Market Morning Briefing

GOOD MORNING!

STOCKS
All round weakness in Equities, with chances of further downside in the near term. Some of the indices may test longer term Supports next week. Need to be bearish now, but may need to temper bearishness a bit, keeping that in mind. 

Further decline in the Shanghai (4190, -0.9%, -39), extension of yesterday's fall. Potential for further losses towards 4000-3900. 

The Dax (11350.15, +0.2%, +22.47) closed flattish yesterday after meeting our target of 11250. It remains bearish overall with potential for further fall towards 11100-00 in the near term. May get good Support there. 

Deep cut in the Dow (17841.98, -0.48%, -86.22) to an intra-day low of 17733.12 yesterday. Tempted to be bearish, but downside could be limited to 17500 in the near term. 

Coming in after three days of holidays, the Nikkei (19332, -1%, -200) is trading below earlier support at 19400. See decent chances of further downside to 19000 at least in the near term. 

The Nifty (8097, -3%, -228) saw a massive decline. It may/ may not be able to bounce today on the news of the passage of the GST Bill in the Lok Sabha yesterday. On the charts, there is potential to fall towards 7800-600 in the medium term

COMMODITIES
Gold (1187.96) as expected dipped to 1191 support and could drop further to 1181 today. The range of 1181-1191-1211 is continuing, however the sustained consolidation below 100-day MA (1211) is a bearish sign. Gold may start moving lower soon. Below 1181, Gold could drop to 1169.

Silver (16.45) is contained below 16.60-85 resistance zone and by the resistance trendlines in charts below. In short term, it could test the 16.25 levels. We do not anticipate any breakouts above these levels in next few days.
Silver charts: http://www.kshitij.com/graphgallery/silvercandle.shtml#candle

WTI Crude (60.82) touched 62.50 but dropped back to close unchanged for the day. Brent Crude(67.27) touched 69.63, close to our target of $70 before giving up its gains. The selling at higher levels caps the short-term up-move for a day or two. The key supports for this uptrend are 58.25 for WTI and 65 on Brent. Oils are in uptrend as seen in charts below

Contrary to our expectations, Brent-WTI spread (6.45) has not broken above the resistances. In-line with some dip in oils, the spread is likely to consolidate over next few days,

Gold-WTI Crude ratio continues to dip and could reach 19. Implying some drop in Gold, while Oils remain stable or in up trend. 

As expected, Copper (2.911) consolidates below 2.95-3.00. Its forming a flag-pattern on daily charts, which is potentially bullish. A dip below 2.85 would invalidate the pattern. See here:
http://www.kshitij.com/graphgallery/coppercandle.shtml#candle

However, the long term Copper trend remains capped under trendlines as seen in the 3-day and weekly charts here:
http://www.kshitij.com/graphgallery/copperma.shtml#ma

FOREX
Weakness in the US Dollar persists. Dollar Index (94.211) came down sharply again yesterday to 93.88 before bouncing off from there. There are chances of testing 93.00 provided it extends its fall in the near term. Near term is bearish.

Pound (1.5237) has again bounced up from 1.5141 levels and may see some fluctuation today as there is UK election polls today. We may expect some volatility above 1.510 for the next couple of sessions till the election results are out. Broadly movement in the 1.51-1.53 could be expected in the medium term. 

Euro (1.1336) has risen sharply exactly as expected, breaking above our mentioned levels of 1.1286. This rise has been brought about by the recently rising German yields as mentioned on our earlier editions. While the rise sustains we may see levels of 1.140-1.145 in the near term. 

Aussie (0.7984) is stretching upwards and may target resistance near 0.80 before a short dip from there to 0.79. A break above 0.80-0.81 may initiate a fresh move. 

USDJPY (119.53) is rising but is broadly in a sideways movement. We may see choppy movements within 120.51-118.5 region. 

Dollar-Rupee (63.53) has been broadly between 63.30-63.70 region for now and may continue this week. No fresh movement is seen immediately. NDF offhore rate is trading at 63.74.

INTEREST RATES
German yields continue to shoot up (http://www.kshitij.com/graphgallery/eursin00.shtml#sin00 ). The 5Yr (0.10%), 10Yr (0.61%) and 30Yr (1.18%) yields are up from 0.05%, 0.54% and 1.06% yesterday. Yield differentials are also up. But the German-US 2Yr spread (-0.86) coming off after testing resistance near -0.77. This is mainly because there is no major movement in the 2YR yields (-0.224%). See chart: http://www.kshitij.com/graphgallery/eurusddiff.shtml#eurusd

The US yields are up. The 5Yr (1.58%), 10Yr (2.24%) and 30Yr (2.98%) are trading higher. The 5Yr is heading towards resistance near 1.70% in the near term while the 10Yr is testing resistance near current levels which is likely to break on the upside. Near term is bullish.

The UK gilts are also up. The 5Yr (1.50%), 10Yr (2.00%) and 20Yr (2.52%) are up from 1.48%, 1.96% and 2.50% respectively. Near term is positive. The UK 10-5Yr spread (0.50%) is testing resistance near current levels while the 20-10Yr (0.52%) is trading just above support. Does it mean that the 20Yr yields may rise now at a faster pace than the other terms? Need to keep an eye on this. See chart:http://www.kshitij.com/graphgallery/gbpdiff.shtml#sindiff

DATA TODAY

1:30 GMT or 7:00 IST Australia Labour Force 
...Expected 4.5 K ...Previous 48.2 K ...Actual -2.9 K


DATA YESTERDAY:-
EU Retail Sales 
...Expected -0.4 % ...Previous 0.0 % ...Actual -0.8 %

US ADP Emp
...Expected 192 K ...Previous 175 K ...Actual 169 K