STOCKS
Equities continue to remain under pressure. Dow and DAX have declined further and keep our bearish view intact to fall further. Dow can fall to 27000 and 26600-26500 while the DAX can tumble towards 11400. Nikkei can dip to 23000 and even lower while below 23500. Shanghai can dip to test the lower end of its 3180-3450 range. Sensex and Nifty have bounced within their respective range 39500-41000 and 11600-12100. Sensex and Nifty look relatively less vulnerable for a sharp fall compared to the other major indices and have high chances of outperforming others going forward.
Dow (27463.19, −222.19, -0.80%) has declined further and keeps our bearish view intact of seeing a fall to 27000 and 26600-26500. An intermediate corrective bounce from 27000 cannot be ruled out before the fall extends to 26600-26500. As mentioned yesterday, 26600-26500 is a very crucial support zone which has to necessarily hold in order to avoid a much deeper fall to 26000 and lower.
DAX (12063.57, −113.61, -0.93%) has declined further in line with our expectation and remains bearish. As mentioned yesterday, with a head and shoulder pattern on the charts, the current fall can extend deeper up to 11400 and even 11200. A break below 12000 can trigger and accelerate the fall. 12400 will be a good support-turned-resistance that can cap the upside now.
Nikkei (23410.76, −75.04, -0.32%) sustains the break below 23500. As mentioned yesterday, while below 23500 a fall to 23000 can be seen. Also, a further break below 23000 will trigger a much deeper fall to 22500 and even 22200 over the medium-term.
Shanghai (3248.93, −5.39, -0.17%) is oscillating around 3250 over the last few days. 3200-3180 is the range support that can be tested now. We expect Shanghai to bounce back from the 3200-3180 support zone and retain the 3180-3450 sideways range.
Nifty (11889.40, +121.65, +1.03%) had recovered back above 11800 and needs to see if this bounce can sustain. For now the 11600-12100 range remains intact and the index can oscillate within it while the other global indices witness further sell-off. While above 11600, the broader bias is bullish to see an upside breakout above 12100. Only a break below 11600 will bring the Nifty under pressure and turn the outlook negative.
Similarly, Sensex (40522.10, +376.60, +0.94%)is holding well above 40000 and is retaining the 39500-41000 range. While above 39500 the bias is bullish to see an upside break above 41000 and a rise to 42000. However, the breakout could take some time as the global equities remain under pressure for further fall.
COMMODITIES
Commodities are down today. Gold and Copper could be headed towards 1880 and 3.00 respectively while Silver looks bullish above 24. Crude prices may remain stable to bearish within 42.50-39.30 (Brent) and 40.0-37.50 (WTI) respectively for the near term.
The American Petroleum Institute (API) reported a build of 4.577mln barrels in crude oil inventories for the week ended 23rd October against analyst expectation of 1.11 mln barrels build.
Brent (40.49) and Nymex WTI (38.71) have dipped slightly from levels seen yesterday. We repeat from yesterday’s morning briefing to see ranged trade between 42.50-39.30 and 37.50-40.00 respectively for Brent and WTI with bias slightly tilted to see lower end of the mentioned range.
Gold (1908) and Silver (24.44) both seems to be stable, trading within a small range since the last 2-3sessions. View remains bullish for Silver while above 24 and Gold could be ranged within 1920-1880 for now.
Copper (3.0830) continues to trade below 3.10 and while it trades lower, we may expect a test of 3 before bouncing back from there again targeting 3.15/20 in the medium term.
FOREX
Dollar Index may dip in the near term towards 92.70 while Euro could bounce back towards 1.18+ again. EURJPY looks bearish for a fall towards 122. Pound and Aussie also look weak. USDCNY may rise towards 6.75. USDINR has fallen sharply but we would wait and watch before taking a firm stand on further direction from here. Watch immediate support at 73.65.
Dollar Index (93.132) trades higher but while below 94.0-93.70, we may continue to look for a fall towards 92.70-92.50 in the medium term. Watch price action near 93.70-94.00 in the next few sessions.
Euro (1.1776) has fallen as expected and could extend the dip further towards 1.1750 which is an immediate support mentioned yesterday. Upside could be limited to 1.1870 just now on a bounce seen from 1.1750.
EURJPY (122.87) has broken below our expected support at 123 and while could be headed towards 122 now. Our expected rally towards 125-126 can be negated for now. View is bearish.
Dollar-Yen (104.30) has broken below support at 104.50 and now looks bearish towards 104 contrary to our expectation of a rise towards 105-106.
Aussie (0.7132) has been stable. While below 0.7170, we may expect a dip below 0.71 towards 0.70 soon.
Pound (1.3035) looks stable above 1.30. A rise towards 1.31 looks possible in the near term. Failure to rise sharply from here could drag it down towards 1.2930 in the near term.
USDCNY (6.7099) looks stable just now. The Yuan has strengthened quite a bit over the last few months against the Dollar. The Chinese Central bank, yesterday has neutralized the counter-cyclical factor (the adjustment that contributing banks make to the daily trade-weighted reference rate that the PBOC uses to guide the Yuan) to let the daily rate fixing more closely reflect the actual market moves and become more market driven, as per Reuters news. We may expect a rise towards 6.75 soon.
USDINR (73.71) fell sharply from 73.9425 to 73.70 breaking below 73.80 contrary to our expectation of seeing a range of 73.80-74.00. We would wait and watch to see if the pair falls towards 73.65/50 in the next 1-2 days or re-attempts to rise back towards 74. We would wait now before taking a firm stand on further direction from here.
INTEREST RATES
The US Treasury yields have dipped further as the sell-off in equities continues to keep the yields under pressure. The Treasury yields are indicating the end of the current upmove. A further fall from here will confirm the resumption of the broader downtrend. The German Yields have reversed lower. The downtrend can continue without seeing a corrective bounce that we had expected. The 10Yr GoI has chances to see a corrective bounce in the near-term before falling further.
The US 2Yr (0.14%), 5Yr (0.33%), 10Yr (0.77%) and the 30Yr (1.55%) Treasury yields have dipped further thereby reducing the chances of any further rise. The 30Yr has come-off sharply below 1.60% and can head down towards 1.50% now. The 10Yr on the other hand has dipped below 0.80% and can now test 0.70% on the downside. As mentioned yesterday the recent upmove seems to be ending and a fall below 1.50% (30Yr) and 0.70% (10Yr) will confirm the same.
The German 2Yr (-0.78%), 5Yr (-0.81%), 10Yr (-0.62%) and the 30Yr (-0.20%) yields have reversed lower again. A further fall from here will negate the chances of seeing a corrective bounce that we had been mentioning over the last few days. In that case the 10Yr and 30Yr yields can fall to -0.70% and -0.40% from here itself and then can see a reversal.
The 10Yr GoI (5.8467%) failed to sustain the break above 5.85% yesterday. A corrective bounce to 5.88%-5.90% looks possible before the yield resumes its downtrend towards 5.75% eventually.
