STOCKS
The hesitation to move up in most Indices (mentioned yesterday) converted itself into a big fall yesterday, bring the markets close to some of the long-term Supports we mentioned yesterday. While those Supports hold, it can be debated Whether long-term bearishness has already kicked in. On the other hand, is the market already pricing in a global slowdown is a question we ask ourselves.
Big fall overnight in the Dow (23387, -602, -2.32%), pulled down by Apple, exceeding our bear target of 25500 for the week. Now, if the 25250-25000 psychological Supports do not hold, then the market will target range Support at 24500-24250. We would expect that to hold for some time, perhaps even produce a bounce.
The DAX (11325, -204, -1.77%) also saw a large fall yesterday, and may try to retest the long-term Support at 11051 in case the immediate Support near 11300 breaks.
The Nifty (10482.20, -103.00, -0.97%) and Sensex (34812.99) also fell yesterday. It is to be seen if they now attract Buyers between 11400-250 and between 34500-34000 respectively, as we currently expect them to. SGX Nifty is quoting near 10453.
The Nikkei (21579) has seen a massive fall today, already coming close to the 21500-250 long-term Support region mentioned yesterday. We have to see if this Support holds over the rest of the week.
Strikingly, the Shanghai (2624), which has often been the loss-leader this year, but had moved UP a bit yesterday, is showing only a minor loss today, perhaps on some optimism of a thaw in the US-China trade war.
As mentioned, we would not want to turn long-term bearish yet while mentioned Supports hold. Let us see how they fare in the next few days.
COMMODITIES
Almost all major commodities have important support levels and could bounce back in the medium term. The next few sessions could see the current fall to continue and gradually stabilize before a bounce is seen.
Resistance near 72 seems to be holding strong just now for Brent (69.41). Although we saw a bounce from last week’s low of 69.13, the rise has not been able to sustain as the price has fallen back to trade at 69.41 currently. Brent weekly line chart shows a possibility of testing 65 on the downside. Immediate fall towards 67 looks likely while below 72. A break above 72 if seen would initiate a reversal, negating the downside possibility.
WTI (59.20) is trading just above support levels near 58.0-58.50 and a bounce from here could be expected towards 65-66 levels in the next few sessions.
Gold (1204.50) has fallen in line with our expectation. Immediate channel support is visible near 1200 as seen on the 3-day and weekly candle charts. While 1200 holds, Gold could rise back towards 1225-1230 or even higher in the medium term.
Copper (2.6745) is trading slightly lower today. Support mentioned yesterday at 2.65 is still holding well. The 3-day candle show a possibility of testing 2.60 too on the downside but preference is for 2.65 to hold and produce a bounce towards 2.75-2.80 again in the medium term.
FOREX
Dollar Index (97.56) has moved above 97.50 mentioned yesterday. Immediate resistance is seen near 97.80-98.00 which is likely to produce some rejection in the near term. Break above 98 would open up chances of moving higher towards 99-100 in the longer run indicating weakness for major currencies against the Dollar. For now we watch price action near 98.
Euro (1.1233) could see a slight rise towards 1.1280 before again targeting lower levels of 1.1150-1.1100 in the near term. There is scope of falling further in the near term and a near term bottom could be seen near 1.11 or slightly lower as seen in the daily line chart. Near term looks bearish towards 1.11. The support mentioned yesterday at 1.13 has broken, now forcing us to look for a fall towards 1.11.
USD/JPY (113.71) seems to be breaking below yesterday’s mentioned support at 113.75 on the daily candles and while the fall sustains it could target 113 in the near term. View is bearish for the week while below 113.75.
Aussie (0.7178) is trading just above the immediate support near 0.7175-0.7150 mentioned yesterday and while that holds, a bounce back towards 0.7200-0.7250 could be expected. A break below 0.7150, if seen could take it down to 0.71 in the near term. Note that the pair has faced rejection from the 21-Week MA on the weekly line chart and while that holds, the pair is likely to remain bearish for the coming sessions.
Pound (1.2864) has been sharply falling from resistance near 1.32 since last week. The momentum indicates the fall to continue targeting 1.27 on the downside which is a decent support and could produce a bounce towards 1.28-1.29 in the longer run. Immediate view is bearish.
EUR/JPY (127.78) has support near 127 and while that holds, a bounce back to levels near 128.5-129.0 is possible.
USDINR (72.90) is likely to range in the 72.45-73.10 with a slight bearish bias in the near term. While the pair closed at 72.89/90 yesterday, we could see a test of 72.60 today within the mentioned range of 72.45-73.10.
INTEREST RATES
Yields, in general, are quoting a little lower in the developed world.
The US 10Yr is quoted lower at 3.15% on Bloomberg as compared to 3.18% a day before. The 2Yr (2.89%) and 30Yr (3.35%) also quote lower, compared to 2.93% and 3.39% respectively earlier. If the dip sustains then we might think of 3.10% and 3.00% on the 10Yr instead of 3.30% on the upside. Of course, a trend-change will need a break below 3.00%, which is not easy.
Importantly, he German-US 2Yr Spread (-3.51%) has moved up slightly from -3.54% earlier. There is an important near-term Resistance at current level. A break above -3.50%, if seen, will trigger a significant rise to -3.40%. This is to be watched over the next couple of days.
The Japanese 10Yr (0.10%) might have broken below the support at 0.11% mentioned yesterday. If the Yield does not bounce back from here today, we may have to look for 0.08-0.07% on the downside.
However, contrary to the dip in Yields in the G-3, In India, the 10Yr GOI is quoted higher at 7.8044%, implying that the important Support at 7.75% is holding for the while. We need to see if there is a fall again today, given that the October CPI has come in lower at 3.31% and Brent ($69.46) is again trading below $70.
