Market Morning Briefing

GOOD MORNING!

STOCKS
Friday turned out to be a boom day for the global equities just as expected, with the Asian markets enjoying that effect this morning. The Indian government reforms, coupled with state election results, will push the Indian index higher today and today the intermediate trend may be firmly decided.

The Dow (16380.41, +1.63%) recovered most of the loss of the week and increased the chance of 15850 being a medium term bottom. Now it has to break above 16600-800 to signal a rally towards a new life high. Dax (8850.27, +3.12%) has bounced very sharply to 8900 just as expected and the price action here will determine the short term trend.

Shanghai (2350.51, +0.40%) 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 (15018.55, +3.34%) has bounced sharply almost exactly from our support area of 14600-550. While it remains in the broader range of 14500-16500, it has tackle supply pressure anywhere from 15200 to 15600.

Nifty (7779.70, +0.41%) bulls did give a fight from 7730 as expected and now from the government reforms & state election results, the index may open with a huge gap up. Again our eyes will be on the resistances of 7925 and 7975, above which the trend will reverse and much higher levels will be expected. But keep an eye on any attempt to fade the gap too.

COMMODITIES
Gold (1236.36) is held well above 1180 and may soon see a rise to 1245. However, before we see a rise past 1245, it may hover in the 1200-1240 region for a few sessions. Silver (17.329) is stable for now and may continue to range in the 17-17.75 zone in the near term.

Nymex WTI (83.15) is trading a bit higher today after the last week’s low of 79.73. The 79.7-77.30 is a crucial support zone which if holds may help the price to bounce towards 90. Else we may see a ranged move just above 77.3 before bouncing. Brent (86.31) is also trying to rise but unless we see a sustained rise past 88.5-92 we cannot confirm any bullish reversal taking place. Next few sessions may consolidate sideways.

Copper (2.9940) has seen a low of 2.95 on 2-consecutive sessions last week and is trading a bit higher. been While 2.95 holds, prices may remain in the 2.95-3.00 range before resuming the fall towards 2.90. Near term is bearish.

FOREX
The recent huge expansion of volatility is seeing a very normal contraction now, making the pairs mostly trade in ranges. The maximum activity today can be expected in Rupee, which may test the lower end of the short term range 60.90-61.90 today.

Euro (1.2762) 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 (107.24) bounced just as expected but now may take a pause or correct a bit near the supply zone of 107.50-108.25. The Euro-Yen Cross (136.88) has broken above 136.60 to signal an extension of the bounce to 137.50-138.25 and the weekly Bullish Hammer candle may help it to rise.
Pound (1.6106) has made the initial bounce from 1.5900-1.5850 as expected and now may try to extend it to the intermediate resistance of 1.6200-25. The series of lower highs must be broken first before considering any strength.

Aussie (0.8765) remains in the sideways corrective mode, looking like Diamond pattern, suggesting a lot of contraction of volatility. A break of the range 0.8650-0.8900 is required to produce a trending move.

Dollar-Rupee (61.43) may open near 61.15-10 today on the back of government reforms & state election results. The old support area of 60.90-85 returns into consideration and below that, 60.60-50.

INTEREST RATES
US and European bonds cooled off a bit on Friday, but longer term danger remains.

Friday evening saw a rebound in US yields after the dramatic fall on Thursday. This kind of high volatility is rare in US Treasuries. Thursday, James Bullard of St Louis Fed had said they should consider QE4. And now Boston Fed's Rosengren says there should be no more QEs. This kind of public debate is going to make the 29th Oct FOMC very important.

On the charts, Friday's bounce seems to be a mere relief rally to previous support-now-Resistance levels. As such, the danger of further decline in yields is still there. The 10Yr (2.22%) has Resistance near 2.25% although the 30Yr (2.99%) has managed to move back up above Support at 2.90%. The 10-5Yr Spread (0.78%) is forming a Double Bottom and a rise past 0.80%, if seen, could lead to further Curve-steepening.

Europe too cooled a bit on Friday with the Greek 10Yr (8.07%) coming off a bit from the closing high of 8.96% on Thursday. But, the peripheral yields could still move higher in the coming weeks unless there is a sharp decline from here, which seems unlikely. The KSHITIJ E4 and E7 Composite Yields (1.1735% and 1.3465% respectively) suggest further rise past 1.20% and 1.40% could be seen.

The Indian 10Yr GOI (8.3892%) remains in an overall downtrend with good Resistance at 8.50%. The Indo-US 10Yr Spread (6.19%) has come off from a high of 6.36% and may not rise beyond that level for some time now. Rather we could see either a ranged market or lower levels in coming days.

DATA TODAY

9:00 GMT or 14:30 IST EU EA (17) Curr Acct Bal
...Previous 32.3 EUR Bln


FRIDAY'S DATA:-
US Housing Starts
...Expected 1.018 K ... Previous 957 K ...Actual 1017 K

CA Inflation Y/Y
...Previous 2.10 % ...Expected 2.0 % ...Actual 2.0 %