STOCKS
The expected bounce in the Dow from 27000 has not happened and the index has tumbled beyond 26000. This has opened doors for a test of a much deeper supports at 25350-25000. DAX and Nikkei have little room on the downside compared to the Dow. They have come very closer to their crucial supports which will need close watch over the next few days. Shanghai has declined below its near-term support as against our expectation and can fall in the near-term. Nifty has an important support near current levels at 11500 which could be under threat today if the sell-off in the global markets spills over India. It will need a close watch today.
Contrary to our expectation Dow (25766.64, −1,190.95, -4.42%) has tumbled well below 27000 thereby negating the possibility of a reversal that we had expected. The next crucial supports of 25350-25000 will now come into picture for a test which will need a close watch for a reversal.
DAX (12367.46, −407.42, 3.19%) has declined sharply again failing to sustain the bounce-back witnessed on Wednesday. . 12100-12000 is a crucial support to watch now. While this support zone holds, a bounce-back move to 12700-13000 is possible in the coming weeks.
Nikkei (21184.77, −763.46, -3.48%) has tumbled towards 21200 in line with our expectation. A crucial and strong support is now at 21000 which will need a close watch. We expect this support to hold and produce a bounce to 22500 levels going forward.
Contrary to our expectation, Shanghai (2913.71, −77.62, -2.59%) has declined below 2950 – a key near-term support which we had expected to hold. While below 2950, a further fall to 2875 is possible in the near-term which in turn will negate the possibility of a rise to 3100-3150 that we had been looking over the last few days.
The support at 11500 on the Nifty (11633.30, -45.20, -0.39%) mentioned in our Evening Comments yesterday could be under threat today following the sell-off in the global markets. A break below it will increase the danger of the Nifty tumbling towards 11200-11100 in the coming days and then the expected bounce can happen. 11500 will need a close watch today.
Sensex (39745.66, -143.30, -0.36%) has come down further and can fall to 39500-39000 as mentioned yesterday. In case of a break below 39000, we may have to allow for a test of 38000 on the downside before a reversal happens. 39000 will be a crucial level to watch on the Sensex now.
COMMODITIES
Overall commodities trade lower. Crude along with Gold, Silver and Copper have fallen and look bearish for the near term. While concerns of Coronavirus rapidly spreading to other nations remain, we may expect lower commodity prices in the near term.
Brent (50.95) and Nymex WTI (46.42) continue to fall. Watch 50 on Brent and 45-44 support on WTI for the near term where a pause looks possible. But overall view looks bearish for the near to medium term. Failure to bounce from respective supports as mentioned above could take Brent and WTI down towards 45 and 42 respectively.
Gold (1643.70) has come down below 1650 and could turn down further towards 1620-1600 in the near term. View is bearish.
Silver (17.62) has fallen sharply breaking below 17.75. While below 17.75, view is bearish for a possible test of 17.5 or even lower towards 17.
Copper (2.5425) looks bearish for a test of 2.50 while below 2.60. Immediate resistance near 2.60 continues to hold for now.
FOREX
US Dollar Index continues to fall but is soon likely to find some support below current levels indicating a possible bounce. Euro could be limited to 1.10 on the upside. Dollar Yen and EURJPY looks bearish. Pound fell sharply after the government rejected EU demands and is indicative of a “no deal” Brexit from June’20. Pound is likely to underperform the rest of the currencies in the near term. Dollar-Rupee could bounce from 71.50.
Dollar Index (98.51) could test 98.30-98.00 that could hold as near term support and push the index higher towards 99.25 again in the medium term. Failure to bounce back from 98.00/30 could indicate further fall towards 97 eventually.
A bounce in dollar Index from 98.30/00 could limit upside for Euro (1.0983) near 1.10 from where a fall towards 1.0875-1.0850 looks possible.
Dollar-Yen (109.16) has fallen sharply along with recovery in other currencies. We may expect the downside to be limited to 109.00-108.75 within the current fall before rising higher towards 110+ again in the medium term.
EURJPY (119.97) is trading below 120. We keep our bearish view of a fall towards 119.50-119.00 intact.
Aussie (0.6556) has dipped further and could test 0.65 as mentioned yesterday. Failure to bounce from 0.65 could take it lower towards 0.64 in the next few weeks. Medium to long term view is bearish.
Pound (1.2884) has also broken below 1.29 to confirm near term bearishness. Initial target of 1.28 is likely to be tested in the next few sessions. A break below 1.28 could take it down towards 1.26 eventually.
USDCNY (7.0106) has dipped a bit. A break below 7 is needed to take it further down towards 6.98. Till then we may expect 7.00-7.03 to hold for the near term.
USDINR (71.56) closed below 71.60 yesterday but is likely to bounce back from 71.50 towards 71.80 today. Unless a sharp break below 71.50 is seen we may expect 71.50-71.80 region to remain intact at least for the next 1-2 sessions.
INTEREST RATES
The US Treasury yields have been moving down over the last one week in line with our and have come closer to their crucial support levels. With little room left of the downside, the US Treasury yields could witness a strong bounce from their respective supports next week. The German yields continue to trade weak and keeps our bearish view intact. They can fall further in the coming days. The 10Yr GoI has risen back above 6.35% and can move up while it sustains above it. This in turn could delay our preferred fall to 6.28%.
The US 2Yr (1.06%), 5Yr (1.07%), 10Yr (1.26%) and 30Yr (1.76%) Treasury yields have been coming down sharply over the last one week in line with our expectation. The 2Yr has come closer to 1% mentioned yesterday from where a bounce to 1.25% is possible in the coming weeks. The 10Yr also has an important support near current levels at 1.25% which will need a close watch. While this support holds, a bounce to 1.50% is possible in the coming weeks. On the 30Yr 1.73% is key level to watch from where we expect a bounce.
The German 2Yr (-0.75%), 5Yr (-0.73%), 10Yr (-0.55%) and 30Yr (-0.07%) yields are also moving down in line with our expectation and keep our bearish view intact. The 10Yr is heading towards -0.60% as expected and an intermediate bounce to -0.50% cannot be ruled out while the -0.60%/-0.61% supports hold. The 30Yr on the other hand looks vulnerable to break -0.10% and extend the fall to -0.20% eventually.
The 10Yr GoI (6.3784%) has bounced sharply from the low of 6.3168% yesterday and is back above 6.35%. It will have to be seen if it can sustain above 6.35%. While above 6.35%, a test of 6.40% is possible now. This in turn will delay our preferred fall to 6.28%.
