Market Morning Briefing

GOOD MORNING!

STOCKS
Poor Chinese data yesterday was reinforced by a flurry of poor Eurozone data. The technical weakness discussed in this space is manifesting. An important period in development from the longer term perspective.

Dow (17055.87, -0.68%) achieved our extreme short term target of 17067 immediately and now may target 16930-900 or even 16830. The advance-decline ratio of 1:29 suggests severe weakness. Dax (9595.03, -1.58%) closed below the support area of 9700-600 and now, if follow-up selling comes today, a further drop towards 9400 or lower can’t be ruled out.

Shanghai (2312.95, +0.14%) retested our support zone of 2285-70 as the correction continues. For a directional move, the broader range of 2260-2350 needs to be broken. The Nikkei (16178.87, -0.17%) is correcting just like the other indices after hitting 16364, a level last seen in October 2007. Expect support from 15900.

Nifty (8017.55, -1.58%) closed below our support area of 8050-25 and opened the door towards a retest of 7950-30 or even lower. A close below 8000-7990 may keep the bearish momentum dominant.

COMMODITIES
Gold (1221.53) made an intra-day high of 1234, but could not sustain above 1225. There is still a possibility of 1200 on the downside from where a bounce towards 1225-1230 may be expected. Silver (17.721) has paused in the 17-18 region and may continue so for this week. Gold-Silver ratio (68.881) has been rising steadily and may soon target 69.5-70 levels.

Nymex WTI (91.61) is held above support near 90 but need to see if this sustains. We may expect some sideways consolidation in the 90-92 region before deciding its direction further. Overall the long term trend is down.

Brent (96.60) is trading lower today and while below 97, it may target 96-95 before pausing. Note that 95 is a crucial weekly support which may hold prices for sometime. Further if it fails to bounce from 95, it may fall towards 92.5-90.

Copper (3.0380) has fallen further on poor Chinese data yesterday and may test 3.00 in the coming sessions. As said yesterday, a failure to bounce from 3.00 may push it to lower levels of 2.95-2.90 in the mid-term. Near term is bearish.

FOREX
A very quiet day, with almost nothing taking place for the Majors and Dollar Index (84.63). Insignificant moves inside narrow ranges prevail.

Euro (1.2857) is showing very marginal signs of making a bottom near 1.2825-2800 with a severe decrease in bearish momentum despite the new lows. Though a break above 1.2930 and then 1.30 is immediately required to make even the smallest dent on the bearish fort. Keep watching for any sudden short covering emerging or another vertical capitulation.

Dollar-Yen (108.58) is in a shallow correction of its overstretched state as expected and a pullback till 107 would be very normal. The Euro-Yen Cross (139.62) faced a sharp rejection exactly from our resistance of 141.25 and with Yen regaining some strength, may correct to 139.00-138.50 now.

The Pound (1.6408) is showing immense volatility as discussed multiple times. Our 1.6550 has turned out to be the cap of the current bounce and is acting as the top end of the short term range as expected with the currency trading in 1.6050-1.6525 for the next few weeks.

Aussie (0.8863) is making a structure similar to a Falling Wedge in the shorter term charts with a breakout level at 0.89. A break above 0.89 may trigger a corrective rally to 0.8950-0.9000 but the major trend remains down very firmly.

Dollar-Rupee (60.94) has tested the Golden Ratio today, turning this into the best opportunity for the bears to take control for a target of 60.60. The bearish momentum begins weakening above 61.05. The broader range for the day may be 60.80-61.20.

INTEREST RATES
The US 5Yr (1.77%),10Yr (2.54%) and 30 Yr (3.25%) are down by 1,2 and 4 bps respectively. The 30Yr has come off after testing resistance near 3.29% on the weekly and may soon see a fall towards 3.00% in the near term. The 10Yr on the other hand has some more room on the downside towards support near 2.50% before bouncing from there towards 2.55-2.60%. The 10-5Yr differential (0.77%) is facing resistance near current levels and may fall again towards 0.75% indicating a fall in the 10Yr yield. The 5Yr may test support near 1.75-1.73% in the near term before bouncing up towards 1.80%. Overall the US yield curve is tending to flatten in the longer run.

The German 5Yr (0.203%) has risen from0.1875%.On the longer term the 30 Yr may fall the most while the 5Yr and the 10Yr may rise towards 1.2-1.3%. Euro (1.2854) may see some short term correction towards 1.29-1.295 but overall the yields may remain stable for now.

The Indian 10Yr (8.46770%) has bounced from 8.43% taking the Indo-US 10 Yr (5.92%) higher by bps and may now target 6-6.5% in the near term.

DATA TODAY

8:00 GMT or 13:30 IST GER IFO Business Climate
...Expected 105.9 ...Previous 106.30

8:00 GMT or 13:30 IST GER IFO Business Situations
...Expected 110.6 ...Previous 111.10

8:00 GMT or 13:30 IST GER IFO Business Expectations
...Expected 101.3 ...Previous 101.70

14:00 GMT or 19:30 IST US New Home Sales
...Expected 432 K ...Previous 412 K


DATA YESTERDAY
No major data release yesterday.