STOCKS
Our caution about chances of a dip/ consolidation in most indices seems to have been well founded. Some more dip to test Supports a little lower down is possible in the near term. There is a possibility of a more robust upmove starting from such Supports later on. We have to keep a watch out for that.
Indices in China and India tested but did not break above near term Resistances yesterday suggesting that we may have to allow for a near term corrective dip or at least some sideways consolidation after the rally in November. In fact, the Nikkei (22036.05, -538.71) saw a sharp decline, possibly triggered by a sharp fall in Dollar-Yen.
The Shanghai (2665.96, +11.16, +0.42%) is crowding into Resistance at 2670. It might need to dip a bit towards 2600 to make room for a sustainable break above 2670 later. The Nifty (10869.50, -14.25, -0.13%) has dipped a wee bit and might come down to Support at 10700 from where a more successful attempt to break above 11000 might take place.
The Nikkei (22036.05) fell sharply yesterday instead of providing a bullish confirmation and may now dip towards 21600 before it once again attempts to move higher. NOTE, of course, that a break below 21600 (not envisaged at the moment) would turn out to be very bearish. Let us see how that shapes up.
Even the DAX (11335.32, -130.14, -1.14%) saw a good dip and might need to test long-term Support at 11200 before it can embark on a more sustainable upmove towards 12200.
In line with our apprehension of a consolidation/ dip, the Dow (25027.27, -799.36, -3.10%) has seen a sharply profit-taking fall, scaring everyone with a massive drop as doubts are raised about the US-China trade truce and about a possible growth slowdown. However, we see good Support at 24750 with good chances of a rise towards 27000 in the medium term. Bearishness needs a break below 24500 (at least) and 24000 (preferably), which may have a probability of less than 50%.
COMMODITIES
Commodities are overall stable. Gold, copper and silver have some room on the upside for the bear term but could face important resistances that could pull them down by the next couple of weeks.
Watch out for resistances on Gold, Silver and Copper at 1260, 15 and 2.85 respectively from where a fall is possible in the medium term.
Gold (1241.50) has dipped a bit after testing almost 1250 yesterday. Now 1239-1240 is the support and while that holds a rise to 1260 is possible. Near term view is bullish.
Silver (14.56) is trading a bit lower but is likely to rise towards 15 in the near term followed by a dip back towards 14.50/00 in the longer run.
Copper (2.7655) has faced rejection from the weekly resistance near 2.85 and while that holds, another dip to 2.70 is possible. Ranged movement within 2.70-2.85 is likely to continue for some more time before a break on either side is seen. Immediate view is bearish towards 2.70
API report yesterday stated an increase in crude supply of 5.36mln barrels for the week ending 30th Nov
Brent (61.38) tested 63.39 on the upside before coming off from there. While above 60, Brent looks bullish and could rise towards 65.00/50 in the medium term with some interim dips to 62-60 levels. Overall some ranged move in the 60-65 region could be possible in the next 1-2 weeks. A break below 60, if seen could open up chances of re-testing 58.
WTI (52.69) has immediate resistance at 55 and could come off towards 50 just now. A ranged move within 50-55 is possible in the near term.
FOREX
Currencies are overall mixed. Strength in US Dollar could keep Euro weak while Aussie, Yen and Rupee could see some strength amidst the strength in Dollar Index. Pound is trading near crucial support at 1.27 and needs to stick on either side to give clarity on further direction.
Dollar Index (97.07) is rising as expected and could be headed towards 97.50/75 in the near term. View remains bullish and the uptrend remains intact while above 96.50.
Euro (1.1331) tested 1.1418 before coming off from there back towards 1.13. As mentioned yesterday, some consolidation in the 1.14-1.13 region is possible followed by a dip to 1.12. Important resistance near 1.1400-1.1450 continues to hold for the near term.
Sharp decline in the Dollar Yen (112.95) has pulled down Nikkei too. Resistance near 114 seems to be strong and while the downside momentum continues, Dollar Yen could continue to decline towards 112.50-112.00 in the next 2-3 session. For longer term bearishness, a break below 112 is needed for price confirmation.
Pound (1.2695) is currently trading below support at 1.27. An immediate bounce back from here could keep the bullish sentiment alive, else a sustain fall below 1.27 could open up chances of testing 1.25 in the longer run. Watch price action at current levels.
Aussie (0.7309) is coming off from 0.74. There is scope of rising towards 0.745-0.750 on the daily candles, while Aussie trades above support at 0.7350.
Dollar Rupee (70.4950) is likely to re-attempt a test of 70.60 again today while the downside could be capped at 70.20/10. A rise in Crude prices this week could pull up Dollar Rupee gradually higher towards 71
INTEREST RATES
Yields are trading lower globally. The German, Japan and US yields are all down and look bearish for the near term. Yield spreads have also fallen sharply and could remain low for the week.
Sharp decline in the US Yields across all tenures. Yield spreads have also fallen sharply. The US 10-2Yr Spread moves up to 12bp from Support near 10.5bp as the 2Yr (2.79%) finally falls below 2.80%. The 10Yr is 2.91%.
The US 5-2Yr Spread remains at 0% for now. We hope to see the 2Yr drop faster now, something it had been refusing to do so far.
The US-Japan 10Yr differential (2.85%) has dropped sharply as the Dollar Yen declined from levels near 114. The spread could come down to test 2.80% before pausing there for a few sessions. Near term looks bearish and could indicate some more fall in Dollar Yen and Nikkei.
The Japan 10YR (0.059%) has fallen sharply too and could test support near 0.040-0.035% in the near term before bouncing back towards 0.05-0.08% in the longer run.
The German yields are also falling sharply breaking below near term support levels. Near term looks bearish for the yields. The 10YR (0.26%) could now be headed towards 0.1% or even lower.
