STOCKS
Lots of big news yesterday (Urjit Patel’s resignation, delay of the UK Brexit vote) and today (Indian state election results). Sentiment is bearish, especially in India. As we said yesterday, our bullish preference is under severe threat of being proven wrong. At the same time, we also note today that the Bulls are putting up a fight, but need to advance more in order to beat back the Bears.
Amid this, however, the Dow (24423.26, +34.31, +0.14%) managed a small gain, surviving a plunge below 24250 and even 24000 to a low of 23881.37. To be sure, a strong rally is needed over today-tomorrow to bring bullishness back into the markets, but the possibility exists. Else, a further dip to 23500 could be on the cards.
Surprisingly also, despite being vulnerable to the downside, the Shanghai (2592, +0.30%) is not seeing immediate selling. Still, bullishness will require a good rise past 2650 to bearish possibility behind.
The Nikkei (21265) is also trading in the green today, bouncing from the crucial level of 21200 mentioned yesterday. A rise past 21500, if seen, would put the Bears on a backfoot.
On the bearish side, the DAX (10622, -1.54%) had broken and closed well below 10700 yesterday and may still be vulnerable to a decline towards 10000.
The Nifty (10488.45, -205.25, -1.92%) had seen a good fall yesterday in line with our warning of fall to 10400. A test of 10200 is also possible today on a combination of the Urjit Patel news and the election results. That said, it would be worthwhile exploring Longs near 10200.
COMMODITIES
Brent (60.22) and WTI (51.20) are stable. Brent is ranged within 64-58 region while WTI is stuck between 50 and 55. On WTI 3-day candles, 50 is an important support and while that holds, medium to long term looks bullish. However, on the weekly there is scope of falling to 48 on a break below 50. This could be the medium term bottom as we do not look at a fall below 48 in the current down move. Brent on the other hand is likely to remain above 58 and eventually move higher in the coming weeks.
Gold (1250.60) is trading at a stable pace. With resistance at 1260 and support at 1240, the price is stuck in the middle of the range and could remain sideways ranged for the week. While Dollar remains strong, stability in Gold could remain intact.
Copper (2.7405) could test 2.70 in the next 1-2 sessions before moving higher towards 2.80/85. Near term looks ranged.
FOREX
News of UK Prime Minister Theresa May to delay her Brexit vote which was to take place today lead to a fall in Pound (1.2574). While the fall below 1.27 continues, we could see a test of 1.24 on the downside. Failure to bounce from 1.24 would make the currency vulnerable to testing 1.22-1.21 in the longer term. For now a bounce from 1.24 can be expected.
Dollar Index (97.10) has risen without sustaining below 96.50. While above 96.0-96.50, there is scope for a rise towards 97.50-98.00 on the upside. Note that 98 is an important resistance and could hold in the longer run, bringing some rejection back towards 96. For now, a rise towards 98 looks likely.
Euro (1.1366) tested 1.1443 yesterday before coming down from there. While above 1.12, there is scope of testing 1.15 on the upside. Ranged move within 1.12-1.15 looks likely in the near term.
Dollar Yen (113.02) is currently trading within the 112-114.50 region and could continue to trade in this region for some more time. While resistance at 114.50 holds strong, there could be a gradual decline in dollar Yen below 112 in the medium term.
Aussie (0.7203) is almost stable but faces immediate support near current levels. A bounce from here is likely to take it higher towards 0.7350. Failure to sustain above 0.7150 could be bearish in the longer run.
Dollar Rupee (71.3475) is likely to rise towards 71.60 today. Above 71.50, upside is open towards 71.80-72.00 for the near term. With the news of RBI Governor Urjit Patel resigning, the markets could see some negative movements today.
INTEREST RATES
The mentioned Support at 2.80% seems to be holding on the US 10Yr (2.84%), which has moved up a wee bit from 2.83%. But, the 2Yr (2.72%) has moved up more than the 10Yr, such that the 10-2 Spread stands at 12bp, down from 14bp on Friday. Continue to watch the Support at 11-10 bp to see whether it continues to hold.
There was a sharp jump in the Indian 10Yr GOI (7.5872%) in the wake of the Urjit Patel resignation, past 7.50%. Now there may be some more room on the upside towards 7.65%. Importantly, the Indo-US 10Yr Spread (4.7274%), has moved up well from above the Support at 4.48% mentioned a few days ago. It might consolidate between 4.50-75% for a while, or try to move higher towards 4.85%.
