STOCKS
Dow (24231.59, -0.17%) is testing immediate channel resistance on the daily candles and could trade in the 23800-24400 region for a couple of sessions before rising towards 24600-24800 by the end of the month. With 3-weeks to go for the year to end we may not expect a rise above 25000 this month.
Dax (12861.49, -1.25%) came down sharply contrary to our expectation that the index would rise towards 13200 and may not break below 12900 just now. The weekly closing at levels below 12900 is important and could take the index towards 12800-12600 in the next few sessions if the downside momentum remains strong just now. Near term looks bearish.
Nikkei (22778.69, -0.18%) tried to test 23000 last week but could not move up above that. A corrective dip towards 22500 or lower is likely to be seen in the coming sessions on a break below 22666.
Shanghai (3308.65, -0.27%) is trapped in the 3350-3300 region and unless a sharp bounce back from current levels is seen towards 3350 and higher, the index could be vulnerable to a fall towards 3275 in the near term.
Last week initiated a sharp correction in Nifty (10121.80, -1.02%), taking it towards 10100 from levels near 10400. Some support could come up near 10030-10000 levels from where a small bounce is possible before the index heads towards 9900 in the longer run. The Gujarat elections would be an important event to look at which could impact the Indian markets next week.
Sensex (32832.94, -0.95%) is likely to find some support near 32500 in the coming sessions. Thereafter some stability is likely to be seen above 32500.
COMMODITIES
Gold (1274.34) also came down on Friday but may not move below 1260 just now. While support at 1260 holds, we stick to our view of a bounce back towards 1300 this week.
Silver (16.37) did finally resolved on the downside last week and could find some support near 16 in the near term. has broken below immediate support and could move down to 16.75-16.60 in the near term.
Gold-Silver ratio (77.77) is rising sharply as Silver has been falling against gold. A test of 79 is possible before the ratio comes back to levels near 77.
WTI (57.99) could move up towards 60 while the immediate support near 57 holds. A break below 57, if seen could take it down to 56-55 in the medium term. Brent (63.42) on the other hand, could test support near 62 before again rising back towards 65-66. Some sideways movement is possible before a sharp upmove.
Copper (3.1095) moved back to levels above 3.05 and while that holds, we could see a bounce to levels near 3.20 or higher. A break below 3.05-3.00, if seen again could take the price back towards 2.95.
FOREX
Dollar-Index (93.109) had dropped on Friday to a low of 92.6 during intra-day trading and closed at 92.89. However, the index is again trading at levels seen prior to Friday, boosted by the late night corporate tax cut passed by the US Senate and a corresponding rise in US yields (see Interest Rates below). It would be interesting to see if this provides strength to the Dollar, in which case, the Index could test resistance levels of 93.30-93.40 on the daily charts very soon. However, a return to weakness could see the index test immediate support near 92.80 on the daily charts.
Euro (1.1871) had seen some strength on Friday with a day high of 1.1940 and a close just below 1.19 at 1.1899. However, late night news of the US tax cuts seems to have brought in bearishness and a drop to support near 1.18-1.1775 on the weekly candle charts might happen soon. There has also been a sharp decline in US-German Yield Spread which could further drive dollar strength (see Interest Rates below). However, it is yet to be seen if the impact of the tax cuts will have a lasting effect, in the absence of which, a move towards resistance near 1.19-1.195 on weekly line charts and a corresponding breach of the same can be expected.
Dollar-Yen (112.74) has been moving up for the last few days and is poised to test resistance around 113.50 on the daily line charts in this week. A move past that could imply a further test of 114 on the weekly candle chart by the end of this month.
Pound (1.3468) had breached resistance near 1.35 on Friday to reach a high of 1.355 during intraday trading but closed below 1.35 at 1.3472. It is currently trading around the same levels, thereby implying a possible hold of resistance at 1.35 for the next few sessions. A breach of the same could however push it to test resistance at 1.36 on the weekly charts.
Dollar Rupee (64.59) has opened higher compared to Thursday’s close (64.4675) and with expectations of Dollar strength resurfacing, a rise beyond 64.70 in the next couple of sessions is likely.
INTEREST RATES
US yields have risen sharply as the US moves to a better tax system. The headline cut in tax numbers have boosted the shorter term yields to move up sharply. The 10Yr (2.41%) and the 5Yr (2.16%) have risen sharply from previous levels of 2.36% and 2.0% respectively while the 30YR (2.80%) is up from 2.76%. Near term looks bullish for the yields.
The Japan-US 10YR (2.37%) is trading along the channel resistance and if doesn’t come off from here could break the resistance to move up towards 2.40% or higher in the near term, leading to arise in Nikkei and Dollar Yen which seems to be less likely for now.
The German-US 10Yr (-2.10%) has also fallen sharply and could possibly test -2.15% before moving up to higher levels in the medium term.
