STOCKS
The sell-off in the Dow and DAX has intensified and the expected fall has happened much faster than anticipated. The CBOE Volatility Index (VIX, 40.28) has surged and can move up further indicating that more sell-off is on the cards. While there is room for further fall in both the Dow and DAX, intermediate supports are coming up which need to be watched closely in the coming days to see if they can hold and produce a relief rally. The fall in the Asian indices are relatively much lesser. Nikkei has come down but much gradually and can dip further in the coming days. Shanghai remains stable near the lower end of its 3180-3450 range. Sensex and Nifty fell yesterday but remains well within their range of 39500-41000 and 11600-12100. It will have to be seen if they can continue to retain this range or not.
The CBOE Volatility Index (40.28) has surged yesterday and can move up further to 45-46. Whether the index moves further above 46 or not is going to be crucial which will need a close watch. A rise past 46 will open doors for the index to revisit 60-65 levels again. That will mean a much deeper fall in the equities going forward.
The expected fall to 26500 on the Dow (26519.95, −943.24, -3.43%) has happened much faster than we had expected. While an intermediate bounce to 27000 cannot be ruled out from here, the downside is open to test 26000-25800 – the next crucial support zone to watch. The Dow will have to necessarily hold above 26000-25800 in order to avoid a much deeper fall. We will watch closely the price action in the 26000-25800 region.
DAX (11560.51, −503.06, -4.17%) has tumbled and is heading towards 11400-11200 much faster that we had expected. It will have to be seen if it can bounce from the 11400-11200 region. Failure to see a bounce from the 11400-11200 region can trigger a much deeper fall to 10500-10200 going forward.
Nikkei (23247.16, −171.35, -0.73%) is moving down towards 23000 in line with our expectation. As mentioned yesterday, 23000 will need a close watch as a break below it can trigger further fall to 22500 and even 22000 going forward.
Shanghai (3255.71, −13.53, -0.41%) continues to oscillate around 3250. There is room on the downside to test 3200-3180 after which we can expect a fresh rise. As mentioned yesterday, we expect the 3180-3450 range to remain intact and Shanghai to bounce from the 3200-3180 support zone.
Nifty (11729.60, -159.80, -1.34%) and Sensex (39922.46, −599.64, -1.48%) had declined yesterday and can extend their fall today to test the lower end of their respective range of 11600-12100 and 39500-41000. Both Sensex and Nifty had performed relatively much better in the last few days amid the sell-off in the other major indices. It will have to be seen if the Sensex and Nifty can sustain above the crucial levels of 39500 and 11600 respectively in order to avoid a deeper fall. We will have to wait and watch.
COMMODITIES
Commodities are trading lower and look bearish for the coming week. The fall in crude prices gained momentum after the Energy Information Administration reported an inventory increase of 4.3mln barrels for week ended 23rd Oct. Inventory movements are being impacted by rising cases of coronavirus in the US that shows a 7-day average for newly diagnosed cases at 70,000 for last week. Silver and Gold are bearish while below 24 and 1880 and have room for fall towards 22.0-21.5 and 1860/1840 respectively. Copper is bearish towards 3.0.
Brent (39.36) tested 39.16 before bouncing back to slightly higher levels. Failure to sustain above 39.30 could drag it down to lower support near 38.30 in the coming week. Overall upside is likely to be capped at 43.50 just now while there is scope for a test of 38.30 on a break below 39.30.
Nymex WTI (37.61) has risen slightly after testing 37.35 on the downside. Like Brent, if WTI also breaks below 37.50 it could be vulnerable to a fall towards 36.40-36.00 in the coming week.
Gold (1877.90) has come down well as expected aided by a rise in US Dollar. While below 1880, there is scope for a fall towards 1860-1840 soon.
Silver (23.42) has broken below crucial support at 24 and could now be headed towards 22.0-21.5. View turns bearish while below earlier support turned resistance at24.
Copper (3.0730) looks bearish towards 3.00 by the early sessions next week.
FOREX
Dollar Index has risen and could remain higher today before again falling back next week. Euro needs to remain above 1.17 to trade higher else a fall to 1.16 could be possible. USDINR could test 74 and attempt to move higher towards 74.25 in the near term.
Dollar Index (93.445) tested 93.645 yesterday before coming off from there slightly. This has been in line with our expected resistance at 93.70 mentioned yesterday. While below 93.70, view is bearish to see a fall to 92.50.
Euro (1.1746) has dipped but needs to keep a close watch to see if it breaks below 1.17 or manages to bounce back from 1.17. A fall below 1.17 could be bearish for a fall towards 1.16 in the next 2-weeks.
EURJPY (122.71) tested 122.18 before rising slightly from there. While above 122, we cannot negate a rise to 123.0-121.10 the coming week. View is bullish while above 122.
Dollar-Yen (104.47) has bounced well and while above 104, a rise to 105+ could be seen in the near term.
Aussie (0.7057) has slightly bounced after testing important support at 0.70 as expected. This if holds could keep Aussie intact within 0.72-0.70 range. But we may expect a possible break below 0.70 to head towards 0.68 in the coming week.
Pound (1.2994) has room to test 1.2850 and could bounce from there in the longer run. Immediate view is to see a dip towards 1.2850.
USDCNY (6.7157) has dipped from 6.73. Immediate range of 6.75-6.70 looks possible in the near term.
USDINR (73.88) has risen well and may test 74 today with high chances of rising towards 74.25 on the upside in the near term. View is bullish for USDINR while above 73.65.
INTEREST RATES
The US Treasury yields have bounced from the lows seen in the US session. While the sell-off in the equities can keep the upside capped in the yields, there are still chances for the Treasury yields to see some upticks in the near-term before a fresh and sharp fall happens. The German yields have dipped further and can fall further without seeing a corrective rise. The European Central Bank monetary policy meeting is due today. The 10Yr GoI can see a corrective bounce in the coming days and then can resume its broader downtrend.
The US 2Yr (0.15%), 5Yr (0.34%), 10Yr (0.79%) and the 30Yr (1.57%) Treasury yields have bounced from their lows seen in the US sessions. The 10Yr has bounced from 0.75% and the 30Yr from 1.54%. While above 1.50% (30Yr) and 0.70% (10Yr) a short-lived rise 0.90% (10Yr) and 1.65%-1.70% (30Yr) is still a possibility before a fresh fall happens. As mentioned yesterday a fall below 1.50% (30Yr) and 0.70% (10Yr) is needed to mark the end of the upmove that has been in place since July.
The German 2Yr (-0.78%), 5Yr (-0.82%), 10Yr (-0.63%) and the 30Yr (-0.22%) yields have dipped further. As mentioned yesterday, the chances of a corrective rise stands reduced. While below -0.60% (10Yr) and -0.20% (30Yr) the yields can resume their downtrend towards -0.70% (10Yr) and -0.40% (30Yr) from here itself and then can see a reversal.
The 10Yr GoI (5.8583%) has risen above 5.85%. Our view of seeing a corrective rise to 5.88%-5.90% remains intact before we see a fresh fall to 5.75%.
