STOCKS
Crucial Supports coming up for test now. As expected, most Indices dipped some more yesterday and may come to test important Supports over the rest of this week. The latest catalyst supporting the charts is news that Canada has arrested a top executive of the Chinese company Huwaei. We would favour a fresh upmove to begin soon enough, but also have to be careful in case our reading goes wrong. Basically, we need to see if the Supports survive the scare about a global slowdown. See Interest Rates below.
The Shanghai (2627, down futher from yesterday’s close of 2649.8051, -16.15, -0.61%) may have Support at 2600 itself and might do very well for itself if that holds. But in case it breaks, we have to be careful about chances of a fall towards 2500-2400.
The Nikkei (21538, down a solid bit from yesterday’s 21919.33, -116.72) has already dipped to a low of 21491 today. There may be some more room down to 21400 which might be a good Support for the expected upmove to start from, but could be pretty bearish if it breaks.
Likewise, the Nifty (10782.90, -86.60, -0.80%) can test Support at 10700-600 and rise from there. Failure to do that could trigger a decline towards 10400-300.
As expected, the DAX (11,200.60, -135.08, -1.19%) has seen a low of 11177. We might now see a test of 11000, which can produce a strong rise if it holds. Else, there could be large fall towards 10000. Be careful there.
The Dow was closed yesterday on account of the earlier death of George Bush (Sr), but the futures are reported to be trading lower, which is not surprising. We see strong/ important Support near 24250 which we think can hold. Let us see.
COMMODITIES
Chinese refiners are willing to buy US Crude as the 90-days of truce period seem an attractive buy for the US Crude. Although they would remain cautious but are willing to explore the opportunity.
Markets await the OPEC meeting that starts today and it would be important to see if the OPEC and the other countries agree upon mutual production cut. Only if the OPEC maintains a balance in the production, we could see a gradual rise in Crude prices in the medium term else any dispute or break between members could lead to higher production levels thereby keeping Crude prices stable or even push it down further below current levels.
Brent (61.48) is holding well below near term resistance at 64. This is likely to hold just now keeping the movement restricted within 64-58 region in the near term.
On the WTI (52.64), immediate support is seen near 51 and the corresponding resistance is seen at 55.
Gold (1245.40) has risen a bit and is gradually heading towards near term trend resistance at 1260. As mentioned earlier, while price trades above support at 1240, near term view is bullish.
Silver (14.56) is almost stable near current levels. While the price is in an overall broad sideways consolidation, there is some scope of testing 15 on the upside. Downside is likely to be capped near 14.25 just now.
Copper (2.7470) is down from 2.7660 seem yesterday. A fall to 2.70 is on the cards for the near term before a bounce back towards 2.85 is seen.
FOREX
Dollar Index (97.01) is rising as expected and could be headed towards 97.50/75 in the near term. View remains bullish while above 96.50.
Euro (1.1341) is almost stable and has room for sideways consolidation for 1-2 more sessions. Thereafter, a break on either side of the 1.14-1.13 region is possible.
Dollar Yen (112.84) has immediate support near 112.50 and if that holds, a bounce towards 114 is possible in the near term. On the weekly line chart, there is 21-day Ma near 112.20 which could be tested on a break below 112.50 but thereafter a bounce looks more likely.
Eur-Yen (127.94) is trading near immediate support at 127.60 and could soon see a bounce back towards 129-130-132 levels in the near term. View is bullish for the coming week. A bullish Euro-Yen could possibly take Euro up towards 1.14-1.15 again.
Pound (1.2720) has risen back to trade above 1.27. While support at 1.27 holds, we could see a rise in the currency pair towards 1.29 in the medium term.
Aussie (0.7222) declined sharply yesterday breaking below immediate support at 0.7250. If the fall sustains, we could see a dip to 0.7150 gradually. Only if an immediate bounce back to levels above 0.7250, if seen could negate a fall to 0.7150 and reinforce a near term rally targeting higher levels of 0.73-0.74.
Dollar Rupee (70.47) could see some more of downside towards 70.30/25 today. But we expect a rise from levels above 70, that could take it higher towards 70.60/80.
INTEREST RATES
There has been some more inversion of the US Yield Curve towards the middle portion with the US5Yr (2.78%) now trading 1bp lower than the 2Yr (2.79%). The 10-2Yr Spread (0.11%) is also trading at a crucial Support. We would want to bet on fresh steepening of the Curve with a fall in the 2Yr being the favored move, but will go by wherever the Market decides to go.
In this, perhaps tomorrow’s US NFP data might be crucial. The NFP has been averaging 200K for almost 2-3 years now. A number below 100K might spook the market further about a slowdown.
Yesterday, the RBI kept the Repo unchanged but allowed a series of cuts in the SLR. The 10Yr GOI (7.4407%) has dipped just below 7.45%, the 38.2% retracement level of the rise from 6.26% to 8.18%. As it seeems to be falling vertically, further decline towards 7.40% and even 7.22% might be possible. Rallies are likely to be sold into (Bonds will be bought).
