STOCKS
Almost all major indices except Shanghai have seen a sharp up move yesterday, contrary to our expectation that the corrective phase may continue for some more time.
Dow (21479.27, +0.61%) rose sharply yesterday coming up almost 130points to test the crucial resistance near 21500-22000. We need a confirmed break above 22000 to further continue the rally upwards; else the current rise could be considered as an initiation of false hope for the near term and the index may come off again in the next few sessions.
Dax (12475.31, +1.22%) bounced back to levels above 12400 and while it remains above 12400, we may expect a rise back towards 12600 levels. But in case it fails to sustain above 12400 just now, we would have to consider a fall towards 12000 in the medium term.
Shanghai (3182.16, -0.43%) came off yesterday to close at lower levels. A test of 3160 on the downside still seems possible in the near term but could be delayed if the index remains sideways for a few more sessions.
Nikkei (20141.21, +0.43%) opened with a gap up but is trading low. A rise towards 20300 is possible in the next couple of sessions. .
Nifty (9615.00, +0.99%)closed at important levels yesterday. Only if it manages to rise past 9615-9625 zone and sustains, can we consider that the immediate correction might be over and target levels near 9700-9800 for the near term. A fall back from 9615-9625 region, if seen (less preferred) could see a fall back towards 9500. Today’s movement could decide the further course of direction.
COMMODITIES
Crucial support of 1230 had been broken and Gold (1222) is trading within the range of 1190-1230. In the smaller time frame, Gold is oversold and needs a pause before attempting sub 1193 levels. But we will remain bearish while Gold is trading below 1250 levels.As we had mentioned yesterday" A failure to rise above 16.70 levels may trigger a sharp fall towards 16.20 regions", we have seen that Silver (15.98) had collapsed. The scrip is also oversold in near term time frame with an immediate trading range of 15.50-16.20 and the overall bias will remain bearish while it is trading below 16.50 levels.
Copper (2.66) failed to move higher due to its overbought condition and trading within the range of 2.66-2.78. It could fall further towards 2.55 levels, which is a strong area of support.
There is 30-35% probability that Brent (47.92) and WTI (46.25) could rise a bit more towards 50 and 48 regions respectively but this recent bounce hasn’t affected their midterm bearishness much. We think that the immediate resistances of 50 (Brent) and 48 (WTI) are expected to hold as the they are in overbought territory and may see range trade between 46-50 in Brent and 44-48 in WTI, but a failure to hold above 46 and 44 may push them towards 43 and 40 levels respectively. We have U.S weekly crude oil inventory data tomorrow, which could be a decisive factor to determine the future course of action.
FOREX
We expect Dollar to stage a turnaround to the upside soon but we are still waiting for confirmation. Till now, most of the majors are in a normal correction and further break of major supports are required before the downtrend can be confirmed.
With Euro (1.1367) weakening after failing to rally above 1.1450-70, the expected bounce in Dollar Index (96.15) has materialized but the major weakness of Euro still needs a confirmation in the form of a break below the support area of 1.1320-1.1290 and the confirmation of Dollar strength comes on a break above the resistance of 96.50-65. Please note, as long as the support of 95.50 holds, the chances of Dollar rising further remains strong.
Dollar Yen (113.22) has not only met our upside target of 113.00 but rallied above it. If it can sustain above 113.00-112.60 for a couple of sessions, then the rally may extend to 114.30-115.00.
Pound (1.2943) has corrected from 1.3029, very close to the 10-month high of 1.3047 but the larger uptrend may weaken only below 1.2880. Till then, the current decline remains just a normal correction.
Aussie (0.7670) has registered a low at 0.7641, close to our downside target of 0.7630. It remains in a normal correction and if it manages to stay above 0.7630-20, then it may retest the long term resistance band of 0.7700-0.7800 which is expected to hold. The RBA policy announcement today may determine the near term path.
Contrary to expectations, Dollar Rupee (64.88) rallied and closed above the resistance of 64.80. if 64.80 holds in the next couple of sessions, then 65.00-20 may be tested in the next few sessions. Immediate support at 64.60-55.
INTEREST RATES
The US yields have risen sharply. The 5Yr (1.93%), 10Yr (2.35%) and the 30YR (2.87%) are all up from previous levels near 1.89%, 2.30% and 2.84% respectively. The 30Yr is heading towards resistance near 2.9% while the 10YR could rise to 2.4% before coming off again by the end of the week.
The US-Japan 10YR (2.26%) has risen sharply and could pull up Dollar Yen to higher levels in the near term if the yield spread continues to rise towards 2.3% and higher.
The German-US 2Yr (-2.01%) and the 10Yr (-1.87%) have come off as expected bringing down Euro with itself. The yield spreads look bearish for the coming sessions.
