STOCKS
Overall major stock indices are in a rally and may soon reach their exhaustion point from where a sharp correction is possible in the medium to long term.
The 2-month long rally in Dow (23329.46, -0.48%) from levels near 21750 could possibly be reaching its exhaustion levels in the near term. We need to remain cautious as the index may be vulnerable to a sharp correction in the medium term. Immediate upside target is 24000 from where a correction is possible.
No major movement expected in Dax (12953.41, -0.46%) while it trades between 12900-13065 levels. Only a break on either side of this range would give us some clarity on further direction.
Nikkei (21738.39, +0.14%) has broken above the initial target of 21600 and is headed towards the next crucial levels at 22666 while the index sustains the current rise above 21600. A rally in the coming sessions is expected with some interim corrections followed by a long term fall which could start soon. Look for an initial turn-around in Dollar Yen for cues.
Shanghai (3409.47, +0.37%) is trading above 3400 just now and could target 3420-3425 in the coming sessions before facing a rejection back towards 3400 or lower. 3425 is a decent resistance which could hold in the near term. For the week, Shanghai looks bullish.
Nifty (10295.35, +0.86%) opened with a gap-up at 10333 as expected but eventually came down to test 10250 before closing at higher levels. 10350-10400 is an immediate resistance on the upside which is likely to keep the index down for a few sessions at least. A sharp correction in Nifty is on the cards for the medium term. We need to be cautious near current levels.
COMMODITIES
Gold (1279.39) is trading narrow since the last couple of sessions. While above 1275, there is still some scope for the price to rise towards 1290/95 again; else a fall below 1275 if seen and sustains could bring in fresh weakness in Gold. For now the support on the daily candle chart holds and remains intact.
Brent (58.37) is trying to attempt towards 59 and could eventually move up to test 60-61 levels in the next couple of weeks. Near term looks bullish with some small interim corrective dips.
WTI (52.09) looks stable just now. There could be some chances of testing 53 from where a slight rejection is possible. Resistance on the weekly candles is likely to push WTI prices to lower levels in the near term.
Copper (3.1875) could be ranged sideways within 3.25-3.10 region in the near term. Thereafter a corrective fall towards 3.00 or lower is possible in the longer run.
FOREX
Further strength in the Euro (1.1827) overnight as the market shies away from going in Short into today’s important ECB meeting where Draghi is expected to unveil the ECB’s plan on "recaliberating" the ongoing QE. Intra-day range would be 1.1740-1850. A break above 1.1850 sets the Euro on course to test 1.20 in a couple of weeks.
The Euro-Yen (134.27) moves up further, this time on Euro strength, continues to target 135+ in the coming days. This is despite the dip in Dollar-Yen (113.55) from yesterday’s high of 114.25, such dip possibly increasing the strength of the long-term Resistance at 114.50. "Outside" Resistance seen at 115.00.
There are chances that the dip in the Dollar Index (93.55) from the Resistance at 94.00 can help keep Dollar-Yen below 114.50-115.00.
Surprised by the sharp rise in the Pound (1.3268), which has rallied strongly on a strong UK GDP data, which has brought back chances of a rate hike in next week’s BOE meeting on 2nd Nov. This possibly changes the near-term direction of the market from 1.30 on the downside towards 1.34+ on the upside.
The Aussie (0.7713) dipped to 0.7690 (200-day MA) yesterday and is trading just above that today. The earlier resemblence with the Euro has been broken and unless a strong bounce is seen from here, the Aussie might be vulnerable to some more dip towards 0.7655.
Dollar-Yuan (6.6335) came close to testing 6.65 yesterday, a level that can still be seen in the coming days. Dollar-Rupee (64.89/90) fell sharply in late trade yesterday and may trade quiet today.
INTEREST RATES
Higher bond yields all around it seems.
Important ECB meeting today, where Draghi is expected to unveil plans for recabilerating the ongoing QE. Market views range from (a) QE will be cut from 60 bln p.m. down to 40-10 bln p.m. while (b) duration of the programme will be extended by 6-12 months, or may even be made open-ended. There does not seem to be a consensus within the above possibility range.
German 10 Yr (0.47%) has written 1bp more yesterday while the US 10Yr (2.44%) has risen even more, past the resistance at 2.40% mentioned yesterday. This has pushed the German-US 10Yr Spread (-1.96%) just below the earlier mentioned Support at -1.95%. This could be a cause for concern for the Euro unless there is a strong bounce after the ECB meeting.
The UK 10yr (1.41%) has also risen past earlier resistance near 1.38%. The Japan 10Yr (0.07%) is also testing its long-term down-trendline at current levels. Need to see if that also rises ahead of the BOJ meeting next week (Tuesday).
Keep an eye out for whether the FED will surprise with a rate hike at its next meeting on 1st Nov, next Wednesday.
