Market Morning Briefing

GOOD MORNING!

STOCKS
The expected short term tops in the indices are taking shape but any breakdown confirmation is yet to take place. Poor Chinese data and dashed hope of any more Chinese stimulus keeps the markets concerned.

Dow (17172.68, -0.62%) signaled a short term top with the Evening Doji Star pattern formation as expected. The minimum target is 17067 now with more possible downside towards 16930-900. Dax (9749.54, -0.51%) hit about 9900 before losing all the gains just like the US index. The bulls must protect 9700-600 to prevent any extended correction.

Shanghai (2296.61, +0.29%) retested our support zone of 2285-70 as the correction continues. For a directional move, the broader range of 2260-2350 needs to be broken. The Nikkei (16205.90, -0.71%) is correcting like the other indices after hitting 16364, a level last seen in October 2007. Expect support from 15900.

Nifty (8146.30, +0.31%) bounced from 8065, not far away from our old support area 8050-25, below which the structure will get weak. Bullish momentum will take dominance above 8160-80. Expect a lot of noise while in the range of 8050-8180.

COMMODITIES
Commodities are overall bearish in the near term.

Gold (1217.87) is falling steadily targeting crucial levels of 1200 in the near term. We may see a bounce from 1200 thereafter towards 1225-1230. Near term is bearish. On the other hand, Silver (17.770) made a multi-year low yesterday last seen in Jul’10. It has rebounded slightly from support near 17.5 and may remain ranged for a few sessions now. Overall the longer term is still bearish.

Nymex WTI (91.25) is trading just above support near 90.5 and may sees a short term correction in the coming sessions. Overall bearishness persists and we may see ranged moves in the near term within 90-95 region.

Brent (97.30) is ranged for now while the 21-day MA is not allowing price to rise above 98-98.5 levels. 97 is a good support on the weekly charts; if holds may take it higher to 101-102 region in the near term. If a break below 97-96 is seen it may face the danger of a fall towards 92.5-90.

Copper (3.044) has fallen below 3.05 and may now test 3.00 in the coming sessions. A failure to bounce from 3.00 may push it to lower levels of 2.95-2.90 in the mid-term. Near term is bearish.

FOREX
A period with multiple possibilities going on. Dollar (84.66) strength is well established but still waiting for a break above 85. May be after some more consolidation in both Dollar and the Majors.

Euro (1.2852) is showing very marginal signs of making a bottom near 1.2825-2800 with a severe decrease in bearish momentum despite the new lows. Though a break above 1.2930 and then 1.30 is immediately required to make even the smallest dent on the bearish fort. Keep watching for any sudden short covering emerging or another vertical capitulation.

Dollar-Yen (108.76) is in a shallow correction of its overstretched state as expected and a pullback till 107 would be very normal. The Euro-Yen Cross (139.79) faced a sharp rejection exactly from our resistance of 141.25 and with Yen regaining some strength, may correct to 139.00-138.50 now.

The Pound (1.6382) is showing immense volatility as discussed multiple times. Our 1.6550 has turned out to be the cap of the current bounce and may well become the top end of the short term range with the currency trading in 1.6050-1.6525 for the next few weeks.

Aussie (0.8889) has overshot our target area 0.8920-0.8890 by a few pips and still looks eligible for a short term bounce but a break below 0.8750, if it takes place, may signal a much larger drop towards 85.

Dollar-Rupee (60.8150) closed absolutely flat yesterday. With the EM currencies experiencing a meltdown, a gap up open is expected with a possible test of the resistance of 60.95-61.00. Today the trading may be limited in the range of 60.80-61.20 with the bearish strength diluted to an extent.

INTEREST RATES
The US 5Yr (1.78%) and 10Yr (2.56%) are stable while the 30-Yr (3.29%) has risen by 2bps. The 10-5Yr differential (0.78%) is facing resistance near current levels and may fall again towards 0.75% indicating a fall in the 10Yr yield. The 5Yr may test support near 1.75-1.73% in the near term before bouncing up towards 1.80%.

The German 2Yr (-0.0695%) and 5Yr (0.1885%) have fallen from -0.065% and 0.2025% respectively and may fall further in the near term while the long term trend remains down. On the longer term the 30 Yr may fall the most while the 5Yr and the 10Yr may rise towards 1.2-1.3%.

The Indian 10Yr (8.4355%) has fallen below 8.45% and is steadily moving downwards every session. If the fall continues we may soon see 8.30% in the coming weeks. The Indo-US 10 Yr (5.87%) is sharply in a near term downtrend and may continue this for some more time. It may target levels of 8.75%-8.70% in the near term.

DATA TODAY

No major data release today.


DATA YESTERDAY

US Existing Home Sales
...Expected 5210 K ...Previous 5140 K ...Actual 5050 K