STOCKS
The price action in equities indicates that the time for a corrective fall that we have been cautioning for some time is coming closer. Dow has come-off failing to sustain above 30000 and the upside will be limited to 30800-31000 even if it bounces back from here. We are looking for a corrective fall to 29000-28000 in the coming days. The US markets are closed today. DAX also has limited upside from here up to 13500-13800. The Asians are giving early signs of a reversal. Sensex and Nifty has declined sharply from near 13200 and 45000 as expected. Shanghai is turning down from the upper end of its 3180-3450 range and keeps the range intact. Nikkei still has hopes of seeing one more rise to 27500 before reversing lower again.
Dow (29872.47, −173.77, -0.58%) has come-off failing to sustain the break above 30000 and strengthens our cautious stance. Inability to bounce above 30000 again will reduce the chances of seeing 30800-31000. Also from a broader picture, we are not very bullish at the moment. Instead we are cautious to see a sharp corrective fall to 29000-28000 from here itself or after a test of 30800-31000.
DAX (13289.80, −2.64, -0.02%) broke above 13300 as expected but failed to sustain. It will have to be seen if it can rise back and sustain above 13300 or not which is needed to see a further rise to 13500-13800. This is possible while the DAX holds above 13200. However, from a bigger picture 13500 and 13800 are important resistances that can cap the upside. We will be looking for a sharp corrective fall to 12400 in the coming weeks.
Nikkei (26470.28, +173.42, +0.66%) has come-off after testing 26700 yesterday. While above 26000, the chances of seeing 27500 will still be there before the expected correction to 25500 happens. We will have to wait and watch.
Shanghai (3358.01, −4.32, -0.13%) has come-off sharply from the high of 3423.48 yesterday. As expected, the 3180-3450 range continues to remain intact. As such we can now expect Shanghai to move down within this range towards 3300-3250 in the coming days.
The resistance at 13200 on the Nifty (12858.40, -196.75, -1.51%) has held very well. The index has declined sharply from the high of 13145.85. A fall below 12750 from here will confirm that a top is in place. That in turn will trigger the fall to 12600-12500 and even lower that we had been cautioning for some time.
Similarly, Sensex (43828.10, −694.92, -1.56%) has come-off from just below 45000 as expected. A break below 43500 can trigger the expected corrective fall to 43000 and 42000 that we had been mentioning over the last several days.
COMMODITIES
Weaker Dollar and report of a decline in US stockpiles of 754000 barrels last week by the Energy Information Administration (EIA) has been positive for the crude prices taking it higher. Crude prices could be headed towards resistances near 48-50 (WTI) and 50-51 (Brent) levels from where a dip looks possible. Gold holds above 1800 but while below 1860, medium to long term bearish sentiment remains intact. Silver may hold above immediate support at 23 but we do not negate a gradual fall to 22-21 in the longer run. Copper needs to fall immediately towards 3.20 before again attempting a rise, else could trigger further bullishness towards 3.40. Watch price action near current levels.
Brent (49.04) and Nymex WTI (46.04) continue to extend the upmove rising sharply on a break above resistances seen over the past few sessions. Immediate resistance on Brent is seen near 50 which if fails to produce a sharp rejection could pull the prices higher towards 55 in the medium term. On the charts, a dip from 50-51 looks likely just now on the Brent. WTI has broken above crucial levels of 45 and could now be open to test 48-50 on the upside. A rejection in Brent if seen could limit the upside for WTI and drag it lower in the near term. Watch price action near 50-51 on Brent.
Gold (1815.40) has bounced from immediate support at 1800 mentioned yesterday and while that holds, we may expect a test of 1850/60 on the upside before another attempt to dip back towards 1800 or lower is seen. Immediate view is bullish while above support at 1800 but in the medium term we cannot negate a dip to levels below 1800 while resistance near 1860 holds.
Silver (23.48) is stable below 24, holding above immediate support at 23. While above 23, there could be some scope of rising back to 24 or higher in the near term. But in the medium term, we may expect a gradual break below 23 to head towards 22-21. Immediate view is to see a bounce from 23 within the medium term bearish sentiment.
