STOCKS
The US Federal Reserve’s move to improve the credit flow and increase the asset purchases have failed to cheer the US equities. The Dow has declined below 19000 and has room to fall further. However, the Asians are trading in green today. Nikkei has bounced well from a crucial support and has high chances to see a corrective rally. Shanghai has also bounced but need to breach a key resistance to extend the move and avoid a fall. Sensex and Nifty have declined below their crucial supports and are bearish to fall further. DAX can consolidate sideways in the near-term.
As mentioned yesterday, Dow (18591.93, −582.05, -3.04%) has declined below 19000 and is now headed towards 18000. However, 18000-17900 is a very crucial support to watch now. As we have been mentioning earlier, we expect this 18000-17900 support to hold and the Dow can see a strong bounce-back move towards 20000-21000.
DAX (8741.15, −187.80, -2.10%) remains within its support at 8200 and resistance at 9200. As mentioned yesterday, the index can remain sideways between 8200 and 9200 for some time. A breakout of this range will then determine the next move. Our preference is to see a breakout above 9200. As we have been mentioning for sometime, only a strong break below 8200 will bring the danger of seeing a fresh fall to 7000 into the picture.
The crucial support level of 16500 onNikkei (18026.73 +1138.95, +6.74%) that we have been mentioning for sometime has held very well and the index has bounced sharply today. While this bounce sustains, Nikkei can rise to 19800-20000 in the coming days on a strong break above the immediate resistance level of 18500.
Shanghai (2707.09, +46.92, +1.76%) has risen back above 2700 and need to see if it can sustain higher. A strong rise past 2750 will be needed to completely negate the chances of seeing a fall to 2600-2560 that we had mentioned yesterday. We will have to wait and watch the price action for a few days.
Nifty (7610.25, -1135.20, -12.98%) has failed to sustain the bounce seen on Friday and has declined sharply below 8000. While below 8000, a test of 7000 and even lower levels looks possible now. 6500-6350 is a very crucial region to watch from where a bounce has to happen. We will have to wait and watch.
Sensex (25981.24, -3934.72, -13.15%) on the other hand has room to test 24000 and even 22000 while it remains below 27500.
COMMODITIES
Commodities have risen from recent lows but are yet to give any reversal signal. We may expect slight corrective upmove in the near term to continue while broad sideways consolidation may remain for some more time.
Brent (28.01) and Nymex WTI (24.42) are trading higher on mild recovery from recent lows. While support near $23 and $20 on Brent and Nymex WTI holds in the near term, the prices could either remain stable or slowly move up in the near term.
Gold (1595.10) has moved up sharply after the Federal Reserve stated a major stimulus package with unlimited purchases of Treasurys and mortgage-backed securities. On the charts, support near 1450 has held well pushing the prices to higher levels. Possibility of further bearishness from 1450 is negated as prices surged sharply. A break above 1600 could re-establish a test of 1700 in the near term.
Silver (14.08) has risen in line with our expectations and need to remain above 14 to see a rise towards 16 or higher in the coming sessions. Near term is bullish while above 12.
Copper (2.1405) has also recovered sharply but a reversal is not confirmed yet. While below 2.35, bearish sentiments remain on the cards. Only a rise above 2.35/140, if seen and sustains would bring back prices into positive bullish territory.
FOREX
Currencies are all mixed but have seen slightly recovery. Aussie, Pound, EURJPY and Yuan have risen from lows seen yesterday but it is to be seen if the rise continues in the near term. Rupee could also possibly see some strength today falling below 76 for a brief period. Watch crucial resistance zone of 76.0-76.5 on USDINR.
ollar Index (101.69) has dipped further and needs to fall below 100 to indicate some bearishness towards 98-97 levels in the medium term. But we will have to keep a close watch on 100 for a possible bounce from there which could re-instigate a rise back towards 103-104 levels.
Euro (1.0801) has risen above 1.08 and needs to sustain to see a further rise towards 1.09-1.10. Watch for a possible rejection from anywhere between 1.0950-1.1050 levels.
Dollar-Yen (110.34) is stable above 110. As mentioned yesterday, possible rise towards 112 looks likely for the near term from where a dip back towards 109 may be seen.
EURJPY (119.29) has moved up and could rise towards 120-121 in the near term. View is bullish while above 118.
Aussie (0.5940) is rising back towards 0.60. A rise above 0.60 is needed to indicate near term bullishness; else a decline back towards 0.55 cannot be negated.
Pound (1.1636) has risen from 1.14 but continues to remain bearish while below 1.20. A rise above 1.20 is needed to see a possible rise back towards 1.21-1.23 in the longer run.
USDCNY (7.0813) tested 7.1238 exactly as expected, before coming off from there. A dip towards 7.07 or lower towards 7.04 looks likely now while below 7.10/12.
USDINR (76.23) rose sharply to 76+ levels and closed near highs yesterday. Our upside target of 76.50 is nearing from where a decline is expected as 76.0-76.5 is crucial resistance on the monthly and quarterly charts. An unexpected rise above 76.50, if seen will open up 77-78 levels for the near to medium term. Today we may expect a short decline from 76+ levels towards 75.40/60.
INTEREST RATES
New measures announced by the US Federal Reserve to improve the credit flow and to increase the asset purchases has dragged the US Treasury yields further lower yesterday. The Fed’s move clearly indicates that the rates are going to remain at current levels for a prolonged period of time. This could continue to drag the yields further lower. The German yields have moved down further indicating a reversal. The outlook has turned bearish. The 10Yr GoI has room on the upside to test its resistances before it reverses lower and resumes the downtrend.
The US 2Yr (0.32%) and 5Yr (0.43%) Treasury yields have inched slightly higher from the levels seen on early trades yesterday. But at the far end, the 10Yr (0.79%) and 30Yr (1.35%) yields continue to move lower. . The bearish view remains intact. As mentioned yesterday, the 10Yr can fall to test 0.50%-0.40% again in the coming days. The chances of the fall extending even beyond 0.40% cannot be ruled out. The 30Yr can test 1.10% and even lower levels on the downside.
The German 2Yr (-0.73%), 5Yr (-0.56%), 10Yr (-0.38%) and 30Yr (-0.04%) yields have come down further indicating the end of the upmove that was in place over the last couple of weeks. The outlook is bearish. As mentioned yesterday, the 10Yr is heading lower towards -0.40%. A break below -0.40% can drag it further lower to -0.50% and even -0.60%. The 30Yr has declined below 0% again and can now revisit -0.20% while it remains below 0%.
The 10Yr GoI (6.3787%) has risen back sharply yesterday and could test the 6.40%-6.45% resistances in the near-term. It will have to be seen if the yield can extend the upmove to 6.50%-6.55% or it reverses lower from 6.45% itself. However, as mentioned in the Evening Comments yesterday, from a big picture we will be looking the yields from the sell side in the broad 6.45%-6.55% region.
