GOOD MORNING! STOCKS
Most indices saw a sharp intra-day fall yesterday, reportedly on the news of the Saudi Arabia/ Yemen spat, but have bounced back later. Maybe we will see a couple of days of indecision while the market decides whether it wants to exit Equities or it is comfortable holding on.
If the Q4 US GDP data today comes in lower than 2.4% today, the market could move up again.
Although the Dow (17678.23, -0.23%, -40.31) has closed lower, it has bounced from an intra-day low of 17579.27 and has closed relatively well above the crucial Support at 17600. Expect indecisive trade between 17600-800 for a couple of days.
The Dax (11843.68, -0.18%, -21.64) too has been able to close above its crucial 11800 Support despite a sharp decline to 11619.72. But, it could be vulnerable to weakness if the Euro (1.0880) regains strength.
The Nikkei (19565, +0.48%, +94) too has bounced from an intra-day low of 19374.72, just below our first bearish target of 19400. Follow-through selling to 19200 has not come about. Contrary to expectation, the Shanghai (3667, -0.38%, -13.5) too has not seen too much of profit-taking, even though it trades lower than yesterday's close. Watch market action today in both for trend clarity.
The Nifty (8342.15, -2.21%) crashed yesterday but may have some chance of bouncing back today. Let us see. Razor's edege now.
Saudi Arabia and its allies launched air strikes in Yemen, bringing a sharp rise in the commodity market yesterday. Almost all the metals and Crude except Copper saw a sharp rise before closing the session lower. Copper saw a fall yesterday as companies shut operations in northern Chile due to torrential rain.
Nymex WTI (50.54) and Brent (58.50) made an intra-day high of 52.47 and 59.78 respectively yesterday on concern over Yemen strikes. They are trading below our mentioned resistances near 54 and 60.00-61.83 which may be tested today or early next week. The Brent-Nymex spread (7.96) has formed a double top on the charts: http://www.kshitij.com/graphgallery/brentvsnymexcrude.shtml and may see lower levels of 6-5 in the coming sessions.
Gold (1201.89) also made an intra-day high of 1219.76 much above our first target levels of 1200-1206, moving closer to the next resistance near 1225. While above 1181-1200 there is a possibility of testing 1225 in the near term. Gold-Crude ratio (23.78) is trading above support near 22.5 see: http://www.kshitij.com/graphgallery/crudeandgold.shtml#ma and may bounce from here to higher levels of 25. Near term is bullish while above 22.5.
Torrential rainfall in northern Chile forced some companies to shut operations at major mines putting an estimated 1.6 million tones of capacity of Copper (according to news) on hold. Copper (2.7840) has been pushed from 2.8690 to 2.7835 yesterday and is currently trading lower. If this continues, we may see some more fall towards 2.75-2.70 in the near term.
Silver (17.030) came off from a high of 17.41 yesterday and is ranged for now. It may remain ranged in the near term.
The Dollar has clawed back gains yesterday. Cross currency moves have been mixed though.
As expected, the Euro (1.0882) was rejected from the 1.0005-55 Resistance region highlighted yesterday and has seen a low near 1.0856. Good Support is seen at 1.0845, can produce bounce to 1.0925 today.
Dollar-Yen (119.31) fell sharply intra-day to a low near 118.33 but has bounced back a bit to trade above the 21-week MA (118.87). The outlook is unclear in the near term now but appears ranged between 121.57 and 116.70 for some weeks. The Euro-Yen (129.82) has broken below yesterday's support near 130.00 but has Support at 129.45 today.
Contrary to expectation, the Pound (1.4847) has lost some ground against the Dollar and the Yen (177.15) breaking below the support at 177.42 (wrongly mentioned as 117.42) against the Yen. But, it has been able to strengthen against the Euro (0.7325, as against 0.7372 yesterday). The Pound may range between 1.4750-5000 against the Dollar for a few days now with a weak bias while below 1.5000.
The Aussie (0.7808) has come down as expected to test the 0.7795 Support mentioned yesterday. Deeper Supports are seen in the 0.7780-65 region, prop the Aussie up over the weekend. Break below 0.7765 (if seen) would sap the Aussie's strength.
Dollar-Rupee (62.67) may move up to 62.85 today, but can come off again from there.
The US yields are up today. The US10Yr (1.99%) and the 5Yr(1.46%) are sharply up from 1.91% and 1.40% respectively. The 10-5Yr (0.53%) spread is up by 2bps but overall is ranged since last couple of weeks. The correction in the spread is sideways but need to keep an eye whether it will it fall further or signal a reversal from here which may be a crucial indication of further movement in the US yields. Our view of 0.45% on the downside remains intact for now while the down channel holds. See 1st chart here: http://www.kshitij.com/graphgallery/usddiff.shtml#sindiff
The 10Yr GOI (7.7969%) inched up higher yesterday towards 7.81%. The overall broad range of 7.74-7.81% continues to hold. As mentioned yesterday, immediate break above 7.81% is not expected.
The German-US 10Yr (-1.78%) has fallen and is just above support near -1.80%; if this holds, it may bounce back towards -1.64%. The German 10Yr (0.21%) is down 2bps. The 10-5Yr spread (0.30%) is also down 1bps and as mentioned yesterday there is a possibility of the German 10Yr yields to fall in the near term towards 0.2% while Curve flattening is seen.
23:30 GMT or 5:00 IST JP Unemp
...Expected 3.5 % ...Previous 3.6 % ...Actual 3.5 %
12:30 GMT or 18:00 IST US GDP
...Expected 2.40 % ...Previous 2.17 %
No major data release yesterday.