Market Morning Briefing

GOOD MORNING!

STOCKS
All the European markets celebrated the promise of more stimuli and even the weaker than expected German IFO (111.1) was ignored. The Indian market was damaged by the Supreme Court ruling regarding the Coal scam. Overall mixed sentiment.

Dow (17076.87, +0.44%) is yet to hit a new high though S&P 500 (1997.92, +0.48%) has touched 2000 levels for the first time. Keep watching the price action at the next resistance area in 17300-400 for short term guidance. Dax (9510.14, +1.83%) recovered and rallied pretty hard on the back of the more stimulus pledge from Draghi. But the immediate risk may decrease only above 9600.

Nikkei (15551.33, -0.40%) continues to rally despite our reservations but looks a bit overstretched. The uptrend remains intact above 15000 levels and higher levels are to be expected, perhaps with a little correction. Shanghai (2225.66, -0.16%) is undergoing a short term correction while the medium term uptrend remains intact above 2200-2190. A break above 2260-70 would be the signal for resumption of the bullish momentum.

Nifty (7906.30, -0.09%) came down after a false breakout above the Expanding Triangle mentioned yesterday. It may test 7850-40 if breaks below 7890-80 in the opening hours.

COMMODITIES
Gold (1279.48) is trading below 1280.5 as Dollar strength prevails amongst major currencies globally. But it is trading just above crucial support on the weekly charts which if holds may take it higher to 1290-1300. Note that the metal is in a contraction phase and may soon see a sharp move in the coming weeks. A break below 1275 could be very dangerous for the metal.

Silver (19.40) is sharply headed towards crucial long term support near 18.5 from where it may again move up t0 19.5-20 levels. Perfect down channel is maintained for now.

Nymex WTI (93.58) is ranged for now and after the recent sharp down move we may see some consolidation in the 92.7-94.6 region. While trading above support near 92, we may expect some near term bullish moves. Note that if a break below 92 is seen it could fall to levels of 90.

Brent (102.77) is trying to move up steadily but while below 104, bullishness cannot be confirmed. Moves are tight and momentum is slow gearing up for a sharp move coming ahead. Near term range is expected to be in the 101-104 region.

Copper (3.2075) is rising sharply and heading towards resistance zone of 3.22-3.25. Near term is positive and if it manages to break above 3.25-3.30, it may rise higher to target 3.40 in the longer run.

FOREX
The Jackson Hole effect has subsided for a while as the currency segment looks to be digesting the news and trying to find its feet. The majors are consolidating and maybe, just maybe they will try to rally a bit against the Dollar, to shrug off the oversold state.

Euro (1.3202) is taking a pause after getting highly oversold in the short term. A break above 1.3220 may signal an attempt to reach 1.33 levels but any sudden selling pressure can’t be ruled out. The medium term target remains unchanged at 1.31.

Dollar-Yen (103.85) is correcting a bit just as expected but the rally may not be over yet as long as the price stays above 103. Interestingly, Euro-Yen (137.10) has been rejected from the upper end of the 3-week range of 135.75-138. A successful break above 138 would signal a rally towards 139.00-25, even 140.

Pound (1.6594) is stuck within a 50 pips range for the last 3 sessions and a break above 1.66 may produce a corrective rally to 1.6650-1.6700 with the major downtrend still in force.

Aussie (0.9298) remains unchanged and keeps the range of 0.92-0.95 intact. Play the range as long as it remains unbroken with the median line at 0.9350-80.

Dollar-Rupee (60.5650) has found a bounce from our support at 60.37-35 but still needs a break above 60.65-70 to extend the bounce higher.

INTEREST RATES
As expected, there's been a sharp decline in the German-US 2Yr Spread (-0.54%) to below -0.50%. These are the lowest levels since July 2007. Some Support can be seen near current levels or near -0.60% on a trendline joining the Apr-10 and Au-12 lows. So, maybe the market may pause for a while before the next ECB Meeting on 4th September.

The US 2Yr (0.50%) has risen well from 0.40% the week before but faces important long-term Resistance near 0.52-53%, which may not break easily. Something to watch. The 5Yr (1.66%) has good Resistance near 1.73% of course. So, there seems to be a limit to the increase in US yields over the next couple of weeks. The market may then wait for the Fed Meeting on 17-Sep. Take a look at
http://www.kshitij.com/graphgallery/usdsin92.shtml#sin92

Japanese Yields are at important long term Supports at 0.15% on the 5Yr and 0.50% on the 10Yr. A bit of consolidation/ bounce may be reasonable at these levels in the near term, but could break lower eventually. Take a look at
http://www.kshitij.com/graphgallery/jpysin92.shtml#sin92

The Indian 10Yr GOI (8.5566%) has risen well above 8.50% again, despite the heavy buying by FIIs through last week. But, the overall trend is down and there should be Resistance near 8.60-65%.

DATA TODAY

12:30 GMT or 18:00 IST US Durable Goods Orders
...Expected 7.40 % ...Previous 1.69 %

13:00 GMT or 18:30 IST US Case Schiller
...Expected 8.20 % ...Previous 9.34 %

14:00 GMT or 19:30 IST US Cons Conf
...Expected 89.10 ...Previous 90

DATA YESTERDAY
GER IFO Business Climate
...Previous 108.00 ...Expected 107.10 ...Actual 106.30

GER IFO Business Situations
...Previous 112.90 ...Expected 112.00 ...Actual 111.10

GER IFO Business Expectations
...Previous 103.40 ...Expected 102.00 ...Actual 101.70

US New Home Sales
...Previous 422 K ...Actual 412 K ...Expected 426 K