Markets and Terror

What happened was sad. But unfortunately such actions of terror are created by the society itself. Though extreme, terror is human expression of revolt. Terror is a mass psychology event as it influences masses, creating panic and despair in them. One of our members mentioned that he was sorry about the state of the world. Though painful, social mood is not just expressed in markets, it’s also expressed through politics, war, terror and in many other forms.
Terror could be explained from a social mood perspective (negative mood) and from cycles. International battles, wars and terror activities are cyclical too. And social mood has a strong bearing on economic cycles, rather they drive them. Extreme terror actions and war’s historically suggest extreme social mood and reversals rather than otherwise. We see more wars and terrors at market bottoms than near tops.
Though the large cycle on terror unfortunately continues to point up, the current terror action in INDIA, comes at a time when we are looking at equity market intermediate bottoms. How this shameful event translates in market tomorrow remains to be seen. But any bounces on market (if any) will not be a classical Mumbai resilience, but extreme social negativity which coincided with a broad market low.
GOLD a crisis commodity will also be effected by the large cycle of terror or negative social mood. But the current upside on GOLD SPOT India has weak links with the onging activity. We compare two Gold assets from different regions, viz. GOLD spot India against GOLD international. As the local financial crisis gets mixed with a large scale terror violence in the city. But GOLD India spot has been outperforming GOLD international spot since MAY 2008 and seems to be heading into a cycle performance high against it’s international peer.
This suggests that local GOLD performance maybe a weak proxy for start of a sustained uptrend on international GOLD prices. The signal might be premature. The performance cycle between local and international prices (illustrated) of Gold suggest that INDIA GOLD may find some tough resistance ahead at INR 13,362 prices. Till prices break the respective level, we will continue looking at the current bounce back as a counter trend bounce on Gold INDIA spot. Regarding international GOLD spot, prices moved up as anticipated to our projected targets near 800 levels and higher. The bounce back seems incomplete and could see XAU pushing higher till 850 levels.
Silver on the other hand held above our anticipated supports and a support at RSI 40, NON CONFIRMATION and extreme oversold momentum, all suggest that our SILVER positive case continues to hold firm. SILVER INDIA spot also has hit a key primary channel support and has made a weekly KEY REVERSAL bar. XAG push up above dollar 10.5-11 would give us further positive price confirmation. Platinum, ZINC and Steel prices last week action was also as anticipated.
On the large time frame, if GOLD dollar 3000 still seems a distant projection, look at what a handful of boat terrorists can do to a city. A multifold projection of this event and you will understand the respective projections on International GOLD. The price of the crisis asset is linked with an impending large degree social crisis that may manifest in an alternate form or as a war. This will bring back to life the famous words of Edward R Dewey, “Till humans live, they will speculate and war”.