Market Morning Briefing

GOOD MORNING!

STOCKS
The general sentiment in the global markets is positive today as the earnings are coming well and the weak Yen has boosted the Japanese Export to lift the ex-China Asian mood.

The Dow (16449.25, +0.25%) rose to our target of 16400-450 as expected after bouncing back from 16000 levels for the third time in the last 9 weeks. But the bulls still need a new high above 16630 to confirm the end of the correction and a resumption of the uptrend.

The Dax (9409.71, +0.99%) is close to the strong resistance of 6450 and the price action here may decide the short term trend. The long term uptrend will get damaged on a break below the major support zone of 9150-9050.

In the Asia-pac, Shanghai (2061.11, -0.23%), contrary to our expectation, has failed to resume the uptrend and now may move sideways between 2050-35 on the downside and 2100-15 on the upside.

The Nikkei (14556.52, +0.30%) diluted the bearish momentum a bit after closing above 14350 last week and rose further to the strong resistance of 14675-700 with the Yen weakening a bit more. The current technical picture is somewhat muddy and the next 1-2 sessions may give the required clarity.

The Nifty (6817.65, +0.56%) registered a new high and signaled its intention to go higher towards 6950-7000. Any correction on the way to the higher levels should be limited to 6745-20 now. A sharper correction would bring the possibility of a sideways move between 6650-6850 for the next few days, which can’t be ruled out in the light of the upcoming General Election result. Our bias remains bullish for now.

COMMODITIES
Crude strong, Gold and Silver potentially weak, Copper can rise. Suggests industrial commodities have a hedge over financial commodities, which might be positive for overall growth.

Gold (1286.65) and Silver (19.35) are stable at lower levels today after having fallen yesterday. Gold is in danger of further decline towards 1270 initially, as mentioned yesterday. Such a dip, if seen, could also pull Silver down towards the long-term Support region of 19.00-18.50. The Gold-Silver ratio (66.495) can move up some more in the near term to test the Jul-13 high near 67.46.

WTI Crude Futures (104.25) continue to look bullish for a possible rise towards 108. Brent (109.85) also continues to be in a steep climb, targeting 112. We note that WTI Crude, in general, is looking strong as it is rising against Gold (Crude-Gold ratio 0.0810 is rising towards 0.0830) and Euro (Crude-Euro ratio 75.57 can rise towards 76.25+). That's something to be borne in mind for the near term at least.

Copper (3.05) continues to consolidate sideways. But, as mentioned yesterday, it seems to be preparing for a rise towards 3.15. A break above 3.07 is needed as confirmation.

FOREX
No real change in the currency markets but the Citi Economic Surprise Index may point to further bounce for the Dollar. A strong Dollar could be a reality when the ECB begins its own version of QE but we still wait for that to take place.

Dollar Index (79.96) has been struggling near 80.00-80.10 as expected and it may face more selling from 80.30 as well. The broad range of 79.25-80.50 may remain in force for some more time. Only on a break above 80.55-60, the trend will turn from down to up.

The Euro (1.3795) is trying to bounce from our support zone of 1.3790-60 and rally higher. From the broader perspective, for major gain it has to break above 1.40 and simultaneously Dollar Index must break below 79.

Dollar-Yen (102.66) has managed to hold above 101.50-20 so far to remain in the 10 week long broad range of 101-104. Now it is testing the resistance at 102.75-103.00 as expected and this resistance zone may push it down once again. We keep watching the long term support at 100.75-50 for major moves.

The Euro-Yen Cross (141.62) is testing our resistance of 141.65-90 after finding buying support from 140.50-139.50 as expected. Now a break above 141.65-90 may take it higher towards the major resistance of 143.50.

Pound (1.6796) has finished the small correction and resumed its major uptrend in line with our expectation. It may reach 1.7000-50 in the next 1-2 weeks as the short term momentum remains intact above 1.6730-10.

Aussie (0.9355) may trade in the range of 0.93-0.94 for some more time before making a decisive move. Bulls are attempting to push it higher from 0.9315 in line with our expectation. Our bias is neutral for the moment.

Dollar-Rupee (60.59) is facing two possibilities - (1) the upside gets over at yesterday’s high of 60.60 and the downside for 60.00 or lower opens and (2) Dollar Rupee breaks above 60.60 at today opening itself and extends the rise to 60.80-61.00. One of these two possibilities should be discarded today.

INTEREST RATES
The US 10Yr (2.71%) saw a slight rise while the 5Yr (1.72%) remained stable after the bounce from 2.63% and 1.64% in the previous session. Currently trading just below resistance at current levels the yields can target 2.75% and 1.75% on a break above the respective resistances. The US 10-5Yr yield spread (0.99%) has come up with the rise in the 10Yr but it may still come down further to test support near 0.95%-0.96% before we see a bounce.

The German-US 2Yr spread (-0.21%) saw a slight dip along with the Euro (1.3795) which also dropped and is testing the 8-MA support on the 3 Day line charts. The German 10Yr (1.51%) is stable and is trading just above the support at 1.50%. A range of 1.45%-1.55% can be expected for now. A break beyond this range will give us further direction.

The US-Japan 10Yr spread (2.10%) remained unchanged and so did the Dollar-Yen (102.66) which remained stable near yesterday’s levels, showing perfect co-relation with the yield spread. The Japan 10-5Yr yield differential (0.42%) saw a slight bounce from the support zone of 0.40%-0.41% as reflected by the slight rise in the Japan 10Yr (0.61%). A further bounce and the yield can target 0.65%.

The Indo- US 10Yr spread (6.16%) has seen a small bounce from the support near 6.12%-6.13% as expected. The Indian 10 Yr GOI yields (8.86%) remained stable and can drop further to test the support near 8.75% before a bounce back to 9.00% and beyond.

DATA TODAY

14:00 GMT or 19:30 IST US Existing Home Sales
...Expected 4550 K ...Previous 4600 K

DATA YESTERDAY
No major data release yesterday.