Market Morning Briefing

GOOD MORNING!

STOCKS
Nearly all the markets are either testing or very close to their respective medium term supports that would determine the price action and direction for the next few days.

The visibly lack of strength in Dow (16368.27, -0.46%) was mentioned yesterday and that resulted in lack of any buyers too. Now a break below 16300-200 would mean a retest of the very important long term support zone of 16000-15800. No luck with the expected bounce in Dax (9038.97, -1.00%) too so far. Just like Dow, the bounce must come right now as it tests the last support at 9000 or it may reach 8800-8600 soon enough.

Nikkei (14776.88, -2.99%) broke below 15100 to reach our target area of 14800-600. At most a pause may be expected inside this zone but even any minor bounce is expected to be sold. Shanghai (2187.83, +0.01%) is facing a bout of profit booking from the 2230 levels just as expected. If this correction is not limited to 2180-70, then the cut may get deeper before ending and rising again towards the final long term resistance of 2260-70.

Nifty (7649.25, -0.30%) closed below 7760 despite a lot of intraday volatility. Today it all depends on the support of 7580, below which the door to 7400 levels open up or 7580 holding, the rangebound movement continues.

COMMODITIES
Gold (1316.02) is rising sharply and if that sustains, it may target 1340-1350 in the near term. This may be a temporary rise and we may soon see a fall towards 1300 from 1340-1350 levels. Gold-WTI ratio (13.48) is testing crucial resistance near 13.5 and that may push it towards 13-12.5 in the near term. That may signal a bearish Gold maybe after a couple of sessions. Look at http://www.kshitij.com/graphgallery/crudeandgold.shtml#ma

Nymex WTI (98.36) has bounced from support near 96. This rise may continue in the near term taking it towards 101-102 in the coming weeks. Brent (106.82) has also moved up sharply but needs to break 107-108 levels to confirm that the fall that started from 115 is over. Brent- WTI spread (8.46) has risen sharply but faces resistance near 9 from where it may come off to 6-5.8 levels.

Silver (19.963) came off from crucial 20.108 levels mentioned on earlier reports. The 20.108-19.7 region is crucial and a break on either side could determine further direction. Long term trend is down.

Copper (3.1715) is trading lower. The growing scrutiny on China’s Copper financing trade may keep Copper prices under pressure for some time. It may now test 3.15-3.10 levels in the near term from where we may expect a little correction upwards.

FOREX
QE didn’t appear as expected and the majors didn’t do anything significantly different. There is marked difference with the equities in this segment regarding the price actions.

Euro (1.3362) didn’t find any direction even after the ECM meet and is stuck in the narrow range of 1.3330-90. Wait for a breakout to go with the short term flow. All the larger trends remain down.

Dollar-Yen (101.81) is trading in the range of 101-103 but lost the bullish impetus to attempt the difficult rise to 103.50-104.The range bound price action doesn’t look like ending anytime soon. Euro-Yen (136.01) is testing the major support area of 136.00-135.75 after the Euro weakened. A break below 135.75 would mean a possible journey towards 134 levels.

Pound (1.6812) tested 1.68 levels after a sharp rejection from 1.6890-6900 as expected. The BOE meet couldn’t affect the trend or direction in any significant way and all bounces should be limited to 1.69 levels in this firm downtrend.

Aussie (0.9256) is suffering from a vicious selloff as its Unemployment rate hits a 12-year high and the Labor Force data comes at -300 against the expected 13500. The price action at the long term support zone of 0.9250-0.92 may determine the medium term direction and trend.

Dollar-Rupee (61.22) may open higher today on the back of strong global cues in favor of Dollar and retest the 61.40-50 levels. As long as any dip is limited to 61.00 levels, the bullish momentum remains fully intact.

INTEREST RATES
US Bonds, and even German Bunds, being bought as safe haven.

Draghi recognised downside risks from prevailing geopolitical tensions to the fragile economic recovery in Europe. He said TLTROs should come in from next month and give a fillip to the economy. Still, he stands ready to buy asset backed securities (ABS) and do QE if required. Rates were unchanged.

The BOE kept rates unchanged as well.

The German yield curve is getting flatter. The 10Yr (1.06%) has fallen from 1.10% while the 2Ys (-0.0025%) has slipped below Zero after move than a year.

US yields have seen a sharp drop. The 5Yr (1.56%), 10Yr (2.37%) and 30Yr (3.20%) are all substantially lower. Even the 2Yr (0.41%) has come down from levels near 0.47% and can move further lower.

The Germany-US 2Yr Spread (-0.41%) has moved up as expected to hit an important mid-term trend Resistance. This could push the Spread lower again, weakening the Euro (1.3363) again. Even the US-Japan 10Yr spread (1.87%) has fallen sharply from 2.01% just last week.

Money seems to be flowing into US bonds as safe haven. To an extent that can mitigate the impact of the continued Taper.

In the meanwhile, BOJ has voted to keep buying Yen 50 trln worth of JGBs annually.

The new 10Yr GOI (8.63%) has dipped 1bp from 8.64% earlier and there are chances the FIIs will come in to buy more bonds

DATA TODAY

2:00 GMT or 7:30 IST CN Trade Bal
...Previous 31.60 $ Bln ...Expected 26.0 $Bln

3:00 GMT or 8:30 IST BOJ Meeting
...Previous - <0.10 %

8:30 GMT or 14:00 IST UK Trade Balance
...Previous - -9.20 £ (Bln)

12:30 GMT or 18:00 IST CA Labour Force
...Previous - -9.40 K


DATA YESTERDAY

Australia Labour Force
...Previous 14.9 K ...Actual -0.3 K ...Expected 13.5 K

BOE Mtg
...Expected 0.50 % ...Previous 0.50 % ...Actual 0.50%

ECB Meeting
...Expected 0.15 % ...Previous 0.15 % ...Actual 0.15 %

CA PMI
...Expected 54.1 ...Previous 46.90 ...Actual 54.1