STOCKS
Equities are mixed. While Dow, Dax and Shanghai looks bearish for the near term, Nikkei and Nifty could possibly see some sideways consolidation if not an immediate fall. We wait for confirmation on Nikkei and Nifty to turn bearish.
Dow (25964.82, -0.085%) is holding well within the channel uptrend on the daily candles. While the trend holds, Dow could come off towards 25500 on the downside before resuming its rise again. Medium term looks bullish and the current correction is expected to be short lived within the overall uptrend.
Dax (12364.06, -1.04%) has fallen sharply. The fall could extend towards immediate daily support at 12200 before trying to move up again. Weekly suggests trade in the 12200-12900 region for the next couple of weeks at least.
Shanghai (2704.28, -0.77%) has come down a bit as expected and could well test 2650 or even lower in the near term. View is bearish while below weekly resistance at 2800.
Nikkei (22772.41, -0.41%) has come off from important resistance levels around 23000 and while that holds, the next 2-3 weeks could well be spent below 23000 with a downside target of 22200. Only a break above 23000, if seen, would trigger bullishness for the near to medium term but such a break on the upside is unexpected and difficult just now. That said, while Nikkei comes off in the near term, our earlier mentioned bullish Shoulder-Head-Shoulder pattern could be negated.
Nifty (11680.50, +0.032%) is in a near term uptrend, 11600 being an immediate support. A break below 11600 if seen could drag it down towards 11400; else a rise from 11600 could take it again to 11800 in the near term.
COMMODITIES
Commodities look bearish for the near term. Crude prices are facing immediate resistances while the precious metals could be sideways to bearish.
Brent (77.35) daily candles show resistance at just above 78 and while that holds, a fall towards 76-75 is possible. Near term looks bearish.
WTI (69.60) has near term resistance at 70-71 levels and if that holds, WTI could see a short corrective fall in the near term towards 68. Else a break above 71, would indicate medium term bullishness towards 74. With Brent looking bearish for the coming sessions, it could possibly drag WTI prices also to lower levels.
Gold (1204.80) is likely to trade in the 1230-1200 region in the near term with a possible extension to 1190 on the downside. At least the next 1-2 weeks looks sideways ranged.
Silver (14.51) has been ranged for the last 10-12 sessions now and could possibly be at the end of this ranged phase. A fall towards 14.25-14.00 looks likely just now which could act as a decent support for the medium term.
Copper (2.6655) came off from 2.75 resistance last week and could continue to move down towards 2.55. We do not see a rise above 2.75 in the near term.
FOREX
Dollar should strengthen against the Euro in this week, while it might stay stable to weak against Yen and Pound. Dollar Rupee could still see levels near 71.20-30. Dips to 70.70 could be bought.
Euro (1.1598): Euro came off from resistance on weekly candles near 1.173 last week and now has immediate support near 1.16 on 3 day line chart. Preference is for 1.16 to be broken and support near 1.155 to be tested in the next couple of sessions, followed by a test of 1.15 later in the week.
Dollar Index (95.19) : Dollar Index rose back from support near 94.5-94.7 on daily candles last week. A breach of 95.5 in the next 1-2 sessions should confirm bullishness towards 96-97 in the next couple of weeks.
Dollar Yen (110.92): Dollar Yen has crucial support near 110.5-110.25 and lower down, near 110.0-109.5, which it could test in this week. Only on a break below 109.5 will we abandon the view of bullishness towards 113 in the next couple of weeks.
Euro Yen (128.65): Euro Yen has broken below support on daily candles and looks bearish towards lower support near 127.5-127.0 in this week. A test of levels near 1.155 by Euro-Dollar and 110 by Dollar Yen in the next 2-3 sessions implies a target near 127 for Euro Yen.
Pound (1.2926): While above 1.29, Pound could test a high near 1.31 this week (resistance on daily candles). Preference is for 1.31 to then produce a dip.
Dollar Rupee (70.995):
Cannot rule out 71.20-30 yet, while above 70.50. Dips to 70.70, if seen, might be worth considering as a “Buy”. Break below 70.50, if seen, changes the picture dramatically and suggests a top is in place.
INTEREST RATES
USA and Canada couldnt reach a trade deal by the Friday deadline thereby dampening sentiments slightly. Moreover, there are murmurs that the US could impose trade sanctions worth $200 bn on China sometime this week itself. If that happens, it could be an extremely significant event -the impact on yields should most certainly be bearish, due to an enhancement of the ‘risk off’ sentiment.
We have been saying that chances of a Dec ’18 rate hike have slightly reduced over the past couple of weeks – this could imply that the May high of 3.125% for the US 10 year yield was the year’s top.
US 10 Year Yield (2.86%) : A breach above 2.9% would be required to negate the possibility of a downmove below 2.82% in this move. Current preference remains bearish for the near term.
German 10 Year Bond Yield (0.33%) has dipped from resistance near 0.4% and could move further lower towards 0.3%.
Japan 10 year bond yield (0.12%) has important resistance near 0.13%-0.14% which if breached, would be a very important event and could lead to further bullishness in Japanese yields.
