Market Morning Briefing

GOOD MORNING!

STOCKS
Uneven economic growth as signaled by weaker than expected US Housing data keeps the markets lower this morning but may well turn out to be the reason for the Fed to keep rates unchanged for a longer period, which would help the markets to rally more. Anyway, the FOMC meet tomorrow will determine the global trend this week.

The Dow (16817.94, +0.07%) has taken a pause after reaching the important level of 16800. The probability of a new life high is looking brighter now with the minor resistance coming in 17000-150 and major supply area in 17500. Dax (8902.61, -0.95%) made a new swing high at 9085 to complete and then break the Rising Wedge just as expected. Now the index remains weak below 9100 and may target 8800 or even the major support at 8650.

Shanghai (2306.93, +0.72%) is showing the initial signs of the expected bounce as it may have finished the largest correction of the last 4 months. Buying must emerge from 2270-60 (or 2240 at most) immediately, otherwise the correction may get a lot deeper targeting sub-2200 levels. The Nikkei (15292.62, -0.62%) has produced a V-shaped bounce but the structural weakness hasn’t been negated yet. The supply pressure from 15600 or even 15750-950 may yet overcome the bulls and they must keep cautious.

Nifty (7991.70, -0.29%) faced rejection exactly from our resistance band of 8050-70 to begin the correction as expected. The initial hope for the bulls would be pinned on 7990 levels but the major support comes at 7935-15.

COMMODITIES
Metals are bearish in the near term while Copper may rise. The oil market seems to be sucked into the bear market and no signs of bullish reversal is seen just now.

Gold (1229.76) has risen a bit but is overall bearish. While it trades in the 1200-1260 range it may fluctuate moving sideways. There is a possibility of retesting 1180 levels in the near term which can only be negated on a sustained rise above 1260-1300. Silver (17.22) is consolidating sideways and may continue for some more time. A steady move towards 17-16.5 may be expected soon.

Nymex WTI (80.59) saw an intra-day low of 79.45 yesterday and is trading a little lower today also. A test of 78-76 levels could be soon expected from where a sharp bounce may take place. Next few sessions may try to move downwards.

Brent (85.26) is trading a bit lower but is overall stable moving tightly in the 84-86 region. A steady fall to 82 may be seen from where it may bounce back to 86-88 levels. However a rise above crucial 88.5 is necessary to ensure a reversal. While waiting for confirmation, we may expect a sideways movement for a few sessions.

Copper (3.0685) has sharply risen as news states that a single buyer has snapped more than half the Copper held in London Metal Exchange warehouses. A rise towards 3.10-3.12 can be seen in the coming sessions from where we may see a fall to 3.10-3.05.

FOREX
Nothing, repeat, absolutely nothing has changed in the last 24 hours in the currency markets, not for even a single pair. This uniform lack of change across the board has not been visible in a long time but it really looks like the currency world is to remain in a frozen state until the FOMC meet outcome breaks it.

Euro (1.2709) has expanded the range to 1.26-1.29 with some more weakness creeping in. Upside probabilities are close to being completely discarded and a retest of 1.25 looks more likely as long as the price stays below 1.28.

Dollar-Yen (107.82) has tested the entire supply zone of 107.50-108.25 but the slower retracement suggests that below 109, the downside risk remains on the cards. The Euro-Yen Cross (137.02) took support exactly from our 135.20 before rallying sharply and may reach 138 now.

Pound (1.6126) has created a Cup & Handle pattern with the neckline coming at 1.6175-85. A successful breakout, if materializes, may produce a rise to 1.63 or even more.

Aussie (0.8816) remains in the sideways corrective mode, looking like Diamond pattern, suggesting a lot of contraction of volatility. A break of the range 0.8650-0.8900 is required to produce a trending move, which will be very sharp most probably.

Dollar-Rupee (61.30) is stuck in a range of 60.90-61.50 for now and may spend some more time inside. No guidance is available from the global cues that may increase volatility, so small movement is more likely for the day.

INTEREST RATES
The German 10Yr (0.87%) has come off a bit from the Resistance near 0.89-90% mentioned yesterday and the 2Yr (-0.05%) is also a little lower than the previous level of -0.375%. Strong and important Support seen at -0.10%. Expect yields to stabilise for a bit between -0.10% on the 2Yr and +0.90% on the 10Yr.

Bonds are stable in the USA ahead of the FOMC meet tomorrow. The remaining $15 bln p.m. QE purchase is likely to come to an end tomorrow, even though the global growth outlook remains cloudy. The 2Yr (0.38%), 5Yr (1.49%) and 10Yr (2.26%) need to see much higher levels in order to avoid fresh declines ahead. Support is seen near current levels on the 2Yr, but yields on the others are still bearish overall. Watch the 2Yr. Note that the 2Yr Swap Cost (0.2574%) has come off a bit from 0.2975% on 16-Oct and could fall some more towards 0.22% or even 0.20% in coming days.

The US-Japan 10Yr spread (1.80%) has crucial Resistance near current levels after its bounce from 1.53% (16-Oct). This could well hold and push the Spread lower again. If so, Dollar-Yen (107.81) could come under fresh pressure.

The Indian 10Yr GOI (8.3163%) has dipped some more and seems to be itching to break below the psychological 8.30% now. The clamour for a rate cut will only grow. The Indo-US 10Yr Spread (6.03%) has seen a sharp drop from the high of 6.27% on 16-Oct and can fall further towards 5.95%.

DATA TODAY

12:30 GMT or 18:00 IST US Durable Goods Orders
...Expected 0.40 % ...Previous -18.38 %

13:00 GMT or 18:30 IST US Case Schiller
...Expected 5.70 % ...Previous 6.75 %

14:00 GMT or 19:30 IST US Cons Conf
...Expected 87.40 ...Previous 86.00


DATA YESTERDAY:-
GER IFO Business Climate
...Expected 104.60 ...Previous 104.70 ...Actual 103.20

GER IFO Business Situations
...Expected 110.0 ...Previous 110.50 ...Actual 108

GER IFO Business Expectations
...Expected 98.90 ...Previous 99.30 ...Actual 98.30