STOCKS
Global equities have been consolidating at higher levels near their crucial first level of resistances. Dow hovers below 30000 and DAX below 13500. It will have to be seen if they can break these hurdles and see an extended rise before the expected correction comes into play. Sensex and Nifty are showing signs of witnessing an extended rise to 46000 and 13500 in the coming days before reversing lower. Nikkei also has room to test 27500. Shanghai is struggling to breach 3450 and that keeps the 3180-3450 range intact for now. From a bigger picture we continue to remain cautious and will be looking for a sharp corrective fall in equities going forward.
Dow (29883.79, +59.87, +0.20%) continues to hover below 30000. The index has been oscillating between 29000 and 30000 over the last few weeks and is struggling to breach 30000 decisively. Our view remains the same. We expect a sharp corrective fall to 28000 and even lower in the coming weeks. It will have to be seen whether this fall happens from here itself or after a short-lived rise to 30800-31000. On the charts, there is room to test 31000 before the correction happens.
DAX (13313.24, −69.06, -0.52%) seems to lack momentum to break above the immediate resistance level of 13500. It has to sustain above 13000 to keep the chances alive of seeing an extended rise to 13800/900 before the expected correction begins. A strong break below 13000 if seen now can trigger the expected corrective fall to 12400 from here itself without seeing the rise to 13800/900. We will have to wait and watch.
Nikkei (26806.37, +5.39, 0.02%) remains stable above 26500. There is room on the upside to test 27500 from where we expect a sharp corrective fall to 25500 and even lower going forward.
Shanghai (3433.06, −16.32, -0.47%) is not getting a strong follow-through buying to sustain and rise above 3450. This keeps the 3180-3450 range intact for now. A fall to 3400 and a subsequent break below 3400 will drag Shanghai to 3300-3250 going forward. It will also negate the chances of seeing 3500 on the upside that we had been mentioning over the last couple of days.
Nifty (13113.75, +4.70, +0.04%) and Sensex (44618.04, −37.40, -0.08%) are holding well above 13000 and 44000 respectively. This keeps alive the chances of seeing a break above 13200/13250 on the Nifty and 45000 on the Sensex which can take them higher to 13500 and 46000 respectively. However, as mentioned yesterday, such a rise will only delay the corrective fall to 12500 (Nifty) and 42000 (Sensex) and not negate it. As such we will continue our cautious stance and approach the indices from the sell side.
COMMODITIES
Crude prices have risen as supports near 45 and 43 holds well on Brent and WTI respectively. Gold and Silver have also risen well and while above 1840 and 24, they could be bullish for the near term. A dip back below 1840 and 24 would be a signal for another dip in the near term. Copper could be ranged below 3.50 and eventually head for a corrective dip towards 3.40/35 in the near term.
Brent (48.07) and Nymex WTI (45.08) rose from levels seen yesterday as supports near 45 and 43 holds well. But we may expect near term upside to be capped at 50 and 48 respectively for Brent and WTI. Watch price action near respective supports.
Gold (1831.40) and Silver (24.03) have risen well as near term supports of 1780/70 and 23 holds well for now. On Gold the price has almost risen to test earlier support turned resistance near 1840 which needs to break and sustain to take the price back towards 1880-1900 levels in the near term. Silver on the other hand has just broken above immediate resistance at 24 and this if sustains could be bullish for the near term towards 25 or even higher. While above 1840 and 24 respectively, Gold and Silver are bullish.
Copper (3.4885) may be capped at 3.50 on the upside for the near term from where a corrective fall towards 3.40/35 looks likely before another rise towards 3.50 and higher is again seen. Watch price action near 3.50 just now.
FOREX
Dollar Index trades lower while Euro has surged above 1.21. Pound and Aussie looks ranged just now and needs to dip or sustain above resistances to indicate further directional clarity. Dollar Yen may remain ranged with 104-105 region while EURJPY may test 127-127.50 before falling from there. USDCNY may dip a bit. USDINR has enough scope for a fall towards 72.90 but while RBI’s presence is seen at 73.50, we may have to look for a range of 73.50-74.20 for the near term.
Dollar Index (90.99) has fallen below 90. Trend is strongly bearish and while the momentum continues, we may expect a fall towards 90-89 in the near term. View is bearish for the near term.
Euro (1.2121) has moved up sharply on dollar weakness. While the Dollar Index remains bearish we may not negate a rise towards 1.23-1.25 on Euro. View is strongly bullish just now.
EURJPY (126.60) has risen sharply. We could expect a dip from 127-127.50 just now before again attempting to rise higher.
Dollar-Yen (104.44) may test 105 on the upside but fairly may remain ranged above 104 just now not participating in the fall along with the Dollar Index. View is ranged for the near term.
Aussie (0.7413) trades above 0.74 and could test 0.75 on the upside before seeing a corrective dip from there. Immediate view is to see some ranged movement within 0.73-0.75 region.
Pound (1.3379) has dipped from 1.3440 but while above 1.3289, there is scope for a break above 1.3450 while Dollar Index trades weak just now. The price my soon bounce back.
USDCNY (6.5575) is almost stable near levels seen yesterday. We may expect a dip towards 6.54-6.53 while below 6.56.
USDINR (73.8050) rose to close near 73.8050 after testing crucial support on the daily charts near 73.45.The sharp rise has also been because of possible RBI intervention. While the global markets indicate more rupee appreciation on the cards for the near term, we may look for a possible test of 72.90 on the charts only if RBI stays out and allows an initial break below 73.50 just now. Overall there is scope for a fall in Dollar Rupee but while above 73.50, we may expect ranged movement between 73.50-74.20 in the near term.
INTEREST RATES
The US Treasury yields have risen further and are coming closer to their crucial long-term resistances which ought to hold in order to keep the long-term downtrend. A break above these resistances will be a major turn-around in the market sentiment which will need a close watch. The German yields have also come closer to their intermediate resistances which if broken can take them further higher. Such a move will also reduce the chances of a fall-back that we had been expecting. The 10Yr GoI has come-off sharply from the high yesterday but has good support which can limit the downside and keep the near-term bullish view intact.
The US 2Yr (0.16%), 5Yr (0.41%), 10Yr (0.94%) and 30Yr (1.69%) Treasury yields have moved up further and are heading towards their crucial long-term resistances. 1% on the 10Yr and 1.75% on the 30Yr are crucial levels to watch. A strong and sustained break above these levels will indicate a trend reversal and a major turn-around in the market sentiment. It will negate the bearish view of a fall to 0.70%/0.60% (10Yr) and 1.25% (30Yr) that we had been expecting. We will have to wait and watch closely the price action over the next few days.
German 2Yr (-0.73%), 5Yr (-0.72%), 10Yr (-0.52%) and the 30Yr (-0.11%) yields remain higher but stable. As mentioned yesterday, -0.50%/-0.48% (10Yr) and -0.10%/-0.05% (30Yr) are the immediate resistances. We expect these resistances to hold and keep the bearish view intact of revisiting 0.60% (10Yr) and -0.20% (30Yr) initially and then -0.70% (10Yr) and -0.35%/-0.40% (30Yr) eventually over the medium-term. This bearish view will get negated if the yields break above -0.48% (10Yr) and -0.05% (30Yr) decisively.
The 10Yr GoI (5.9219%) rose to 5.9475% and has come-off sharply from there. Immediate support is at 5.91%. While this support holds, the outlook is bullish to see a rise back to 5.95% and 6% eventually in the coming weeks. A strong break below 5.91% is needed to negate the bullish view and drag the yield to 5.88% and lower.
