STOCKS
We see Nikkei and Shanghai as the best long-term bullish bets among the indices covered, with a willingness to buy on dips. We do not have the same confidence in the Dow and the DAX at the moment. India falls somewhere in the middle of these two sentiment points.
India came in good yesterday itself as the Sensex (36318.33, +464.77 +1.30%) and Nifty (10886.80, +149.20, +1.39%) rose well without dipping towards 35500 and 10650-600 as we had thought they might. The bounce possibly establishes 36000-35500 and 10800-600 as good medium term Supports for the Sensex and Nifty respectively. Beware, however, that the immediate Resistances at 36500 and 11000 respectively need to be broken for proper bullishness to set in.
Although the Dow (24065.59, +155.75, +0.65%) rose again yesterday, we prefer caution while below 24100-500, as that is a formidable Resistance region on the longer term chart. Profit-taking on the 11% rally since 21750 (in less than a month) is a decent possibility.
Resistance at 11000 is still holding on the DAX (10891.79, +35.88, +0.33%) and chance of profit-taking are high in our eyes.
Contrary to our expectation of a dip towards 2500, the Shanghai (2565) rose well to almost 2575 yesterday, trying to break the downtrend since 2825. A rise past 2627 is still needed for the anticipated long-term bullishness to set in good and proper.
The Nikkei (20414) rose to a high of 20571 yesterday but has dipped back a bit today. It remains a buy on dips.
COMMODITIES
Commodities look bearish for the near term apart from the crude prices that has some scope of rising above current levels before resuming the fall.
API data reported a fall in the US Crude supplies by 560,000 barrels for the week ended 11th Jan while the gasoline stockpiles rose by 6mb. The inventory data by EIA is due today but markets expect a fall in the inventory data too.
Crude prices have risen a bit. Brent (60.59) and Nymex WTI (52.01) are trading higher just now. Brent could see a small rise towards 62 before coming off from there back towards 58-56 levels. WTI also has similar resistance near 54 from where a dip is possible in the near term towards 48.
Gold (1289.00) has come down to test immediate support near 1280 and if a bounce from here is seen, we could well see a rise towards 1300-1320 in the near term. On the other hand, a break below 1280 would take the price to lower levels of 1250. Looking at the 3-day line chart, near term looks bearish while resistance at 1300 holds.
Silver (15.61) is also trading below resistance near 16 and could see a decline to 15.25/15.00 in the near term. View is bearish for the next few sessions.
Copper (2.6450) has been coming off, unable to rise past 2.70 at the moment. While the price remains below 2.70, there is scope of some more decline towards 2.60/55 in the near term.
FOREX
Overall currency pairs are mixed. But while there is scope for strength in the US Dollar, major currencies could see a short period of weakness in the near term.
Sharp rise in the Dollar Index (96) seen yesterday to test 96.30 before coming off from there. While above 95.75, Dollar Index looks bullish towards 96.50 in the near term. This could be negative for major currencies in the coming sessions.
Euro (1.1402) is trading lower and could come off towards 1.1350-1.1300 which is a near term support and could produce a bounce back towards 1.15-1.16 in the medium term. On the 3-day chart, 1.16 is a crucial long term resistance and while that holds, trade within 1.16-1.12 is possible for the next 2-3 weeks.
The Euro-Yen (123.66) has dipped lower while earlier support turned resistance near 125 is holding well. Near term looks bearish towards 122.80-122.00 levels which is a long term support on the line charts and could produce a bounce back towards 125.
Dollar Yen (108.48) is trapped in the narrow sideways range of 107.5-109.10 for the last few sessions. A bounce on the upside towards 110-111 is preferred while long term support near 107 holds as seen on the 3-day line chart. Medium to long term view is bullish.
Pound (1.2840) faced slight rejection near 1.2930 from where the currency has dipped to current levels. While below 1.2930, the currency could decline to 1.2750 before resuming a rise back towards 1.30/31 in the longer run.
Aussie (0.7198) has paused near 0.72 instead of rising towards resistance near 0.73. A gradual rise to 0.73 is possible before a sharp decline from there is seen. On the weekly line chart, long term looks bullish towards 0.76 indicating a start of an uptrend.
USD-CNY (6.7683) has decent immediate support at 6.7350 and while that holds, the Chinese Yuan could now set to weaken towards 6.80 or higher in the medium term. View for USDCNY is bullish towards 6.80/85 while above 6.7350. A break below 6.7350 would open up chances of a fresh fall towards 6.68/65 but that looks unlikely just now.
Dollar Rupee (71.0450) closed above 71 yesterday after testing 71.15 on the upside. It would be crucial to watch if the pair manages to break above 71.15 or comes off towards 70.80 today. A break on the upside would turn bullish for Dollar-Rupee for the near term with an upside target of 71.60. We would watch price movement at immediate resistance at 71.15.
INTEREST RATES
US Yields ((2Yr 2.53%, 5Yr 2.53%, 10Yr 2.71% and 30Yr 3.07%) have been overall stable yesterday, with some steepening at the Long end as the 10Yr and 30Yr have moved up by 1bp and 2bp respectively.
Even though Yellen stated yesterday that Fed might be done with its interest rate increases, the market is again pricing in a 14-15% chance of two rate hikes after June.
Indian Yields (10yr GOI 7.4728%) is yo-yoing up and down a bit and has gone up again yesterday, despite the lower inflation readings. We are not being able to synch in well with the market at the moment and may need to step back for a while.
