Today’s relief rally was based on what relief really?
IMF refuted the rumor of Italian bond purchase and things everywhere remained same as ever. But still Dow was up 300+ points; Crude up about $ 1.50, Gold reached $ 1722. All based on “hopium” .
Will it lead to a new high? Not likely. I think we will reach a short term top around Dec. 5th, before we see weakness again. But again, I expect the weakness to be limited. Have you noticed that stock markets have diverged from Euro to a great extent? When Euro dived to 1.32 level, stocks did not reach new low.
I do not think the October lows will be broken.
Crude on the other hand has broken the correlation totally.
I am disappointed with the price movement of gold. If gold cannot decisively close above $1711 tomorrow and close the week above $ 1730, then we will see further weakness in gold.
The world economy will muddle through. The situation today is not the same as it was in 2008/9. The bears are expecting a huge drop every day, but it is not going to come. While a Santa rally is now unlikely to materialize, it is not going to sink to the bottom either.
I shall be calling out the opportunities for safe trade as I see them. At this point of time, with volatility so high, it is better to wait for good trading opportunities and may be better to let go few chances. Risk reward ratio is not very good at this moment.
Be safe out there.