Market Morning Briefing

GOOD MORNING!

STOCKS
The worse than expected Chinese data keeps the Asian markets in red but no significant change structurally. Some selloff is seen in the IT sector globally as the fund managers make room for the coming Alibaba IPO and that affects the broader indices too.

An Inside Day for Dow (17031.14, +0.26%). An Irregular Flat with bullish implications? We will see. The bias remains bullish as this correction may not go lower than 16800 even on a downside break.

Dax (9659.63, +0.09%) has bounced exactly from our support of 9600 and is expected to rally anytime now. A failure to rise at this point and a break below 9600 now would weaken the setup considerably.

The Shanghai (2329.53, -0.41%) just tested the swing high of 2343 and fell very sharply. After the Graveyard Doji, this probable Double Top may keep the index in a corrective mode for a few more sessions. A dip till 2285-70 would only be a natural correction in this bull phase. The Nikkei (15899.49, -0.31%) is rising strongly on the back of a crashing Yen and faces the long term resistance 16100-200 now.

The Nifty (8042, -0.78%) closed below 8050 as expected and confirmed its weakness. Now 8000-7970 can be expected on the downside but the major intermediate support remains at 7940-30. Return of strength will be signaled only by a break above 8125-35 as discussed earlier.

COMMODITIES
Gold (1236.83) has bounced a little from just above support near 1225 and has showed some positivity in the last 2-sessions. A continued rise past 1250-1260 is necessary to bring in any bullish view. Untill then this rise may be considered a short term correction in an overall downtrend.

Silver (18.732) has bounced from 18.46 as expected and may now rise towards 19-19.25 in the near term indicating a reversal which will confirm after a break above 19.25.

Brent (97.96) bounced from 96.21 yesterday but only a sharp rise towards 100 may initiate any reversal. A break below 96 cannot be negated just now and that if seen may take it lower to 94-92 levels.

Nymex WTI (92.80) is held well by the support near 90.5 and while that holds we may see some sideways consolidation before starting a fresh move upwards. The 90.5-93 levels may hold for a few sessions now.

Copper (3.1015) bounced back a bit and seems to be fluctuating in the 3.07-3.12 region. We may see some ranged moves in the said zone for sometime before determining further direction

FOREX
The consolidation of the Majors continues and may remain in the same state till the FOMC meet is concluded tomorrow.

Euro (1.2947) keeps consolidating in a probable Bear Flag/Pennant. The bearish momentum remains very strong below 1.3025-50 and a resumption of the downtrend may come soon.

Dollar-Yen (107.04) has made 4 small candles suggesting loss bullish momentum, after hitting the trendline resistance at 107.40, also near the 12-year old long term trendline resistance of 108-109. The price action here will have severe impact on both this pair and Nikkei. The Euro-Yen Cross (139.06) is correcting a bit now after achieving our first target of 139.15. Expect support from 138.25-00 if Yen doesn’t strengthen up considerably.

The Pound (1.6239) is trading quietly in the narrow range of 1.6200-80 after the gap-filling exercise. 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.

The Aussie (0.9043) is trying to bounce from our target support zone of 0.8990-70 but a sideways range can be the best bet for the bulls right now. The next targets remain unchanged at 0.8920-0.8890.

Dollar-Rupee (61.13) ended the day achieving our immediate target of 61.15. Now a break above 61.15-25 may extend the bounce to 61.40-50 but a correction till 60.90-85 would be normal before any further rise.

INTEREST RATES
The US 5Yr (1.78%), 10Yr (2.57%) and 30Yr (3.33%) have all fallen from 1.82%, 2.58% and 3.34% respectively yesterday. The US 10-5Yr (0.80%) differential is near resistance and may see some fall towards 0.75% in the coming weeks. Markets may remain stable for now waiting for the FOMC meeting tomorrow.

The German 10Yr (1.06%) has fallen a bit after rising sharply on Friday and the German-US 10Yr Spread (-1.51%) has come down by 1bp from -1.52% yesterday. The 2Yr Spread (-0.61%) is stable for now. Euro (1.2947) is trading a bit lower today but may soon get out of the ranged phase with an overall increase in the European yields in the near term.

The Indian 10Yr GOI (8.50%) is stable for now while the 10Yr GOI-US 10 Yr spread (5.91%) rose from 5.89% yesterday. Rise in the 10Yr GOI against the US 10Yr yield is likely in the coming sessions.

DATA TODAY

8:30 GMT or 14:00 IST UK CPI Y/Y
...Expected 1.50 % ...Previous 1.60 %

12:30 GMT or 18:00 IST US PPI ex Food & Energy (MoM)
...Expected 0.10 % ...Previous 0.11 %

13:00 GMT or 18:30 IST US TICS (Net foreign purch of long-term Sec)
...Expected 24.3 $ Bln ...Previous -18.73 $ Bln


DATA YESTERDAY

IN WPI
...Previous 5.19 % ...Actual 3.74 %

EU Trade Bal
...Expected 15.90 EUR Bln ...Previous 13.80 EUR Bln ...Actual 12.20 EUR Bln

US Industrial Production
...Expected 0.40 % ...Previous 0.19 % ...Actual -0.10 %

US Capacity Utilization
...Expected 79.30 % ...Previous 79.10 % ...Actual 78.80 %