China isn't the only country in Asia

Part of the discussion surrounding the remarkable rebound in commodity prices this year has been the sustainability of these moves given the diminishing economic leverage of resource consuming China after woefully slumping back on its growth with more than expected intensity resulting in a lack of substance finding strength in the upward move.

The boom created in resources over the past two decades have largely stemmed from the massive infrastructure spend started by the Chinese government in transitioning its country's economic policy from an obsolete communism system into a one operating by the mechanisms of the free market.

China's transformation into an economic powerhouse has meant the spotlight not only being shone on its achievements but also on the scrutiny regarding continuity of this existing feat due to the scale of enormity attached to it.

In the last three years alone world leaders have grown ever more skeptical over China's ability to continue on its illustrious growing path when considering the latest and extensive overhauls policymakers have been introducing to the system in order to shield the nation from unwanted economic consequences such as debt traps.        

The world's biggest miner is looking beyond China for buyers https://t.co/kk4gVSpK6K pic.twitter.com/L00spSb5rQ

— Bloomberg Markets (@markets) August 19, 2016

Many global miners have been gutted by the development after initially following projections that indicated the demand for commodities would remain constant when peaked thus creating a reason to expand production capacity. Fast forward a few years later and these same miners are scrambling to consolidate their balance sheets by cutting back on burdensome debts and unprofitable operations in an effort to keep investors at bay.

However as the situation in China worsens commodity prices seem to get more resilient suggesting correlation between the two detaching with the latter branching into new forms demand to satisfy it's supply.

The pace of China's consumption of world resources has almost overshadow the other pockets of opportunity with India the likely front runner to overtake the Sleeping Giant as the new growth story. Unlike the remnants of conformity in China's economy, India has poorly functioning infrastructure and a disparaging wealth gap between the rich and the poor but bundles of potential when it comes to improving the lives of its people which numbers 1.3 billion!!!

Based solely on comparable populations, India could very easily compete at the same height as China once did.

Whilst drifting South of China we find countries who've laid in the wings for many years being easily overlooked due to size of their economies however when combining each nation's economic activity one is able to envision the scope of potential that could very well be where commodities find their demand.

As much as China's rise in the global economic ranks has yielded great strides in distributing the powers more fairly amongst the world one aspect has been forgotten. The enormous strides made by the Asian continent has translated into an ability to compete economically with the other continents such as Europe and the United States.    

Will the resignation of India's central bank governor weigh down on confidence?

Debate was set into action over the weekend when Central Bank of India governor Raghuram Rajan released a statement to his staff saying he would not be staying past the end of his first three year term that ends in September.  The move left investors wondering over who will possibly replace the former Chicago University professor who has been hailed as a beacon of light in a world of central bankers grappling to arrest rapid economic deterioration.

Rajan put to bed rumours of his unhappiness by indicating his reasons for leaving were based on his fallout out with government officials most notably after receiving a backlash of criticism from members of Narendra Modi's Bharatiya Janata Party (BJP) who called into question Rajan's true identity as an Indian citizen pointing to the fact he continues to hold a US Green Card and frequently visits the country to keep his residence active.

Although they conceded that Rajan's policy of high interest rates did attract much needed foreign investment as well as contained inflation that had gotten out of control, it also placed pressure on small businesses who aren't able to service debt with high levels of interest payments.

Yet between blurred lines it seemingly looks evident that Rajan's resolute promise to shape up Indian banks was the real reason to have him pushed out the job. The Central Bank of India set a deadline for banking institutions to "clean up"their balance sheets by making provisions for bad loans of which the most affected being stated-owned banks.

Rupee falls after RBI Rajan's surprise move to quit in September https://t.co/POpVu4Aj6m by @neha_5 and @Suvadc #Rexit #Rajan

— Reuters India (@ReutersIndia) June 20, 2016

The words "stated owned" says it all if we were to assess the success of bureaucratic administration of strategic organisations by government who find the convenience of using such enterprise as a means of political payback in terms of employment for loyal friends than meeting the true objectives.

At the end of last year I penned a piece highlighting the potential economic prosperity that beckoned for India with the promises of newly installed prime minister Narendra Modi who offered a lot if he could prove successful in passing through the reforms needed to elevate India's growth engine relative to its Asian counterparts China.

However as the clouds of doubt draw nearer this latest development delve's a heavy blow on Modi's aspirations whose government is increasingly foreshadowing previous regime's who instituted the same control measures to serve their own selfish ways.

