Market Morning Briefing

GOOD MORNING!

STOCKS
Equities have moved largely in line with our outlook yesterday. The USA and India continue to look better to us, with India offering the better value. 

Dow (18038.27, +0.49%, +88.68) got bought decently well on an intra-day dip to 17888 yesterday, which gives confidence to the chances of an eventual rise towards 18500. Break above 18100 would confirm. US Existing Home Sales data came in at a good +5.19 mln yesterday. The New Home Sales data due today has by itself been rising strongly over the last few months. The Housing sector data is coming out better than most other US data over the past month. 

See http://www.kshitij.com/fundamentals/funcharts/usnewhomesales.shtml

The Dax (11867.37, -0.6%, -72.71) dipped yesterday in line with our warning about possible profit-taking, possibly reacting to a fall in Eurozone Consumer Confidence. It is vulnerable to a fall towards 11400 while below 12200 now. This is despite the fresh weakness in the Euro (1.0698). 

In line with our warning, first signs of profit-taking are seen in the Shanghai (4382, -0.37%, -16.3) also, which is down from an early morning high of 4419.7. We see decent chances of Resistance at 4400-4500 holding well. A break below 4200 could intensify the profit-taking. Fresh Longs are avoidable.

The Nikkei (20202, +68) has risen to test the Resistance at 20200 mentioned yesterday. We think the Resistance can break, allowing the Nikkei to push higher towards 20600. Failure to break above 20200, however, could pull it down to 20100-00 , or even lower. But, we have to be careful about Resistance at 120.36 on Dollar-Yen. Failure to break above that could be a drag on the Nikkei also.

Despite a lot of volatility, the Nifty (8429.70, +0.6%, +52) closed appreciably higher yesterday. It got bought well at a low of 8284, reflecting the better relative value it offers to the global investor. Of course, it needs to build on yesterday's bounce in order to bring in committed buying again. Perhaps the MAT issue being downplayed could help. A rise past 8550-8600 is needed to bring in fresh strength.

COMMODITIES
A divergence is seen as metals seem to head lower while Crude oil maintain its bounce. Could this portend a period of low inflation and recovering growth?

Gold (1186.96) dipped to a low of 1184. It is now testing its support at 1181. Contrary to our earlier expectation we could soon seen the resolution to this range of 1181-1191-1211. (Yesterday we had mentioned the range as 1191-1210) There has been a good consolidation below 100-day MA (1212) implying a increased chance of break down from the range. 

Silver (15.80) dipped to its support zone at 15.75-15.45 before bouncing. Silver is likely to probe this support area for some more time, especially since Gold is also dipping. Gold-Silver ratio (75.26) is likely to rise to 75.91, indicating Silver is likely to underperform.

Its a bullish sign that both WTI Crude (56.30) Brent Crude (62.78) have managed to hold above their double-bottom supports. As long as these supports hold, Oil prices are likely to head higher. Brentcould target 65 and 67.30, while WTI could target 58.50. The Brent-WTI spread (6.48) could stabilize around $7 in coming few days.

Copper (2.6595) is testing its important trend supports across time frames as seen here:http://www.kshitij.com/graphgallery/coppercandle.shtml#candle Copper bulls need to hold these trend supports. Below 2.65, its immediate support, Copper could test 2.55.

FOREX
Overall Currencies remain weak except the Pound (1.501) which rose up yesterday after the BOE minutes. 

Pound (1.501) moved up sharply making an intra-day high of 1.508 which is within the 1.50-1.51 resistance zone. While 1.51 holds the currency may see a short downward correction. Only on a sustained break above 1.51, we may see signs of further upmove. Near term is bearish while below 1.51.

Euro (1.0694) saw a high of 1.08 yesterday but fell back from there to close the session at 1.0724. It is currently trading lower and may soon test 1.0562-1.0535 on the downside. Near term remains bearish. 
EURGBP (0.712) fell sharply yesterday due to sharp rise in the Pound and may dip slightly to 0.7100 before again bouncing back towards 0.7200. Note that it is currently testing support and may soon see a bounce.

Dollar-Rupee (62.83) has been trading in the upper half of the 62.75-63.00 region in the last couple of sessions. It is vulnerable to a break above 63.00 if the offshore rate (currently at a 10-13 paisa premium to the onshore rate) continues to trade higher in the near term. Need to keep an eye on this. 

USDJPY (119.97) has risen and is targeting 120.00-120.36 on the upside. It is ranged sideways now and while the broad 121.00-118.30 holds, we may see some choppy moves. 

Aussie (0.7736) came off yesterday after testing resistance near 0.78 as expected and is trading lower today. While 0.7800-0.7815 holds we may see some sideways consolidation within 0.75-0.78. 

INTEREST RATES
The US yields are all up. The 5Yr (1.39%), 10Yr (1.97%) and 30 Yr (2.64%) have moved higher from 1.32%, 1.90% and 2.57% respectively. The 10-5 YR spread (0.58%) is 0.55-0.59% region and is finding difficulty in breaking the 0.60% resistance just now. (see 1st chart on :http://www.kshitij.com/graphgallery/usddiff.shtml#sindiff ) There is scope for the 10Yr yield to move up towards 2.00% in the near term. Existing Home sales came out better than expected yesterday. 

The German yields have also risen sharply yesterday. The 10Yr (0.162%), 5YR (-0.101%) and 30 YR (0.54%) are all up from 0.095%, -0.143% and 0.477% respectively. The US-German 2Yr spread (-0.81%) has fallen from -0.79% and may test support near -0.85% if the yields keep rising at this pace. See chart : http://www.kshitij.com/graphgallery/eurusddiff.shtml#eurusd 

The Japanese yields are slightly up within an overall downtrend while the UK Gilts have moved up sharply. The 5Yr (1.33%), 10YR (1.729%) and 20Yr (2.286%) are sharply up from 1.207%, 1.589% and 2.171% respectively as Pound (1.501) moved up yesterday after the BOE minutes. See charts:http://www.kshitij.com/graphgallery/gbpsin00.shtml#sin00

The Indian 10Yr GOI (7.753%) has come down from 7.77% seen on Tuesday. While Rupee trades above 62.75-62.80 and is vulnerable to further weakness, we may see a the yield trading in a broad 7.70-7.80%.  

DATA TODAY

14:00 GMT or 19:30 IST US New Home Sales 
...Expected 514 K ...Previous 539 K



DATA YESTERDAY:-

AU CPI 
...Expected 0.2 % ...Previous 0.2 % ...Actual 0.2 %

UK BOE Minutes 
...Expected 0-0-9 ...Previous 0-0-9 ...Actual 0-0-9

US Existing Home Sales 
...Expected 5040 K ...Previous 4890 K ...Actual 5190 K