Market Morning Briefing

GOOD MORNING!

STOCKS
The markets have mostly continued their grind in narrow ranges and the expected resumption of rally hasn’t materialized yet. This last day of the week can be the make or break day, especially for the Indian market, waiting for the CPI & IIP data today.

Dow (17049.00, -0.12%) keeps trading in the now 3-week old range 17000-150 testing patience even as the jobless Claims rise. The bias remains bullish as this correction may not go lower than 16800 even on a downside break.

Dax (9691.28, -0.09%) has been testing the support area of 9630-9600 for the last two days and is expected to rally anytime now. Above 9800, targets of 10000 and even 10600 will come into consideration.

The Shanghai (2316.31, +0.20%) made a new high at 2343 but faced a sharp rejection to create a Graveyard Doji with bearish connotations. But in a strong bull market like this, this pattern would require a lot of follow up selling to be meaningful. A dip till 2285-70 would only be a natural correction in this bull phase. The Nikkei (15968.07, +0.37%) is rising strongly on the back of a crashing Yen and faces the long term resistance 16100-200 now.

The Nifty (8085.70, -0.10%) continued its correction to reach close to our bear trigger level of 8050. The uptrend is retained somehow but the strength will return on a break above 8125-35 only.

COMMODITIES
Commodities are overall trading low. Near term is bearish.

Gold (1234.94) is sharply headed towards 1225 for now. The next level to watch would be 1200 which is a crucial support. A break below 1200 if seen would take push it down to 1190-1180 last seen in Dec’13. While Dollar continues to strengthen against major currencies Gold would remain strongly bearish.

Silver (18.52) is trading near the crucial support levels but while the bears are strong we may see a break below this support to target 18.2-18 levels. Gold-Silver ratio (66.61) has risen and is testing resistance near 66.74 which if holds may bring it down to 65.75. If the 66.74 levels break on the upside it may signal some bullish moves coming in for the metals.

Brent (97.89) has fallen sharply again and is firmly in a downtrend. Testing support near 96.75 on the weekly a break below would take it towards 92-90 levels and maybe further down towards 89-88.5. Need to see for a couple of sessions if 96.75 holds.

Nymex WTI (92.82) bounced yesterday from 90.43 but remains under the bearish pressure for now. While below 93, a fall below 90 cannot be negated. May remain sideways ranged for some sessions. Overall trend remains down.

Copper (3.0930) has broken the support levels near 3.10 and is also headed downwards in line with other commodities. It may soon target 3.05-3.00 in the coming weeks. Near term looks bearish.

FOREX
The fall in commodities keep Aussie under high pressure. Dollar keeps rising, even as the Euro & Sterling are not falling right now. Rupee may be controlled by domestic factors like CPI/IIP data today.

Euro (1.2920) is contracting in a triangular shape in the range of 1.2850-1.2970, suggesting just a pause and not any reversal. A few more sessions in the range would be beneficial for the trend-followers.

Dollar-Yen (107.32) gained further towards the 12-year old long term trendline resistance of 108-109 and the price action there will have severe impact on both this pair and Nikkei. The Euro-Yen Cross (138.62) had broken above 138.00-25 to shoot up towards 140 more on the back of a severely weakening Yen than any strength in Euro. Immediate target/resistance comes at 139.15-30.

The Pound (1.6234) bounced to 1.6250 as expected and nearly filled the gap created on Monday. The weekly candle suggests buyers coming from the long term support of 1.6050-6000 levels but a massacre of this magnitude requires a long base building before any sustainable reversal attempt. So expect some volatility in the short term.

The Aussie (0.9071) failed to reach 0.9250-70 and crashed to achieve all our targets at 0.9060 exactly as expected. Keeping the bear dominance in mind, the next targets come at 0.8990-70 and 0.8920-0.8890.

Dollar-Rupee (60.93) continues its correction and only a break beyond yesterday’s range of 60.72-94 may produce a decisive move. The bias remains bullish as long as the support of 60.70 holds.

INTEREST RATES
US Yields have risen further across the Curve, with the 10Yr (2.56%) rising the most, from 2.53% earlier. The rise in the 5Yr (1.80%) and in the 2Yr (0.57%) are breaks of significant resistances. The rise in the 5Yr is a triangle breakout and suggests 1.90-1.95% ahead, with Support now at 1.75-1.73%. As mentioned yesterday, we look for a "bear flattening" of the US Yield Curve over the next few weeks.

The 2Yr US Swap Cost (0.241%) is rising again after a dip to 0.1936% at the beginning of September. This suggests that the market favours a rise in US rates, even if it might be erring on the side of caution.

The German-US 2Yr Spread (-0.65%) has come down a bit more but the 10Yr Spread (-1.52%) has moved up by 1bp, as the German 10Yr (1.04%) has moved up from 0.98%. But, the German 10Yr faces trend Resistance near current levels and could be vulnerable to fresh declines towards 0.90% unless it breaks above the Resistance immediately. This could keep the Euro (1.2919) pressured on the downside.

In India, the 10yr GOI (8.51%) has dipped again from the rise to 8.5434% a day earlier. Overall trend is down at the moment with Resistance at 8.58-8.60%

DATA TODAY

9:00 GMT or 14:30 IST EU IND Prodn (MoM)
...Expected 0.6 % ...Previous -0.3 %

12:00 GMT or 17:30 IST IN IIP
...Previous - 3.40 %

12:00 GMT or 17:30 IST IN CPI
...Previous 7.96

12:30 GMT or 18:00 IST US Retail Sales (MoM)
...Expected 0.20 % ...Previous 0.02 %


DATA YESTERDAY
Australia Labor Force
...Expected 15.2K ...Previous -4.1K ...Actual 121.0K

CN CPI (YoY%)
...Expected 2.2%...Previous 2.3%...Actual 2%

CN PPI (YoY%)
...Expected -1.1%...Previous -0.9%...Actual -1.2%