STOCKS
The expected corrective bounce is happening in the Dow and DAX ahead of the US elections tonight. But we need to watch the resistances at 27200 on the Dow and 12000 on the DAX which has to be broken in order to avoid a fresh fall and negate the bearish view. Shanghai has bounced sharply from near the lower end of its 3180-3450 range. It can now move up towards the upper end of this range. Sensex and Nifty are getting good buying support at lower levels. A strong fresh follow-through buying over the next few days to take them above 11800 (Nifty) and 40200 (Sensex) will be bullish from a medium-term perspective. Nikkei is closed today.
The corrective bounce to 27000-27200 on the Dow (26925.05, +423.45, +1.60%) is happening in line with our expectation. While below 27200 we retain the bearish view of seeing a fall to 26000 going forward. A strong break above 27200 and a subsequent rise past 27500 will be needed to completely negate the chances of seeing 26000 on the downside.
DAX (11788.28, +231.80, +2.01%) has bounced and tested 11800 in line with our expectation. As mentioned yesterday, the upside can extend upto 12000 before the broader downtrend resumes to target 11200 and lower levels eventually.
Nikkei (23295.48, +318.35, +1.39%) is closed today.
Shanghai (3269.38, +44.26, +1.37%) tested 3200 as expected and had bounced-back sharply from there. The 3180-3450 range remains intact. We see high chances of Shanghai now moving up within this range towards 3350 initially and then to 3400-3450 eventually on a break above 3350.
Nifty (11669.15, +26.75, +0.23%) seems to be getting fresh buyers below 11600 which is positive. While above 11600 a rise to test 11800 is possible in the next few sessions. As mentioned yesterday, a strong break above 11800 will be necessarily needed to pave way for 12000-12100 again and also to negate the danger of breaking below 11500 and seeing a fall to 11350. We will have to wait and watch.
Similarly, Sensex (39757.58, +143.51, +0.36%) is getting buyers below 39500 and will have to see if it can rise past 40200 decisively from here. Such a break will negate the danger of seeing the fall to 38500 and will also open doors to revisit 41000 levels.
COMMODITIES
Gold and Silver trade higher on Dollar weakness also boosting a rise in Copper. But we would like to wait and see for the next couple of sessions to confirm direction for the near term. The US Presidential elections and its possible outcome could keep the markets volatile for the next 2-3 sessions. Crude trades higher just now but any rise seen could be short lived with resumption of downtrend to be seen soon.
Brent (38.85) and Nymex WTI (36.76) have both bounced well from lows seen yesterday. But we would be cautious to see further decline in the coming sessions. Any rise seen just now is likely to be short lived and limited. Watch for immediate resistances near 39.30 on Brent and 37.30/40 on WTI .
Gold (1897.70) has moved up unable to sustain below 1880, boosted by a weaker Dollar. On the upside, we continue to look at 1900-1920 as crucial resistance that may hold for now. Our bearish view of seeing 1860-1840 could be delayed for now.
Silver (24.23) has risen too, moving sharply above 24. While the price sustains above 24, we may expect a rise towards 25 in the near term. Unless a fall again below 24 is seen, we may not bring in bearish possibilities for now.
Copper (3.0945) has bounced back well after a test of 3.028 yesterday, slightly higher than our expected support at 3.0. While the rise sustains, we may expect a bounce to 3.15/20 in the near term.
FOREX
Euro may test 1.16 and rise from there just now that could keep Dollar Index lower for the day. But this could be short lived as Euro has scope for a further fall towards 1.15.EURJPY trades higher but we do not negate another leg of a fall back to levels below 121. Aussie, Yuan and Pound could trade sideways. USDINR could hold below 74.50 today but we caution for a possible rise back above 74.50 soon. US elections and its outcome could keep the markets volatile this week.
Dollar Index (93.993) has dipped slightly from 94.285. The dip is likely to be short lived and we may expect a bounce back towards 94.40-95.00 soon on the upside. View is bullish while above 94.
Euro (1.1647) has immediate support at 1.16 which may hold for the near term and keep the Euro higher. But we caution a possible break below 1.16 to fall towards 1.15 on the downside before a sharp rise towards 1.17 or higher is seen in the longer run.
EURJPY (121.98) has risen well and could extend towards 122.50 in the near term before again resuming its fall towards 121.0-120.50 in the medium term. View is bearish within which we may expect short interim corrective upmoves.
Dollar-Yen (104.71) has immediate resistance near 105.0-105.30 which if holds could keep the pair lower for the near term. Watch for a possible test of mentioned resistance while the Dollar trades higher. Range of 104-105.30 is possible for the near term.
Aussie (0.7050) is stuck in the 0.70-0.7135 region and could remain so for a few more sessions before deciding on further direction from here. We are fairly bullish on Aussie above 0.70.
Pound (1.2929) is stable and continues to hold above immediate support at 1.2875. While the support holds, Pound is bullish for a rise towards 1.31 or higher.
USDCNY (6.6908) has risen slightly from levels seen yesterday but we may expect sideways trade for sometime between 6.70-6.68.
USDINR (74.43) could hold below immediate resistance at 74.50 to see a corrective dip towards 74.30/10 over today and tomorrow; but we do not negate chances of rising above 74.50 in the near term. Any dip from 74.50 could be seen with caution for a possible rise again in the next few sessions.
INTEREST RATES
The US Treasury yields have dipped slightly. There is limited room on the upside from here and we expect the yields to reverse lower after testing their immediate resistance. The German yields continue to trade lower and are likely to fall further. The bearish view is intact. The 10Yr GoI can extend the current corrective rise in the near-term before resuming the broader downtrend.
The US 2Yr (0.15%) Treasury yield remains stable while the 5Yr (0.37%), 10Yr (0.84%) and the 30Yr (1.65%) have dipped slightly. Our view remains the same. There is less room on the upside to test 0.90% (10Yr) and 1.70% (30Yr). Thereafter we expect the yields to reverse lower and begin a fresh fall.
The German 2Yr (-0.81%), 5Yr (-0.83%), 10Yr (-0.64%) and the 30Yr (-0.23%) yields have dipped further and are keeping our bearish view intact. We expect a test of -0.70% (10Yr) and -0.40% (30Yr) on the downside in the coming days after which a strong bounce-back move is possible.
10Yr GoI (5.8912%) remains higher and can extend the upmove to 5.93%-5.95% on a break above 5.90%. As mentioned in the Evening Comments yesterday, the upside in this current bounce will be capped at a maximum of 6% and the broader downtrend will continue to remain intact.