Copper (3.3590) has risen to test immediate trend resistance at current levels from where a dip is expected to be seen towards 3.20 before attempting to bounce back again in the longer run. Failure to decline from current levels could initiate fresh upmove and force us to look for higher targets of 3.40. Watch price action near current levels today.
FOREX
Dollar Index has fallen afresh below 92 and could be headed towards 91.75 or lower indicating strength for the other currencies. Euro may test 1.20 while Aussie and Pound are headed towards immediate resistances near 0.74 and 1.34 which needs to break and sustain to take the currencies further up. Watch price action near the mentioned resistances. EURJPY may dip from 125. USDCNY and USDINR may dip towards 6.55-6.50 and 73.80. USDJPY can decline towards 104.
Dollar Index (91.906) has finally broken below 92 and could head towards lower end of the support zone of 92-91.75 from where failure to bounce back would drag the index lower towards 90 in the medium term, indicating strength for other major and EM currencies across the globe.
Euro (1.1927) has risen well above 1.19 on fresh Dollar weakness and while the index trades lower, we may expect a test of 1.20 on Euro. Immediate view is bullish.
EURJPY (124.36) has risen but has immediate trend resistance near 124.50-125 from where a fall looks possible towards 123 again in the medium term.
Dollar-Yen (104.27) has fallen from immediate resistance at 105 and while that holds, we may expect a dip towards 104 in the near term in line with the weakness seen in the Dollar Index.
Aussie (0.7368) has risen slightly but needs to break above immediate resistance of 0.74 to continue the rally upwards. Having close directional correlation with industry metals, if Copper falls from current resistance levels, Aussie could also decline form 0.74 and fall back towards 0.72. But on the other hand if Dollar weakness continues to extend, we may expect a break above 0.74 on the Aussie.
Pound (1.3391) has risen to test immediate resistance near 1.34 and while that sustains, a fall towards 1.33-1.32 could be seen in the near term. Only a continued fall in Dollar Index if seen below 91.75, could leave scope for Pound to break above 1.34 and head higher towards 1.36 in the longer run.
USDCNY (6.5633) could dip towards 6.55-6.50 in the near term if Dollar weakness continues below current levels. We look for a dip within the broad range of 6.60-6.50 mentioned yesterday.
USDINR (73.92) tested 73.90 and closed near the intra-day low seen yesterday. Further strength in the Euro today could drag USDINR lower towards 73.80 before a bounce is expected from there. We expect a test of lower end of the 73.80-74.25 range for the day.
INTEREST RATES
The US Treasury yields remain higher but stable. With limited room on the upside, we retain our view of seeing a sharp reversal in the Treasury yields going forward. The German yields remain bearish and can see a fresh fall in the coming days. The 10Yr GoI can oscillate in the range of 5.85%-5.92% for some time.
The US 2Yr (0.16%), 5Yr (0.39%), 10Yr (0.88%) and 30Yr (1.62%) Treasury yields remain stable. Our view remains the same. 0.92% on the 10Yr and 1.65%-1.67% on the 30Yr can cap the upside and drag the yields lower again. With limited room on the upside we expect the Treasury yields to fall towards 0.78% (10Yr) and 1.50% (30Yr) initially and then to 0.70%/0.60% (10Yr) and 1.25% (30Yr) eventually over the medium-term.
The bounce in the German 2Yr (-0.76%), 5Yr (-0.76%), 10Yr (-0.57%) and the 30Yr (-0.16%) yields seen on Tuesday is losing steam as expected. The broader bearish view is intact. The 10Yr and 30Yr can retest -0.60% and -0.20% in the near-term. An eventual break below these levels can drag them to -0.70% (10Yr) and -0.35%/-0.40% (30Yr) eventually over the medium-term. Thereafter a fresh rise is possible.
The 10Yr GoI (5.8864%) remained below 5.90% yesterday. As mentioned yesterday we can expect the 10Yr GoI to oscillate in the 5.85%-5.92% (revised slightly wider from 5.86%-5.92% mentioned yesterday) range for a few days.
