STOCKS
The stock indices have all risen sharply from support levels and look bullish for the near term.
Dow (25798.42, +2.17%) rose sharply yesterday to our expected levels. Near term looks bullish with the current rise to possibly continue towards 26000-26500 in the coming sessions.
Dax (11776.55, +1.40%) has also risen sharply yesterday. The bulls seem to be taking control gradually and the upside momentum if continues could take the index higher towards 12000 by next week.
Nikkei (22907.73, +1.59%) saw a gap up opening today, bouncing sharply from support levels near 22200. While the rise continues, we could see a test of 23400-23600 again in the near term.
Shanghai (2560.72, +0.57%) is above 2530 and has not seen a bounce yet.While the other major indices have risen and look bullish for the near term, Shanghai could eventually pick up in the coming weeks. Some range trade in the 2500-2650 region is possible followed by a rise back to 2700.
Nifty (10584.75, +0.69%) continued to move up yesterday. A test of 10800 is likely in the near term. A small corrective dip could be seen from 10800-10900 region.
COMMODITIES
Watch support on the Crude prices. Near term could be ranged above the support levels. Gold could dip slightly while below 1240.
Brent (81.50) has interim support at 80 which is holding for now keeping the price ranged below 82. While above 80, Brent could possible trade in the 80-82 region this week. But thereafter, if the crude price comes off below 80 or rises towards 84 would be important to keep an eye on. For now, there are equal possibilities of moving on either side of the 80-82 range.
WTI (72.04) too is holding above the 71 support and could move up gradually towards 73-74. Although there is scope on the downside to test 68 on the weekly charts, it would be crucial to see if the support at 71 breaks in the near term.
Gold (1225.40) is testing immediate resistance near 1240 on the daily candle chart. Also there is 21-Week MA on the weekly line chart which could keep the prices low in the near term. While the resistance at 1240 holds, we could see a short dip towards 1210 before again attempting to rise higher.
Copper (2.7690) continues to remain stable and could trade within the 2.75-2.85 region this week too. No major movement is expected just now.
FOREX
Dollar Rupee could fall more towards 73.20-00. Watch supports near 1.1535 and 1.30 on Euro and Pound respectively.
Euro (1.1561) : Euro again came off after testing a high near 1.1622 yesterday. While it stays above 1.1540-1.1535, it could still rise beyond 1.162 towards resistance near 1.17 by next week. A break below 1.1535 could make it bearish towards 1.145.
Dollar Index (95.20) – While below 95.35, there are chances of testing support near 94.75 in the next 2-3 sessions. Alternatively, if it breaks above 95.35, we can again start looking at the upside.
Dollar Yen (112.38) has broken above the 112.20 resistance level we mentioned yesterday and it could now rise towards 113 by next week (seen as interim resistance on daily line chart).
Euro-Yen (129.97) could stay below 130.5 in the next couple of sessions. While Euro stays above 1.154 and Dollar Yen above 112, Euro Yen would find it difficult to break below 129.13 (necessary for bearishness towards 127).
Pound’s (1.3178) almost tested resistance near 1.324 on daily candles yesterday and could now come off towards 1.31. A break below 1.31 could open up chances of a test of support near 1.30 in the near term. A break below 1.30 (if it happens) would be bearish.
Aussie (0.7133) has some resistance near the 8 weeks MA (0.7158). If it crosses above that, it should test higher resistance near 0.7175-0.7200 by next week. A break above 0.72 and then above 0.7321 (21 weeks MA) would be required to negate the possibility of a downside below 0.705 in the next 1-2 months.
Dollar Rupee (73.455): Should now fall towards 73.20-00 in the near term. A break above 1.162 on Euro or below 80 on Brent could be Rupee positive.
INTEREST RATES
India 10 year yield (7.8727%) has broken below the support at 7.90%. It could now fall further towards lower support near 7.80%-7.70% in the near term.
The US 10 Year (3.17%) : The US 10 year yield is currently staying above immediate support near 3.15%. Below 3.15%, even 3.10% could provide some support. While above 3.10%, there are chances of a rise towards the previous high of 3.25%-3.26%.
US Industrial production increased 0.3% in Sep, in line with expectations (this is the 4th straight month of increase). However, the 3rd quarter growth in Industrial production of 3.3% (annualized) is much lesser than the 5.3% growth in the 2nd quarter.
Moreover, Capacity Utilization stayed unchanged at 78.1% slightly below the expected 78.2%.
Earlier on Monday, US Retail Sales data had showed that the growth in Sep (0.1%) was much lower than the expected 0.6%.
These 3 data points could have had some bearish impact on yields but two other factors seem to be keeping yields elevated
increased supply of US treasury bonds
US jobs report released yesterday showing job openings at a record high, indicating further tightening in the job market
We need to watch out for further more data releases on the US economy in the next couple of weeks and also developments on the trade war front. Any disappointment in economic growth indicators or a rise in trade war rhetoric could pull yields lower, increasing chances of a break below 3.15% on the US 10 year.
10 Year German-US spread (-2.68%) – As mentioned yesterday, there is immediate resistance near -2.60% to -2.65% and support near -2.725%. It could move towards -2.725% by next week. Medium term preference remains for a break below -2.725% towards lower long term support near -2.80%. A break above -2.60% would however negate the medium term bearishness.
2 Year German-US spread (-3.44%) is also at support on short term chart. A break below this level could be bearish.
