STOCKS
Equities continue to trade strong. They show signs of seeing an extended rise before our long awaited correction begins. The price action in the coming days will need a close watch to see if the equities are turning down from the first level of resistances itself or will move up further and then fall-back after the extended rise. Dow has tested 31000 but has room (on the short-term charts) to test 31300-31500 before reversing lower. DAX can also rise to 14300-14500 on a break above the 13900-14000 resistance zone. Nikkei can test 28000. Shanghai has a crucial resistance at 3600 that can be tested in the coming days. Sensex and Nifty can bounce back today taking cues from the global markets. They can retain their strength and move up towards 48700 (Sensex) and 14300 (Nifty).
Dow (30829.40, +437.80, +1.44%) surged to 31000 as expected. On the weekly and 3-day chart there is room to test 31300-31500 on the upside while on the long-term charts the resistance is at 31000 itself. As such, the correction that we are expecting can happen anywhere from the broad 31000-31500 region. Only a strong rise past 31500 will prove our view wrong and force us to change the stance.
DAX (13891.97, +240.75, +1.76%) has risen back sharply to retest the 13900 resistance. The price action over the last couple of days brings back the chances of seeing the extended rise to 14500 that we had mentioned earlier this week. For now the fall to 13200 is not happening immediately as we may have to allow for an extended rise above 14000 to 14300-14500 before the expected correction begins.
Nikkei (27553.09, +497.15, +1.84%) has risen back above 27500 thereby negating the danger of breaking below 27000 immediately. A test of 28000 looks possible and thereafter the index can reverse lower.
Shanghai (3555.69, +4.81, +0.14%) sustains higher and hovers around 3550. As mentioned yesterday, 3600 will be a very crucial level that can be tested now. A strong reversal from 3600 can drag the index lower to 3450-3400. On the other hand, a strong break above 3600 will be very bullish from a long-term perspective. The price action at 3600 will need a close watch.
Nifty (14146.25, −53.25, -0.38%) and Sensex (48174.06, −263.72, -0.54%) fell yesterday but can bounce-back very well taking cues from strong rise in the global equities. The near-term view continues to remain bullish to test 14300 (Nifty) and 48700 (Sensex) in the coming days.
COMMODITIES
Precious metals trade lower today as some bounce is seen in the Dollar Index. We may expect Gold and Silver to fall towards supports at 1900 and 27 before a bounce is seen again towards higher levels. Crude prices look bullish towards 55-56 (brent) and 51-52 (WTI). Copper is also bullish towards 3.80.
Brent (54.50) and Nymex WTI (50.87) had dipped slightly yesterday but has bounced back showing intrinsic strength that could hold for the near term. While Brent has broken above 54.15, we may expect a rise towards 55-56 in the near term. WTI on the other hand could test 51-52 on the upside. Overall medium term view is bullish.
Gold (1918.50) did not test 1980 but came off from lower levels of 1960 as Dollar has bounced a bit. While Dollar trades strong for the near term, the rise in Gold prices could be subdued for sometime before resumption of the upmove is seen again. For now while below 1980-1940, Gold could fall towards 1900 on the downside which is a crucial near term support.
Silver (27.10) has also dipped a bit but the fall could be limited to 27 as we may expect a bounce back towards 28-29.50 over the medium term while above support at 27.
Copper (3.6690) continues to trade higher. A rise towards 3.80 cannot be negated in the near term.
FOREX
Most currencies trade stronger and looks bullish for the near term including the Chinese Yuan, EURJPY, Aussie and Euro while Dollar Yen could be headed towards 103.50/75 before falling from there. Dollar Index has bounced but could be limited to 90 in the near term. Watch price action on USDINR to see if it breaks below 73 today else a range of 73.0-73.25 remains intact for now.
Dollar Index (89.4650) has bounced a bit but while below 90, the view remains bearish for the near term. Only a break above 90 if seen and sustained could take it towards 91-91.50 before a possible fall sets in.
Euro (1.2323) has risen to trade above 1.23 and could face a pause near 1.2350 which is an initial obstruction from where a slight dip or some sideways movement could be possible before the currency attempts to test 1.24-1.25 in the medium term.
EURJPY (127.18) has risen as expected and could move up further along with the rise in Euro. A break above 127.27 could be bullish for the pair towards 127.50-128 on the upside.
Dollar-Yen (103.15) has bounced in line with a bounce in Dollar Index but as Dollar Index is likely to be limited to 90 on the upside, we may expect Dollar Yen also to be limited to 103.50-103.75 on the upside before a fall is seen again.
Aussie (0.7793) has rise as expected and could be further bullish on a sustained break above 0.78. We may look for a target of 0.80 on the upside over the next couple of weeks.
Pound (1.3587) has dipped and while below 1.37, the Pound may fall towards 1.35 before again attempting to rise in the longer run.
USDCNY (6.4575) has dipped yet again and we may expect a possible test of 6.40/38 in the medium term.
USDINR (73.1050) seems to be holding well below 73.25 and while that holds, we may expect a test of 73 or even a possible break on the downside towards 72.90/75 in the near term. Strength in Euro and Chinese Yuan is positive for the Rupee. Failure to break below 73 could keep intact the range of 73.00-73.25 for the near term. As mentioned yesterday we see possible extension to 72.80/75 and 73.50 if the pair breaks on either side of the range.
INTEREST RATES
As expected the US Treasury yields have risen breaking above their key resistances. The outlook is bullish and the yields have room to move up further. The German yields have key resistances ahead which will need a close watch. A break above the resistances will negate our view of seeing a fall-back. The 10Yr GoI has risen yesterday contrary to our expectation for a fall. A break above an immediate resistance will turn the outlook bullish and negate the bearish view of seeing a fall to 5.82%-5.80%.
The US 2Yr (0.14%), 5Yr (0.43%), 10Yr (1.04%) and the 30Yr (1.82%)Treasury yields have risen sharply across tenors. The 10Yr and 30Yr have risen past 1% and 1.75% respectively as expected. This keeps our bullish view of seeing 1.20%-1.25% (10Yr) and 1.85%-1.90% (30Yr) on the upside.
The German 2Yr (-0.71%), 5Yr (-0.73%), 10Yr (-0.53%) and the 30Yr (-0.14%) yields have risen further. We expect the resistances at -0.50% (10Yr) and -0.10% (30Yr) to cap the upside and drag the yields lower to -0.60% (10Yr) and -0.20% (30Yr) again. A stained break above -0.50% (10Yr) and -0.10% (30Yr) will prove our view wrong and can take the yields further higher. We will have to wait and watch the price action in the coming sessions.
Contrary to our expectation for a fall, the 10Yr GoI (5.8971%)has risen back sharply. 5.9250% will be an important immediate resistance to watch. A break above it will negate our bearish view of seeing 5.82%-5.80% on the downside. Such a break will turn the outlook bullish to revisit 5.94% and 5.98% going forward.
