Investors are advised to be cautious for creating fresh longs and on the contrary advice to book profits in any rise from here on as the market is expected to become volatile and a decline is likely early into the new F&O settlement
S&P Nifty close: 5048.60
1. The bulls have succeeded in driving prices higher which have now we have reached the minimum target area between 5,023-5,070 points (Fibonacci target if one takes into cosideration the rise from 4,531 to 4,800 and the subsequent higher bottom of 4,588 points)
2. This corrective rise has now come very close to 5,068 points (61.8% retracement levels of the fall from 5,399-4,531 points) hence one should be cautious in rallies from here on.
3. A significant short-term top is already in place or is likely this week and one should book profits around the 24th-27th January 2012 from where we are expecting a sudden bout of selling to take place.
After a brief one-day pause, the Nifty rallied smartly but covered slightly more ground than was anticipated for this week. However, it has fitted perfectly into the picture we had visualized of the market going strong into the Futures and Options (F&O) settlement expiry due this week. We advocate caution for creating fresh longs and on the contrary advice to book profits in any rise from here on as the market is expected to become volatile and a decline is likely early into the new F&O settlement.
(Vidur Pendharkar works as a consultant technical analyst & chief strategist, at www.trend4casting.com)
The commodities market in silver showed some signs of life by suddenly moving up 5.4% on 20 January 2012.
Last year, silver exhibited one of its most volatile movements in recent times with a sharp parabolic movement that saw the price shoot up from $30 per ounce to reach a high of $48 per ounce in April 2011, before crashing to end the year at $28 per ounce.
Eric Sprott, chairman of Sprott Inc and one of the largest holders of physical silver and silver equities globally, was obviously not happy with this volatility. “I have always liked silver because I look at the physical supply and demand metrics and they scream that silver should be higher. But the price is being kept down by paper silver traders who are abusing the market”, he cites in an open letter to silver producers.
According to news sources (Y! Finance), Mr Sprott had called for an action to 17 of the world’s largest silver producers to limit the sale of the metal until prices increase. Basically, he was calling for an unofficial cartelisation to control silver prices, similar to the arrangement Organisation of Petroleum and Exporting Countries (OPEC) has for oil.
Thus, in an attempt to ‘rectify’ the actions of the paper silver traders, he filed with Securities Exchange Commission (SEC) his intent to raise as much as $300 million in a follow-on offering of his fund, of which the proceeds will be used to buy physical silver.
If one reads the fine print of the SEC filing, it states: “....The net proceeds will be used by the Trust to acquire physical silver bullion in accordance with the Trust’s objective and subject to the Trust's investment.....”
So, on 20 January 2012, the silver commodities markets finally showed signs of life by exhibiting sharp upwards movement. It has gone up by 5%, from $30.6 per ounce to $32.2 per ounce? Why?
Nobody realised the significance of SEC filing until according to FMX Connect, “Today’s incredible move was the culmination of a comment made by UBS analyst Edel Tully. He stated that hedge fund manager Eric Sprott may be in the market buying spot futures in a private letter to his clients.”
To summarise the above statement, the market felt that Mr Sprott will supposedly use the proceeds raised in the follow-on offering, and use it to corner the silver market, by buying $300 million worth of physical silver, thus taking some supply off the markets which, in turn, will make the metal dearer.
Mr Eric Sprott expects silver to touch $100 per ounce by 2012 end, from the current price of $32, and believes that this decade will be defined by silver and not gold.
A concise and handy guide to turning one’s collection into investment
Nobel Laureate Paul...