STOCKS
Sharp fall in the US equities overnight. Yesterday we had mentioned that the equity segment has little room on the upside and then can run into a sharp correction. The sell-off in the US markets yesterday is hinting that the expected correction might come into play without seeing the rise. The major indices have important supports a little away from current levels. A strong follow through sell-off breaking below those supports will confirm that the correction has already begun. 28000 on the Dow, 12800 on DAX, 23000-22500 on Nikkei are important supports to watch. Shanghai is moving down within its broad sideways range.Sensex has support at 38000 and Nifty at 11400 and 11200.
Dow (28292.73, −807.77, -2.78%) has tumbled below 29000 yesterday. It is now important to see if it manages to bounce-back from 28000 again or not. A strong follow-through sell-off today taking it below 28000 will be bearish to see 27000 on the downside. It will also indicate the beginning of the sharp corrective fall that we had expected to happen from around 29500.
DAX (13057.77, −185.66, -1.40%) has come-off sharply from the high of 13460. A test of 12800 on the downside looks likely again. While above 12800, the bullish outlook of seeing 13800 is still alive. A strong rise past 13200 will be needed to trigger the upmove. Only a strong break below 12800 will negate the bullish outlook and will turn the outlook bearish.
Nikkei (23240.95, −224.58, -0.96%) has failed to sustain the break above 23500 seen yesterday and has come-off today. It can oscillate in the range of 23000-23500 (narrow) or 22500-23500 (broad) for some time. While above 22500 for now we retain the view of seeing a rise to 24000 first and then a sharp corrective fall. A strong break below 22500 is needed to trigger the corrective fall from here itself without seeing 24000 on the upside.
Shanghai (3339.56, −45.42, -1.34%) has opened with a wide gap down and can fall to 3300-3250 in the coming days. The narrow range of 3250-3450 remains intact and the index can now head towards the lower end of this range. In case of a break below 3250, a further fall to 3200-3180 can be seen and the broader range of 3180-3470 will come in the picture then.
Sensex (38990.94, −95.09, -0.24%) is struggling to breach 39000 and can see a dip to 38500-38000 in the coming days. 38000 will be an important support to watch. A strong break below it will negate our broader bullish view of seeing 40500-41000 on the upside and will trigger a sharp corrective fall from here itself.
Nifty (11527.45, -7.55, -0.07%) could fall towards the lower end of the 11400-11600 range. Below 11400, cluster of supports are poised in between 11300 and 11200. A strong break below 11200 will be needed to negate the chances of seeing 11800-12000 on the upside that we have been expecting and will turn the outlook bearish.
COMMODITIES
Crude prices continue to dip. News states that an oil tanker that was bound for Pradip, Odisha (India’s eastern coast) from Kuwait caught fire. The tanker carried 200000metric ton of crude. Watch supports on Brent and WTI near 42.50 and 40 respectively. Gold and Silver too are headed towards support levels of 1940/30 and 26 and while they hold, we may expect a bounce back in prices soon. Copper too tests similar support at 2.95; a bounce or break from here would decide the next course of movement. Overall watch important supports below current levels on almost all the commodities mentioned below.
Brent (43.75) has dipped contrary to our expectation of a rise to 47.50. While the price remains below 45, we may expect a dip to 42.50 before bouncing back from there. Above 42.50, we may keep our view of testing 47.50 intact with some delay. WTI (41.05) has fallen too and needs to remain above 40 to keep possible chances of an upmove intact. Watch for a bounce from 42.50 and 40 over the near term. The current correction in the crude prices may be short lived.
has also dipped and unless it rebounds back from 41, we remain cautious on further bullishness towards
Gold (1947.50) has dipped further but trades above support at 1940/30 which may hold to produce a bounce in the prices back towards 1980-2000 in the near term. Only on a sustained break below 1930, we may negate possible upside and look for lower levels with confirmation of a medium term top already in place. Watch price action near 1940/30.
Silver (27.04) tested 26.875 yesterday but bounced back to trade above 27. A sustained dip below 27 if seen may keep prices stable or drag it lower in the near term towards 26. But unless a sharp fall confirms the reversal of direction, we remain bullish on Silver for a test of 28-30 soon.
