Market Morning Briefing

GOOD MORNING!

STOCKS
A revision in the US GDP has brought it from 0.1% growth to a huge 2.9% contraction now. But the markets discard this hindsight data which doesn’t fit with the more recent data. Positive mood prevails.

Both shorter rallies and smaller drops are visible in Dow (16867.51, +0.29%) as it remains stuck in the range of 16700-17000 (+/- 50) for the last 3 weeks. Only a break below 16700-600 may signal a deeper correction towards 16300. The Dax (9867.75, -0.71%) is close to the major support of 9800-700 once again and may bounce now towards 10000-50, above which the major rally will resume for a target of 10300-40.

Nikkei (15314.23, +0.31%) is facing selling pressure from 15400-700 as expected but now a directional move may come only if the Yen manages to break above 102.75. It may still rally towards 15900 levels if it can hold above 15200 and breaks above 15450. The Shanghai (2036.47, +0.54%) has bounced exactly from our 2010 levels to keep the broader sideways movement intact and may test the 2040-50 levels now.

Nifty (7569.25, +0.14%) took pause yesterday exactly in line with our expectation after achieving all our targets at 7560-90 and confirming the bottom at 7442. As long as any correction is limited to 7540-20, we may see 7630 coming in a day or two, above which 7900-8000 comes into the picture.

COMMODITIES
Commodities have fallen on lower US first quarter GDP except Copper. Overall there is a long term contraction in the structural movement of the commodities.

Gold (1318.90) fluctuated highly in the 1325-1310 region. Note that the 1325-1330 zone is crucial and has the potential to push the prices down to 1300-1290 and further to 1250 levels. The Gold-WTI ratio (12.35) has exactly come off from resistance at 12.5 and may now fall to 12-11.3 levels indicating that Gold prices may drop in the coming sessions.

Silver (21.04) may consolidate sideways for a few sessions within 20.5-21.5. We need to see if the recent rally from 19.57 is an indication of a fresh bull market or is it just a short term correction? A break above 21.5-22.5 may indicate the coming of any bulls.

Brent (113.96) and Nymex WTI (106.69) both dropped sharply on increasing violence in Iraq. The oils are in the pause mode after the recent rally and may continue to rise after a ranged movement of a few more sessions. While the long term trend is up, Brent may target 115-117 and WTI may head towards 110.

Copper (3.1665) has risen on better Chinese PMI breaking above the crucial resistance at 3.15. It may now target 3.20-3.23 levels. Note that the metal is in a long term contraction and a break above 3.23 in the longer run may initiate a sharp upmove.

FOREX
US GDP weakness affected the Dollar a bit but more importantly, does the sudden dovish tone from the earlier hawkish one by BOE imply a desire to see the Pound below 1.70 just like the ECB wants to keep the Euro below 1.40? We will see.

At 1.3650, Euro (1.3633) has tested the higher end of its narrow contracting range of 1.3550-1.3650 but it needs to confirm the bullishness by a break above 1.3680-90, which may lead to rallies towards 1.38 or more.

Dollar-Yen (101.75) is stuck in the range of 101.50-102.75 for the nearly two weeks as expected. Now only a break above 102.70 or below 101.50 may bring any directional move. The Euro-Yen (138.71) has been in a comatose mode as both Euro & Yen are stagnant for the last few days. It still runs the downside risk of testing 137 but there is a bullish reversal possibility, suggested by indicators, to be confirmed only on a break above 139.50-60.

Pound (1.6990) is correcting the last sharp rise and may test 1.6925-1.6900 now but this correction should be limited to 1.69 to keep the bullish momentum intact.

A breakout in a low volatility environment is very difficult and Aussie (0.9400) showed that by failing to break above 0.9440-60 and back into the range of 0.9200-0.9450 which may continue for a few sessions more.

Dollar-Rupee (60.1250) opened higher but descended over the course of the day to maintain the range of 60.00-50 perfectly. Trade this range with strict stoploss beyond the boundaries.

INTEREST RATES
US first quarter GDP has fallen sharply at an annual rate of 2.90% lowering the yield prices. The US 10-5Yr yield differential (0.88%) fell sharply and may target 0.87%-0.85% while in a near term down trend. The US 10 Yr (2.56%) and 30 Yr (3.38%) have fallen while the US 5 yr yield (1.68%) remains stable.

The German 5Yr (0.35%) has fallen below the crucial 0.37% but has the potential to rise towards 0.40 in the coming weeks. The German 10Yr (1.26%) has also fallen sharply as expected and may now target the upcoming support near 1.2%.

The US-Japan 10Yr spread (1.99%) has fallen as the resistance near 2% holds well. Dollar Yen (101.74) has shown some strength and may continue so in the near term.

The Indian 10Yr GOI (8.71%) is stable for now while the 8.5%-9.10% region holds. We may see the rates fluctuating in the said region for some more sessions.

DATA TODAY

12:30 GMT or 18:00 IST US Personal Income
...Expected 0.50 % ...Previous 0.30 %

12:30 GMT or 18:00 IST US PCE Price Index M/M
...Expected 0.40 % ...Previous -0.07 %


DATA YESTERDAY

US Durable Goods Orders
...Expected -0.1 % ...Previous 0.85 % ...Actual -1.01 %

US GDP
...Expected -1.70 % ...Previous -1.00 % ...Actual -3.00 %