Market Morning Briefing

STOCKS
A quiet day for Dow but a sharp intraday recovery of Dax, just like the US index a day back, points to a pause period, if not a reversal. The weak Japanese and Indian markets are yet to decide if they will take a pause or not.

The Dow (16117.24, -0.15%) made an Inside Day bar with no clear guidance. A break above 16350-550 will increase the chance of an intermediate bottom at 15850. Till that happens, weakness persists. Dax (8582.90, +0.13%) formed an excellent Bullish Hammer candle, suggesting a retest of 8900 on the higher side but it will need to go a long way up or make a base for a good period before considering any serious reversal.

Shanghai (2330.14, -1.12%) is in a pause mode as expected after correcting from 2390 and may continue for a few more sessions. Bullish momentum remains strong above the support area of 2315-2290. The Nikkei (14666.97, -0.48%) structural weakness is more pronounced now as it reaches within sniffing distance of the major trendline support at 14600-550 & then 14350. A bounce from the support can keep the index in the long term range of 14500-16500.

Nifty (7748.20, -1.47%) bears fully exploited the structural weakness mentioned earlier and pushed the index down to 7730, the final point for the bulls, from where they can attempt a fight back. Right now, the same 7925 remains the actual bullish reversal level and until that is broken above, downside risk for 7500-7400 can’t be ruled out.

COMMODITIES
Gold (1238.06) is stable for now but is trading below 1245. As said earlier, a sustained break above 1245 is needed to take it higher towards 1264 but before that we may see a ranged move below 1250. Silver (17.358) is held well below the 21-day MA and is ranged sideways for now. This may continue for a few more sessions. No signal of any rise is seen for now. Ranged movement to be expected for now.

Nymex WTI (83.21) has risen yesterday but we need to see if this sustains or resumes the fall downwards targeting crucial support near 80-77.3. Brent (86.37) also saw a rise yesterday but could not sustain the intra-day high of 88. No signal is seen for any reversal just now and the fall towards 82-80 cannot be negated. Near term remains bearish.

Copper (2.9795) has been falling sharply since the last 3-sessions from resistance near 3.10. It may now test support near 2.95 which may keep prices in the 2.95-3.00 range for a few sessions before resuming the fall towards 2.90. Near term is bearish.

FOREX
The world of currencies spent a session in an almost unchanged fashion. An attempt to consolidate after the recent long period of volatility is seen.

Euro (1.2799) rallied within 15 pips of our target area of 1.2900-50 but a failure to break above 1.29 immediately may terminate the bounce and bring back the major downtrend in force. Euro bulls should be cautious now.

Dollar-Yen (106.33) has achieved all our targets till 105.50 very fast as it bounced from a low of 105.20. It may try to bounce from the current levels or 104.70-50 area. The Euro-Yen Cross (136.04) is moving in such a volatile fashion that our every analysis has been going wrong this week. Still, the huge bullish Hammer candle on the daily charts suggests that a break above 136.60 may signal a bounce to 137.50-138.25.

Pound (1.6080) has made the initial bounce from 1.5900-1.5850 as expected and now must break above 1.6110 to extend it to the intermediate resistance of 1.6200-25.

Aussie (0.8765) remains in the sideways corrective mode as expected but the resolution may be coming soon in the next 2-3 sessions. A break of the range 0.8650-0.8900 is required to produce a trending move.

Dollar-Rupee (61.8350) broke above 61.50-55 to reach 61.92 as expected. Now the global cues suggest a much lower opening. It is to be seen if the support of 61.45-35 can protect the bullish momentum.

INTEREST RATES
Turmoil in European and US bond markets? James Bullard of the Fed suggests the Fed should consider delaying end of QE. Soon people may start talking QE4. Then why end QE3 at all? Is the Fed panicing?

Bullard's comments have led to a pick up in US yields. The 2Yr (0.34%), 5Yr (1.37%), 10Yr (2.15%) and 30Yr (2.93%) have also risen a bit from 0.28%, 1.23%, 2.01% and 2.82% earlier. But, the earlier uptrends on the charts are so badly damaged that last night's rally in the yields could turn out to be temporary. In any case, there's no reason to expect a rise in yields if there is less tapering/ more QE.

In Europe, the Greek 10Yr (8.794%) rose to as much as 9.015% yesterday, pulling up even the French 10Yr (1.25%) up from a low of 1.112%. Italian and Spanish yields are already rising. The German 10Yr (0.82%) too rose from a low of 0.715% suggesting an end of "flight to safety" declines in the German yield. The KSHITIJ E-4 Composite Yield (1.172%) has risen from 1.10% over the last few days and there could be serious trouble in case of a further rise past 1.20%.

The US-Japan 10Yr spread (1.67%) has picked up a bit with the small bounce in the US 10Yr, but the picture will remain a little scary unless we see a further rise past 1.75% soon. Since there is little room for Japanese yields to fall further, any rise in the Spread will have to come from a rise in US yields, which could be temporary as mentioned above.

The Indian 10Yr GOI (8.3695%) has broken below 8.40% and could dip a bit more, maybe towards 8.30%. The rise in the Indo-US 10Yr Spread (6.2195%) past the 6.20% resistance-turned-Support is worrisome. There can be increasing clamour for the RBI to cut rates if US yields decline further.

DATA TODAY

12:30 GMT or 18:00 IST US Housing Starts
...Expected 1.018 K ... Previous 956 K

12:30 GMT or 18:00 IST CA Inflation Y/Y
...Previous 2.10 %


DATA YESTERDAY
EU CPI (YoY)
...Expected 0.35 % ...Previous 0.37 % ...Actual 0.31 %

EU Trade Bal
...Expected 13.5 EUR Bln ...Previous 12.70 EUR Bln ...Actual 15.8 EUR Bln

US Industrial Production
...Expected 0.40 % ...Previous -0.2 % ...Actual 1.0 %

US Capacity Utilization
...Expected 79.0 % ...Previous 78.7 % ...Actual 79.3 %

US Philifed Index
...Expected 19.90 ...Previous 22.50 ...Actual 20.7

US TICS (Net foreign purch of long-term Sec)
...Expected 23.3 $ Bln ...Previous -18.63 $ Bln ...Actual 52.1 $ Bln