The independence of a nation's central bank cannot be stressed enough when comparing the calamitous situation advanced economies find themselves in due to the lack of proper government policy aimed at correcting economic damage whilst opting to utilise the tools of "free money" to artificially hide the cracks of failure and then listening to the voice of reason from a policy maker such as Raghuram Rajan who couldn't be swayed to push a political party line by remaining unbiased in talking the truths that may at times been inconvenient yet needed to be heard and fixed.

It is indeed a sad day for proponents of monetary economics who've lost a champion of reason and replaced with a never ending trend of government meddled interference.

Travelling Technicals with Global Indices: Nifty 50

If you're an avid fan of kung fu movies you'll recall the title "Crouching Tiger, Hidden Dragon" that became famous world over in 2000. But apart from the name of the film I've always thought it to be an appropriate way to describe the economical growth spurt we are seeing amongst two of Asia's fastest growing economies namely China and India. I've dealt with Chinese equities a while back so today's focus is going to be on the Nifty 50 of India.

India has roughly the same population size as China however the steadiness with which they have grown in terms of economic development is world's apart from their counterparts who have set the new benchmark with the speed and adaptability of progression in less than 25 years. However there remains pockets of opportunity for India to be had as the Sleeping Giant battles to regain the height of the growth percentages it once amounted pre and post Financial Crisis.

Probably the most recognisable brand to foreigners listed on the National Stock Exchange of India and featured in the Nifty 50 is the Tata Company that lists a number of different enterprises such as Tata Motors, Tata Steel, Tata Mahindra, Tata Power and Tata Consultancy Services. One of the objectives when listing a company is to gain international reputation with foreign investors which I think Tata has done well. With that said more needs to be done with other bigger companies listed to expose themselves to foreign investors in an effort to raise more capital and diversify the sources of funding, a lesson that can be learned from the likes of Tata Co.

Besides Tata there is also the likes of Bharti Airtel, a global mobile telecommunication that has amassed a large base of subscribers locally in India as well as across the Asian continent. The need for communication has grown rapidly throughout emerging markets with India being no exception.

Let's get straight into the charts:

Monthly

An exceptional bullish charts that looks close to touching the support line of the long term uptrend, the index has followed the wider trend experienced globally of retracing back some of the mammoth gains accumulated in yesteryear. The prominent feature that separates this chart from the rest I've done analysis on is the fact that price has exceeded the highs made in 2008, 2010 and 2013 that formed solid resistance. Just this fact alone has the potential to open the upside to new all time highs being recorded with the latest occurring in early 2015 not so long ago.

An ascending triangle formed over a protracted period of time with the breakout happening quite some time ago meaning that the current trend has a degree of continuity in it if it hasn't been broken up yet. Both the lateral and uptrend support may provide the confluence needed to get the bulls fired up to surmount a decent effort that could see the previous highs of 9000 being surpassed with an ultimate target 10 400. The stochastic has been skirting along the oversold region for some time now with signs that its looking ready to bolt upwards which could be the cue for the bulls to enter the fray.

The RSI has trended downwards for a number of months and appears to be breaking the downtrend signalling the end of the downward momentum, added evidence that the buyers are coming to the party to take things higher.

Daily

On the daily we see a downtrend firmly in place since October 2015 perhaps even longer if you consider the lower highs towards the left of the chart. The price lies underneath the 50 SMA with the recent retest of 7600 being critical for taking things higher. As you can see that hasn't happened with the stochastic currently pointing down.

My thinking here is we could begin to see the formation of the right shoulder of an inverse Head & Shoulder pattern forming. This plays into my previous bullish analysis of the monthly chart by lining up the price movements that could occur before we see the next up move. If we were to see a pullback on the chart I would speculate that it would be limited to the lows of the left shoulder which isn't that far from where we are presently.

We would then need to see a rally back to the top of 7600 that is suffice to breakthrough overhead resistance and onwards towards the next resistance level which I think would be the 50 SMA. Overall it feels as if the chart is building into something explosive but we can't be for certain yet so its best to monitor it on an ongoing basis.

That wraps up another interesting edition of Travelling Technicals, I hopefully get to hear from you soon as I really appreciate all the feedback I've gotten so far. If you would like to contribute or comment on the blog please contact me on cadetrader@gmail.com