Copper (2.9855) has dropped back to levels below 3, unable to sustain and move higher. A test of support at 2.95 looks possible just now but we would wait to see if it manages to bounce back to 3+ levels or breaks below 2.95, to head lower. A bounce or break from 2.95 would decide the next course of movement.
FOREX
Dollar Index trades slightly higher but is yet to give a confirmed indication of a sustained rise from here. We look at support of 1.1750 on Euro to give confirmation in the near term. Aussie, Pound and EURJPY have near term supports below current levels and a break or bounce from there would decide on further movement. USDCNY has bounced well and looks likely to rise further from here. This could be bullish for USDINR too but we would watch immediate resistance at 73.50 that may cap the upside and lead to a fall. A break above 73.50 may take it higher to 73.70/80.
Dollar Index (92.82) is headed towards 93.0-93.15 which needs to be broken on the upside to avoid another dip to 92 or lower. Unless the index rises above 93.15, we remain cautious for a dip in the near term.
Euro (1.1844) tested 1.1789 yesterday. While above support at 1.1750, there is still some chances of seeing a rise back to 1.19-1.20 in the coming 1-2 weeks. Else a break below 1.1750 would confirm a near term top and shift our target to lower levels. For now watch price action near 1.1750 from where a bounce looks likely.
EURJPY (125.77) has immediate support at 125.44 and while that holds we do not negate resumption of an upmove. Only a break below 125.44 and further below 125 would confirm bearishness for the medium term.
Dollar-Yen (106.17) is stable just now but is likely to remain in the 107-105 region for the near term. An initial rise to 106.80 is possible followed by a fall towards 105.
Aussie (0.7267) has immediate support at 0.7217 which if breaks could drag Aussie down to 0.71/70 soon. Also Copper has fallen to support at 2.95 and unless a sharp bounce back is seen, Aussie could trade lower.
Pound (1.3281) has fallen but we would look at piece action near 1.32. A bounce from there may indicate that the upside rally is not over yet and another rise to 1.35 could be in place. However, in the longer term there is scope for testing 1.37 on the upside. But we may expect some corrective dip before the rally resumes.
USDCNY (6.8438) has bounced back and could seem to head higher towards 6.85-6.90 in the near term. Immediate view is bullish.
USDINR (73.48) rose to test 73.50 as expected but we would expect 73.50 to cap the upside and trigger a fall back towards 73. In case the pair moves contrary to our expectation and rises beyond 73.50,we may have to allow for a test of 73.70/80 on the upside. For now, we do not fully negate chances of falling back to 72.50-72.00
INTEREST RATES
The US Treasury yields continue to trade lower. The near-term outlook is bearish and a further fall can be seen in the coming days. The German Yields have dipped and are coming closer to their key near-term supports. Inability to bounce from the supports can drag them further lower in the coming days. The 10Yr GoI oscillates around 5.90% and remains bearish to fall further. The chances of seeing a corrective bounce before the downtrend resumes cannot be ruled out.
The US 2Yr (0.13%), 5Yr (0.25%), 10Yr (0.64%) and the 30Yr (1.37%) remain lower. As mentioned yesterday a test of 0.60% and even 0.50% looks likely on the 10Yr. Broadly 0.50%-0.75% is the range that can be seen on the 10Yr in the coming weeks. The 30Yr can test 1.30% and need to see if it can bounce-back from there. Inability to bounce from 1.30% can drag it to 1.20% eventually.
The German 2Yr (-0.72%), 5Yr (-0.71%) and the 10Yr (-0.49%) German Yields have dipped slightly while the 30Yr (-0.06%) has dipped slightly deeper. As mentioned yesterday-0.52% is an important support to watch on the 10Yr. A break below it will be bearish to see -0.60% on the downside. The 30Yr on the other hand has support at -0.11% which needs to hold in order to prevent a further fall to -0.20% again.
The 10Yr GoI (5.9175%) oscillates around 5.90%. It will have to sustain well above 5.90% in order to see a corrective bounce to 5.95%-5.98% before resuming the downtrend. Inability to sustain above 5.90% can drag the 10Yr GoI lower to 5.80%-5.75% from here itself.
