known as a leading diagonal and occurs in wave 1/A of a trend. So this marks a near term bottom from where the entire fall can be retraced meaningfully. Typically 38.2% up to 100 but mostly to test the wave 4 high at 101.28 close to 50% of wave A. In some cases we do get 61.8% which is near 101.74. After that wave C down is very swift. So this should be the last best rally for the dollar to 101. Nikkei The Japanese index making a new high now counts as impulsive and so it changes the markings from 2009 onwards into a 5 wave rise. We are in the 5th wave. This can have two efffects. Shorter term wave v=i can point to 20900 however the larger structure allows for a bigger move up. 5=1 is as far as 24000. Adam Smith Associates offers trade & commodity finance related services & solutions to its domestic & international clients. Views

Aluminium Aluminium - broke the neckline at 120 so the 40 week average is at 118. At the same time the pattern looks like a head and shoulders top which has pattern implications of a move down to 113. Nickel MCX Nickel prices developed a positive divergence on the RSI, and wave v of C should be finally complete. After a larger decline in A-B-C, we can expect an X wave, up, meaning a retracement of the fall if not a fresh up trend. A move back to 630-668 maybe possible to start with retracing 38.2% of the entire fall and near the wave iv of C swing high Adam Smith Associates offers trade & commodity finance related services & solutions to its domestic & international clients. Views expressed in this article are purely of the author - Mr Rohit Srivastava - a leading technical analyst. Visit www.adamsmith.tv for services offered by Adam Smith Associates Pvt Ltd