GENERAL MARKET CONDITIONS

It’s all about the US dollar in metals and energies. Metals and energies are being dictated by the movement in the US dollar and not by fundamentals. As long as the US dollar continues to fall metals and energies will trade with a firm bias. Crude oil prices are at $115.0 and could be headed for $125 if it is supported by a weaker US dollar. Year-on Year returns in crude oil is at 86.99% while gold, silver and natural gas have given over thirty percent returns. It’s natural for investors to invest more in these commodities without looking at the fundamental value. In the short term these committees will rise and give good returns in investors.

In 2009, I do not expect such higher returns in commodities to investors. Crude oil is at $115, will crude oil rise to $207 (80% of $115) by April 2009. I do not think so. If crude oil were to rise to $207 by April 2009, we could be nearing a global recession and not just a US lead recession. Central banks will run out of options to control inflation as interest rate cuts will not work. The rise in crude oil and the fall in the US dollar is temporary which can last another six to seven months (under the best case scenario). Day traders and jobbers can trade in either way. Long term investors need to be careful and should buy far dated put options as an hedge against a fall.

Base metals are being supported by falling LME inventories. If food prices continue to rise, the global savings rate will fall, and there will be less retail consumption. Less retail consumption will not be evident now but over the coming years. If a rise in prices of essentials outpace salary hikes, the axe will fall on non essential consumption and lower demand for base metals.

COPPER -- MAY FUTURE -- INTRA DAY PIVOT: $404.0

Back to square one. Copper has to break $404-$406 zone for $421 and failure to do the same will result in $382 once again.

NYMEX CRUDE OIL -- FUTURE -- INTRA DAY PIVOT: $112.20

Intra day as long as $112.50-$112.80 holds crude oil will target $117.10 and $119.60. Remain on the sidelines.

INDIAN RUPEE (USD/INR)

Falling US dollar and higher global stock markets will result in sellers at higher prices for the Indian rupee. Tomorrow banks are closed due to “Mahavir Jayanti” which could result in position squaring and rebuilding ahead of the long weekend. All eyes will be on the weekly inflation numbers. If inflation rises further, there will be pressure on the rupee to appreciate. Unless the rupee closes over 40.08, it will appreciate to 39.80 and 39.60 in short term.

MCXARUN
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