STOCKS
Bears continue to rule the stock prices for now. Near term looks bearish for major stock indices. Dow, Dax, Nikkei, and Shanghai all trade in the negative and could decline some more before pausing within the ongoing correction.
Dow (24583.42, -2.41%) and Dax (11191.63, -0.73%) continued its decline further in yesterday’s session. Dow looks bearish towards 24000-23700 in the near term and Dax could also continue to decline towards 11000-10800 levels in the near term.
Nikkei (21443.72, -2.94%) and Shanghai (2555.41, -1.84%) have also fallen and look bearish for the near term. Shanghai may test 2450-2400 levels in the near term while Nikkei is headed towards 21000-20800 as mentioned yesterday.
Nifty (10224.75, +0.77%) is the only one among the other mentioned indices that saw a slight up move yesterday. But the fall could not be over for Nifty yet. While scope of further decline towards 10000 is still on the cards, a corrective upmove could be seen capped at 10400 on the upside.
COMMODITIES
Commodities are all mixed. Brent and WTI are almost stable and are trading above important near term support levels. Gold on the other hand is trying to attempt a rise above immediate resistance and if manages to do so could set in a bullish rally for the coming weeks. Copper continues its sideways consolidation.
Brent (75.60) has important support zone of 72-74 below current levels which seems likely to hold for the medium term producing a bounce back towards 78+ levels soon. Only a break below 72 would raise concerns of a near term top in place with a possible bear market to have set in for the longer run. We would wait for confirmation from price action near 74-72 support region.
WTI (66.32) is almost stable. 64-66 is an important support zone for WTI and is likely to hold in the near term. Only on a break below 64, we would consider any bearish possibilities for the longer run. For now, preference is for a bounce from 64-66 levels.
Brent-WTI (9.27) spread has come off further from 9.83 seen yesterday. The spread looks bearish for the near to medium term and could target 9-8 levels soon. This could be bearish indication for the Crude prices.
Gold (1239.20) is trading just at the crucial near term resistance at 1240. If this holds, a dip towards 1220 could be seen over the next couple of sessions; else a rise above 1240 could trigger medium term bullishness targeting 1250-1270 by the coming week.
Copper (2.7370) has come off from levels near 2.80 and could now test immediate support near 2.70. While the support holds, the price may bounce back towards 2.80 in the near term. Overall the channel is trying to tilt to the downside within the narrow 2.70-2.80 region.
FOREX
Watch crucial levels on Euro and Dollar Index near 1.14 and 96.3 respectively – the ECB meet today could be crucial. USDINR has supports in the 73.10-72.95 zone.
Euro (1.1411) saw a low of 1.1379 yesterday, thereby dipping below support on 3 day and weekly candles. We need to wait and see if this support breaks decisively or not – the ECB meet later today might well be the decider on that. If the Euro closes the week below 1.14, it could be a bearish indicator for the near term.
Dollar Index (96.27) rose above the resistance near 96.30 on 3 day and weekly candles to see a high of 96.53 yesterday, but is currently trading below the resistance. On weekly, 3day and daily line charts, resistances seem to have been broken already, which is a bullish indicator for the near term. However, we should wait for the ECB meet later today and see if the Dollar Index closes the week above 96.3 tomorrow, before inferring further bullishness.
Dollar Yen (112.09) dipped below support at 112 to a low of 111.82 but is again trading above that support. If this support breaks, then there is lower support near 111.25 on daily candles. As long as Dollar Yen closes the week above the 21 weeks MA at 111.47, the chances of a near term rise towards 114 will remain intact.
Euro-Yen (127.91) looks bearish towards support near 127 on 3 day candles, which it could test sometime next week. Below 127, there is some support near 126.0-125.5 on weekly candles.
Pound (1.2889) has fallen faster than we had anticipated with a test of support near 1.2800-1.2775 looking likely in the next week itself. Below 1.2800-1.2775, there is lower support near 1.27 on daily line chart.
Aussie (0.7077) could continue to see some ranging between 0.715 and 0.705 in the near term. Note that 0.705-0.704 is a crucial long term support level, which if broken, could be very bearish for the Aussie.
Dollar-Yuan (6.9425): Watch the 6.945 level (previous high of 22nd Oct). A rise above this level would be bullish. While below that level, next 2-3 sessions might well see a downmove towards 6.932.
Dollar Rupee (73.155): While above 73.10-72.95, a rise towards 73.50 in the next 1-2 sessions is possible. Euro weakness and support in Brent price could be possible negative factors for the Rupee.
INTEREST RATES
Watch out for the ECB meet today. Given the European Commission’s refusal to accept Italy’s budget proposal yesterday, this might be one of the major points to watch in the press conference after the meet.
The US 10 Year (3.11%): Exactly as per expectation, the US 10 year yield has moved lower towards support near 3.10%. It will be important to see whether 3.10% holds or breaks – in case of a break, the yield could even move down towards 3% in the next couple of weeks.
2 Year German-US Spread (-3.47%) has risen from support near -3.50% and could now face some resistance near -3.45%. GOI 10 year yield (7.8716%) saw a low near 7.8287% yesterday. This has raised chances of a further fall in the yield towards 7.80% by Nov.
German 10 year yield (0.40%) has been falling after testing 0.577% in early Oct and could test support near 0.35%-0.30% in the near term. A break of 0.30% (if it happens) would be very bearish. Watch out for the ECB meet today.
Keep a watch on the VIX (25.23) which has moved up from levels near 11.61 in the beginning of the month and has seen highs near 28.84. If it continues to rise, we might see a rise in bond prices and consequently, a fall in yields globally.
