Excerpts from CNBC-TV18’s exclusive interview with Ray Barros:

Q: What is the Sensex chart telling you after the not insignificant pullback?

A: Relative to the severe downtrend, it has been quite a good pullback but to me this is still a bear market rally. In terms of the Sensex, a very strong resistance is coming in at about 15,300 and then again at 16,590. Those will be the two levels to watch. If we can take those levels out then we maybe hitting back to the 21,000 levels. This is a bear market rally and the markets will break from there. The rally will continue till the end of August and generally speaking bear market rallies will resume downtrends around early middle September.

Q: Is this picture consistent with the rest of the Asian charts that you are suggesting that we are in a bear market rally groove there also?

A: Absolutely and different charts obviously have different structures. The Chinese chart is the weakest. The closest to the Indian charts in terms of the Asian markets is the Hang Seng but they are all suggesting bear market rallies. We have not taken out significant resistance to say that this bear market is over. Generally speaking bottoms are not made from ‘V’ bottoms where market just hits a low and bounces. They take some time to grind out and we have not seen that. Tops are different, they tend to spike up but lows are tend to be ground out of fears and signs of a structure that suggests we have seen the bottom of the bear market are not seen.

Q: If the Sensex does go up to those 16,500 kind of levels and finds resistance there what would you expect to see then?

A: I would expect to see a pullback down to the bottom end of 12,515 and essentially it has buy zone between 12,515 and 13,200. Those levels have to hold and if we do come down here before the end of August or early September, we may still get one more rally before the break. If we just break 12,015 then the bear market has reared its ugly head and unfortunately with the Sensex there is nothing between 12,515 and 9,200. So, the next support becomes 9,200 and that is a long way away.

Q: If your call is that we are still in a bear market and this is a bear market rally, in terms of time how do you see things progressing in India?

A: If we start from the top, you had a high there at 21,200 back in October 2008. Usually bear markets last around two years, so I would be projecting a bear market bottom around October 2006. For shorter-term, the bear market rally should peter out around end August probably early September rather than end August and then the market should turn around and head south. But only at a break of a couple of closes below 12,515 will we know that the bear market has resumed.

Q: Is the bull market in crude dead?

A: It depends on what timeframe you are talking about. The crude looking at the larger timeframe, what I call a quarterly trend timeframe, will just try to find a reaction low and is going to occur around towards middle-end October between a USD 100-110 per barrel. Yesterday we saw the market break USD 128 per barrel but not convincingly. I am trying to see signs with temporary bottom; it will probably hold USD 115/116 per barrel rally. If we can take out USD 128 per barrel, we will come back down to USD 110-100 per barrel level. If those levels can hold, then we will start to see a rally back to above USD 150-200 per barrel but we are not going to see those prices before next year.

Q: So you still see this phase as a pullback or a correction phase in an overall bull market in crude?

A: In a secular long-term trend this is just a pullback in crude.

Q: What is the chart of gold looking like? Is it similar?

A: Very similar, the critical level for gold is USD 850 per ounce. We are going to have a look at it and then we are going to take that out. We are going to test USD 780-800 per ounce level and from then on will rally again. I am looking for USD 1,500 per ounce for gold as a possible top.

Q: What is the S&P or the Dow telling you out there?

A: In terms of the Dow, the critical levels are going to be the 11,820 levels. 11,800-11,900 is going to hold the Dow. It is very difficult to talk about Dow at this time of the year because the kids go on holidays and the market gets very choppy. For example, we had a nice day up last night. If we look at the statistics, we will expect a down day today. So we have this choppy up and down move and expect 11,800 levels to hold. We are going to come down and retest 10,800 where we came from and eventually that is going to be pessimistic on the Dow. We will probably reach 7,000-7,500 in two-year period. 
 

Q: Broadly speaking for most global equities, how long do you see this pullback or bullish phase lasting and by when do you expect things to turn bad again technically speaking?

 

A: In terms of the Asian markets, it is a little bit hard because most of my stuff is statistically based and I do not have enough of a database on the Asian markets to make a confident call. It is a little bit different with the US markets because they are going back to 1890s. Dow will probably rally to the first week of September and then is going to turn down. Usually what happens with the Dow is that this September pullback or September draw down tends to last till early October and then we have this seasonal rally into the end of December. I do not know if that is going to happen this year because of this pullback that we have had recently, I suspect that the seasonal tendencies will be different this year. It will rally to early September perhaps mid September and will break then. It will continue heading south until probably December when we may have a Christmas rally.