STOCKS
A strong bounce-back move in Dow seen yesterday as the news on a possible tax-break announcement from the US Government has given some relief to the market. Asian markets have also seen some bounce from their lows following the US markets. Sensex and Nifty can also get some relief and can see a near-term corrective bounce. While there is room to see more rise while the current bounce-back move sustains, we expect it to be short-lived as the broader picture continues to remain weak. As we would like to remain cautious and will watch for the broader downtrend to resume eventually in the coming weeks again.
Dow (25018.16, +1167.14, +4.89%) seems to be getting support near 23700. A test of 25500-25700 is possible in the near-term. We may see the Dow consolidating between 23700 and 26000 for some time. While below 26000, the chances of seeing 23000-22000 that we had mentioned on Monday will still remain alive.
Contrary to our expectation, DAX (10475.49, −149.53, 1.41%) has tumbled below 11000. While below 11000, the outlook is bearish to see a test of 10000-9900 on the downside. Intermediate support is at 10200 a break below which can drag it to the above mentioned lower levels.
Nikkei (19707.63, −159.49, -0.80%) fell to test 19000 as expected and has bounce-back from the low of 18891.77. A strong rise past the 20000-20200 resistance zone is needed to gain strength. Such a break can trigger a corrective rally to 21200 in the coming days and in turn will delay the fall to 18000 that we had mentioned on Monday.
As expected, Shanghai (3002.84, +6.07, +0.20%) had tested 2900 yesterday and has opened with a wide gap-up today. The near-term outlook is mixed. As we had mentioned earlier, a range of 2850-3075 looks likely to be seen for some time. Within this range, the index can now move up towards the upper end of the range in the coming days.
Nifty (10451.45, -538, -4.9%) and Sensex (35634.95, -1941.67, -5.17%) can see some short-covering rally following the global markets. Nifty can rise to 10600-10800 and can even extend it up to 11000. Sensex on the other hand can target 37000 on a strong break above 36000. However, from a broader picture the danger of seeing 10000 on the Nifty and 34000 on the Sensex will still remain alive as long as they trade below 11000 and 38000 respectively.
COMMODITIES
Commodities have paused to see some slight reversal after the sharp volatile movement seen in Monday. Gold has come down a bit while Silver looks ranged. Copper may rise in the near term. Crude prices have risen too and look bullish for the near term while above crucial long term supports.
Brent (38.61) and WTI (35.42) have risen slightly and could trade higher in the near term. Brent is bullish while above $30-35 and WTI could rise too while above $30. The sharp gap down opening seen on Monday is likely to be recovered soon with Brent re-testing $45 and WTI moving towards $41 in the near term.
Gold (1655.80) briefly rose above 1700 on Monday but could not sustain higher as resistance on the 3-day candles seems to be holding well for now possible dragging the price lower towards 1640-1620 in the near term. A break above 1700 is not likely just now. View is bearish while below 1700.
Silver (17.08) has crucial support at 16.0-16.5 which is expected to hold in the near term. We may expect some range trade in the near term above 16.50.
Copper (2.5340) has some scope of rising towards 2.57/60 in the near term while downside could be limited to 2.45. We may see some ranged trade in the broad 2.45-2.60 region for now with prices likely to test 2.57/60 before a fall takes place.
FOREX
Dollar Index (96.20) recovered sharply from low of 94.65. While another dip to 95 cannot be negated, we are fairly bullish on the index for the near term for a possible rise towards 97.
Euro (1.1322) is trading lower. Resistance near 1.15 is holding well for now and could indicate a dip in exchange rate towards 1.1275 in the near term. While we may not negate a re-test of higher levels from here, we would be cautious at levels near 1.1275-1.1200 to watch price action there.
Dollar-Yen (104.84) has bounced well from Monday’s low below 101.50. Above 101-102, 105.50 is an immediate resistance which could hold in the near term and possibly push down prices towards 103.50-103.00 in the near term.
EURJPY (118.74) has risen from levels below 117 but has near term resistance at 120 above current levels. A rejection from 120 could take the price down to 117-116 again in the near term. Unless a sharp recovery above 120 is seen, it would be difficult for the cross to turn strongly bullish just now.
Aussie (0.6509) has come down to test 0.65 as expected. While below important resistance at 0.66 seen on the 3-day candles, there could be some trade in the broad 0.63-0.66 region for now.
Pound (1.2911) tested 1.32 as expected and came off sharply from there. While below 1.32, we may expect a fall towards 1.28 again in the near term.
USDCNY (6.9581) has bounced from support near 6.90 and while that holds, we may expect a rise back towards 7. View is bullish while above 6.90.
USDINR (74.0850) did not see much fall on Monday rather chose to remain stable above 73.75/80. Now we may look for either a break above 74.20 to rise towards 74.48 or a fall below 73.75 to expect a corrective dip for at least the rest of the sessions this week. Watch for price action near current levels.
INTEREST RATES
The fear of oil price war after the OPEC meeting last week failed to agree on an additional supply cut and Saudi Arabia announcing a deep price discount has added fuel to the on concerns pertaining to the corona virus outbreak. As a result, high risk aversion in the market has seen the US Treasury yields tumbling at early trades today. The Treasury yields have room to extend their fall in the coming days. The German yields continue to trade lower and keep our bearish view intact. The 10Yr GoI has declined below its key support and is now bearish for further fall.
The US 2Yr (0.29%), 5Yr (0.38%), 10Yr (0.47%) and 30Yr (0.96%) Treasury yields have tumbled well below the key levels that we had mentioned on Friday. The 10Yr has tumbled below 0.60% and is now in danger of seeing 0% on the downside while it remains below 0.60%. The 30Yr on the other hand looks vulnerable to test 0.10% in the coming weeks. Intermediate support for it is at 0.70%
The German 2Yr (-0.88%), 5Yr (-0.87%), 10Yr (-0. 71%) and 30Yr (-0.29%) have declined further and keep our bearish view intact. As we had mentioned last week, the 10Yr can fall to -0.80% and -0.83%. The 30Yr has come closer to our preferred level of -0.30%. We will have to wait and see if it can bounce from this support or not. A break below -0.30% will pave way for a further fall to -0.50%
The 10Yr GoI (6.1846%) has declined below the 6.20%-6.19% support zone on Friday. Our bearish view remains intact for a test of 6.10% on the downside now. A break below 6.10% open doors for a test of 6% and even lower levels in the coming weeks.
