STOCKS
Our warnings of a dip in most Indices seems to be working out. It is to be seen now whether the second leg of the expectation, of a bounce from Supports, works out.
Within this, the Dow (24947.67, -79.40, -0.32%) plunged to a low of 24242.22, just below the important/ strong Support of 24250 we had mentioned yesterday, and then bounced back to close just a wee bit below Tuesday’s close. We can now expect the Dow to quieten down and move sideways between 24500-25500 for the next couple of weeks.
The Nikkei (21587) fell to a low of 21308 yesterday but has recovered a decent bit and trading above yesterday’s close of 21501.62. We would look to approach this market from the Long side while it remains above 21200, looking for an eventual rise past 22000.
Now we need to see how the Shanghai trades today. Yesterday the Shanghai (2605.18, -44.62, -1.68%) closed just above Support at 2600. We have to see whether the recovery in the Dow last night triggers a bounce in the Shanghai as well. If that does not not happen and the the issue of the arrest of the Huwaei CFO worsens, then the Shanghai could be vulnerable to a decline towards 2500-2400. On the charts, the market has to show an immediate bounce to avert the fall.
The Nifty (10601.15, -181.75, -1.69%) closed just at important Support on the Weekly Candles. Let us see, maybe it recovers a bit towards 10700-800 today?
Among all the indices, the DAX (10810.98, -389.26, -3.48%) might be the most bearish, as it plunged to a low of 10762.41 and might be vulnerable to a further decline towards 10000 while below 11200.
COMMODITIES
OPEC meeting yesterday concluded with a no production cut deal while there were discussions of reducing output by 1mln barrel/day which was not consented by all. Non- OPEC allies are due to continue their talks today.
Overall crude prices plunged yesterday as the OPEC meet started and has continued to trade lower. No major movement is expected today as the prices may continue to remain lower.
Brent (59.54) is trading low and could fall towards immediate support at 58. Maximum downside that we expect is 56.50 (200 week MA) which looks less likely to be breached in the next 1-2 weeks, producing a bounce back towards 60 and higher by the end of this month.
WTI( 51.21) is trading above immediate support at 51 and while that holds, the price could remain stable. Break below 51, could take it down towards 50-49 in the medium term.
Gold (1243.80) is trading above immediate support at 1240 and looks bullish towards 1250/60. Trade within 1260-1240 is possible in the next 1-2 weeks.
Silver (14.53) is almost stable and could head towards 14.75 over the next few sessions.
Copper (2.7445) is stuck in the 2.70-2.85 region for quite some time now. While support at 2.70 holds, we could again see a bounce back to 2.85 in the near term. A break on either side is required to give some more clarity on further directions.
FOREX
Dollar Index (96.81) has fallen back to daily trend support levels and could trade in the 97.50-96.75 region today. Note resistance on the 3-day candles at 98 which could be tested in weeks time before a gradual fall is seen in the longer run.
Euro (1.1376) tested 1.1412 in line with our expectation. Narrow sideways movement seems to be over now with a break on either side of the 1.13-1.14 region due in the near term.
Dollar Yen (112.75) moved up from support at 112.50 but came off to close at lower levels. Currently trading above 112.50, we expect this immediate support to hold and take the pair higher towards 114 again in the near term. View is bullish above 112.50.
Pound (1.2770) has moved up a bit and looks bullish towards 1.29-1.30 in the medium term.
While below 0.7250, Aussie (0.7225) looks bearish and may decline towards 0.7150 in the near term. But there could be some Ma supports near 0.72 which if holds, could prevent further fall and produce a bounce back towards 0.730-0.735 in the medium term.
Dollar Rupee (70.91) is likely to open today with a gap down of 30-40paisa from yesterday’s close of 70.91. Although we were expecting trade within 71.20-70.70/60, fall in Brent crude prices could bring down Dollar Rupee today back towards 70.50 with a possible re-test of 70.40-70.30. Where the pair will close today would be important to get some cue for the movement next week. Important data watch: US NFP today
INTEREST RATES
Good dip in the US 2Yr (finally) to 2.76%. With the 10Yr at 2.89%, the 10-2 Spread (13bp) has bounced a bit from the important Support at 11-10bp. Now, as the 10Yr dips further towards 2.82%, it will be important to see if the 10-2 Spread moves up towards 15-16 bp (it can), as that will imply a faster decline for the 2Yr Yield.
A weak, but not too weak, US NFP number today might just be helpful to the charts. Let us see, for the danger of a proper Yield Curve inversion cannot be ignored at the moment.
The 10Yr GOI (7.42%) continues to fall and can target 7.30% (maybe not the 7.22% mentioned yesterday) and bounce a bit from there, as the Indo-US 10Yr Spread (currently 4.52%) has an important Support at 4.48%.
