STOCKS
Dow and DAX got a breather yesterday after having fallen sharply over the last few days. However, the indices are still weak and can resume the fall in the coming days. Dow can test 26000 and DAX can test 11400-11200 from where these indices will have to bounce-back strongly in order to avoid a much deeper fall. Nikkei is heading down towards 23000 as expected and needs to see if it can bounce from there or not. Shanghai is indicating the chances of reversing higher from here itself without testing the lower end of its 3180-3450 range. Sensex and Nifty tested their crucial range supports of 39500 and 11600 respectively yesterday and are managing to hold above it. It will have to be seen if they can continue to sustain above this support and move higher. The price action in the next few sessions will need a close watch.
A slight recovery in the Dow (26659.11, +139.16, +0.52%) which we do not expect to sustain. Immediate resistance at 27200 can cap the upside for now and keep the Dow pressured to test 26000 on the downside. As mentioned yesterday, the Dow has to necessarily sustain above 26000 and rise above 27500 in order to avoid a much deeper fall to 25000. We will have to wait and watch.
DAX (11598.07, +37.56, +0.32%) oscillated around 11600 and has closed on a mixed note yesterday. The broader bearish view of seeing 11400-11200 on the downside remains intact. We reiterate that a failure to see a strong bounce from the 11400-11200 support zone will leave the DAX in danger of seeing a much deeper fall to 10500-10200.
Nikkei (23152.83, −179.11, -0.77%) remains lower below 23500 and is likely head down towards 23000 in line with our expectation. As we have been mentioning over the last few days, the level of 23000 is very crucial which if broken will pave way for a much deeper fall to 22500 and even 22000 from here.
Shanghai (3277.19, +4.46, +0.14%) is attempting for a bounce. A strong rise past 3300 from here will negate the chances of seeing a test of 3200-3180 that we had been expecting. In turn, that will open doors for a rise to 3400-3450 again. Overall the 3180-3450 range is continuing to remain intact.
Nifty (11670.80, -58.80, -0.50%) tested 11600 yesterday and has managed to hold above it. The price action in the next few days will need a close watch to see if it can retain the 11600-12100 range and move up again. Nifty will come under pressure for a fall to 11500-11350 only on a strong break below 11600.
Sensex (39749.85, −172.61, -0.43%)is also holding above 39500 and has bounced-back after testing this key support yesterday. For now the 39500-41000 range remains intact. It will have to be seen if the Sensex can continue to sustain above 39500 and avoid a further fall to 38500.
COMMODITIES
Commodities have recovered a bit from lows seen over the last 1-2 sessions. Gold and Silver look bearish towards 1860-1840 and 21.50 respectively. Copper is bearish towards 3.0 before a rise back to 3.15/20 sets in. Overall immediate bounce is any is likely to be short lived with bias tilted to further bearishness.
Brent (38.64) tested 38.18 before bouncing back from there while Nymex WTI (36.53) moved down to test 35.89 before again rising above 36. We were looking at 38.30 on Brent and 36 on WTI which were broken yesterday but the pries have now moved back above the respective mentioned support levels. The corrective bounce could be short lived and we may expect a test of 37.50-34.86 on Brent on a sharp fall below 38. Similarly, WTI could be dragged down towards 33 on a break below 36 again in the medium term.
Gold (1875.30) trades stable for now but has scope of falling towards 1860-1840while below 1880. View is bearish for the near term.
Silver (23.54) has slightly bounced from 23.27 but as mentioned yesterday we would be bearish on Silver while it sustains below 24. A break of 23 on the downside could trigger a fall towards 22.0-21.50.
Copper (3.0750) tested 3.0545 on the downside before bouncing back again to higher levels. There is scope for a test of 3.0 on the downside from where a rise back towards 3.15/20 looks likely.
FOREX
Weakness in Euro could be negative for the Rupee. Dollar Index on the other hand trades just below important levels of 94 and needs to break on the upside to keep the upward momentum intact; else a fall back towards 92.75-93.00 could be possible. EURJPY looks bearish but could see a short corrective bounce from 122. Aussie and Pound look poised for a rise from current levels.
Dollar Index (93.81) has moved above 93.70 and if that sustains, we may expect an eventual rise above 94 to test 95.15. Watch price action near 94.
Euro (1.1688) has dipped below 1.17 initiating a fall towards 1.16 in the near term. View is bearish while below 1.17.
EURJPY (122.09) has come down to test crucial support at 122. A break or bounce from here would be the decider of the next leg of movement from here. A fall below 122 could trigger a fall to 120.50.
Dollar-Yen (104.45) trades below 104.50 after testing an intra-day low of 104 yesterday. View is bearish while below 104.50 for an initial sideways trade within 104.0-04.50 followed by a possible dip towards 103 on a break below 104 in the medium term.
Aussie (0.7046) has important support at 0.70 and while that holds, we may expect a rise to 0.7140. View is bullish while above 0.70.
Pound (1.2931) has support near 1.2850 and while above that, a possible bounce towards 1.31/32 looks likely. View is bullish while above 1.2850.
USDCNY (6.6918) has dipped to break below 6.70 contrary to our expectation of seeing a ranged movement within 6.70-6.75. While the pair trades lower and sustains below 6.70, we may look for a fall towards 6.68. Immediate view is bearish.
USDINR (73.1050) closed well above 74 yesterday. On the downside 73.75 is an immediate support (revised up from 73.65) but we may not see a fall back to 73.75 instead the view now looks bullish for an initial test of 73.25 followed by an attempt to test 74.50. View is strongly bullish above 74.
INTEREST RATES
The US Treasury yields have risen further and keep alive the chances of moving up to test their resistances before beginning a fresh fall. The German yields continue to move down in line with our expectation and are keeping our bearish view intact. The European Central Bank had left the rates unchanged yesterday and had hinted that more stimulus could be on the cards. The 10Yr GoI has risen as expected and can extend the upmove further before reversing lower again.
The US 2Yr (0.15%) Treasury yield remains stable while the 5Yr (0.36%), 10Yr (0.82%) and the 30Yr (1.60%) have inched further higher. This keeps alive the chances of seeing a rise to 0.90% (10Yr) and 1.65%-1.70% (30Yr) in the near-term. Thereafter we expect the yields to reverse lower and begin a fresh fall.
The German 2Yr (-0.81%), 5Yr (-0.84%), 10Yr (-0.64%) and the 30Yr (-0.23%) yields continue to move down in line with our expectation. The downtrend is intact and the chance of a corrective bounce seems to have got negated completely. As such, the yields can move down to -0.70% (10Yr) and -0.40% (30Yr) straight away and can reverse higher thereafter.
As expected, the 10Yr GoI (5.8837%)has moved up to 5.88% and can test 5.90% now. While we retain the broader bearish view of seeing a fall to 5.75% over the medium-term, the current corrective bounce can extend up to 5.93%-5.95% before reversing lower again in case of a break above 5.90% is seen from here.
