GOOD MORNING! STOCKS
Last week, everyone was seeing 15-20% drop coming in the markets all over the globe. Now, it looks like a typical correction market. The sentiment has flipped swiftly and the bears look trapped, even in the Eurozone.
The Dow (16614.81, +1.31%) resumes the rally after a pause day and the intensity of the rise is alarming for the bears. Above 16800, as mentioned earlier, the probability of new life high increases a lot. Dax (8886.96, +1.94%) is fighting near the strong resistance of 8900 and while the index may expect support from 8600-550, a break above 8900 may extend the rally to 9100-50.
Shanghai (2344.15, +0.19%) is in a pause mode as expected after correcting from 2390 and may continue for a few more sessions. Bullish momentum remains strong above the support area of 2315-2290. The Nikkei (15057.47, +1.71%) is consolidating after bouncing sharply almost exactly from our support area of 14600-550. While it remains in the broader range of 14500-16500, it has tackle supply pressure anywhere from 15200 to 15600.
Nifty (7927.75, +0.61%) closed above 7925 yesterday to register the first higher high and signaled a probable test of 7975, even 8005-30. The sentiment is bullish and if panic short covering ends the day above 7975-80, the possibility of a new life high next week increases manifold.
Gold (1248.84) has risen a bit but the moves have been tight. It may now test resistance near 1250 and remain ranged for a few more sessions. Silver (17.48) has risen a bit yesterday but overall remains ranged in the 17.25-17.75 region. Near term remains stable.
Nymex WTI (82.67) is indecisive about the next move and continues to fluctuate below resistance near 84. Movements may be restricted in the broad 80-84 region in the near term.
Brent (86.21) continues to extend its fall downwards and made an intra-day low of 82.93 yesterday. While below 86, a sustained fall to 82 is possible. But need to see if it bounces back from there or falls further towards 80-77 region.
Copper (3.0215) has again risen and is fluctuating in the 2.95-3.03-3.05 levels. As said earlier we may see a sideways consolidation while above 2.95 but a break below 2.95 can push it sharply down. Near term is bearish.
One of the most renowned Hedge fund manager, David Tepper says that Euro is headed much lower and that may have brought some Euro selling. Anyway, almost nothing is happening in the currency markets, which is very normal after a few action-filled weeks.
Euro (1.2726) is testing the lower end of the short term range of 1.27-1.29 on the back of ECB bond-buying rumors but the possibility of extending this corrective bounce to 1.2950-1.30 levels still survives above 1.27, while the long term trend remains bearish.
Dollar-Yen (106.88) is in the expected pause mode near the supply zone of 107.50-108.25 and may continue for this week. The Euro-Yen Cross (136.02) has come down contrary to expectations but the upside possibilities are not negated as long as the price stays above 135.50-20.
Pound (1.6124) has made the initial bounce from 1.5900-1.5850 as expected and now may try to extend it to the intermediate resistance of 1.6200-25. The series of lower highs must be broken first before considering any strength.
Aussie (0.8791) 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.
Dollar-Rupee (61.31) spent a pause day with a very small range but today it may test 61.15-10 or even the major support in 61.90-85. The collapsed volatility may keep today’s range small too, though a lot of participants will square off their positions on this last day of the shortened week.
A bit of relief pickup in US and German yields on yesterday's bounce in global Equities, but some stress remains.
The US yields (2Yr 0.36%, 5Yr 1.419%, 10Yr 2.207% and 30Yr 2.979%) traded a little higher than the 0.35%, 1.39%, 2.17% and 2.95% respectively the day before. Still, Resistances at 2.25% and 2.99% hold for the moment on the 10Yr and 30Yr respectively. For the 2Yr, the Resistance to watch is 0.40% and for the 5Yr the mid-term Resistance is near 1.57%. These need to be broken in order for the medium-long term danger of fresh decline in yields.
German yields (2Yr -0.044%, 5Yr 0.158%, 10Yr 0.865% and 30Yr 1.761%) have also moved up a bit, but not much. The Greek 10Yr (7.638%) now trades lower than the high of 8.794% last Thursday. A fall below 7.50% (at least) will be needed to suggest that the market is now relaxed.
The Germany-US 2Yr Spread (-0.404%) and 10Yr Spread (-1.342%) are likely to consolidate near current levels for a few days now, after having come off from higher levels seen last week. Resistance at -1.25% is holding well on the 10Yr Spread. As mentioned yesterday, the Dollar could regain some of its yield advantage against the Euro in the coming days.
The U-Japan 10Yr Spread (1.729%) has rebounded well from last week's lows, but has a crucial Resistance near current level. Expect some consolidation here for a couple of days while the market decides where to go next.
12:30 GMT or 18:00 IST AU CPI
...Expected 0.40 % ...Previous 0.50 %
08:30 GMT or 14:00 IST UK BOE MINUTES
...Expected 0-0-9 ...Previous 0-0-9
12:30 GMT or 18:00 IST US Core CPI (MoM)
...Expected 0.20 % ...Previous -0.17 %
14:00 GMT or 19:30 IST BOC Meeting
...Expected 1 % ...Previous 1 %
14:00 GMT or 19:30 IST US Existing Home Sales
...Expected 5110 K ...Previous 5050 K
2:00 GMT or 7:30 IST CN GDP (YoY)
...Expected 7.2 % ...Previous 7.5 % ...Actual 7.3 %
5:30 GMT or 11:00 IST CN Retail Sales
...Expected 11.80 % ...Previous 11.90 % ...Actual 11.60 %
5:30 GMT or 11:00 IST CN Ind Prodn
...Expected 7.5 ...Previous 6.9 ...Actual 8.0