GOOD MORNING! STOCKS
The key OPEC meeting is to unfold its decision today. In short term, with holidays and lower volumes, it would not have much impact on prices, however the decision will have big impact on fragile global growth.
Dow (17,827.75, +0.07%) saw another paper flat day. For past four days, Dow has been confined to less than 100 points. For 16 trading days now, Dow has been confined within 370 points, about 2% move. The range studies, even of weekly charts are at multi-year lows, the levels last seen in 2011. Almost every time when the ranges have fallen so much i.e. so complacent, we have seen the markets fall. And this happening at the all-time highs is especially concerning. However, these are not normal markets and normal times. In Central bank liquidity fueled situation, normal wisdom has been proven wrong countless times. However, caution is a definite must, and investors and traders should let the market prove its up trend or down trend before placing money on it.
Nikkei (17,333.52, -0.29%) continues to trade in range unable to break above 17,500 levels. We expect the market break upwards. Sustaining of the higher levels depends on corporate profits and guidance.
Shanghai (2,610.53, +0.24%) is going strong and now above the second target of 2,600. Index is at levels last seen in 2011. The next resistance comes in at 2,657. The next serious resistance above 2,660 comes at 2,710 and beyond that at 2,800 levels. To reiterate, Shanghai composite looks very bullish on long term, any correction in medium term would be an opportunity to buy.
Dax (9,915.56, +0.55%) showed a strong closing and within striking distance of key 10,000 resistance. We expect the markets to retest this level in a day or two. There is high probability that we will break higher to new highs, however we need to watch the market reaction near 10,000.
Nifty (8,4675.75, 0.15%) was volatile but in a limited range. The open interest indicates we may see a closing above 8,500 for the day, however it also depends on how open interest builds up through the day.
Wednesday, because of disappointing US Economic data releases Dollar declined against the major currency pairs. Precious metals are expected to hold its pull back rally.
Gold (1194.07) is trading flat as of now. Candle pattern formation on daily charts and subsequent hourly charts suggest extension of indecision amongst the traders. But, as the support level of 1170 is well intact, so we continue to hold our short term bullish view for the target of 1230. Silver (16.34) failed to breach 16.80, as discussed in our previous posts. But, might get into a Consolidation would in the range of 15.80-16.80 within the primary down trend initiated from July-14.
In early trading hours Nymex WTI (72.80) has breached support level of 73. But, the oil market is clearly oversupplied now and could produce a counter wave any time soon. Keep an eye at the crucial April 2010 low around 68 levels. Brent (76.58) declined before tomorrow’s OPEC meeting, and currently trading at very crucial support levels of 75-76. We expect Brent will hold these levels, but cautious trading is advised ahead of OPEC meets on supply measures.
Copper (2.9600) is trending lower and approaching towards down channel support placed at 2.85.
The booking of the dollar gains ahead of long holidays seasons and the month-end flows will determine what is left of the forex market today and tomorrow. With volatility and volumes at lows, it is likely most of these have been factored in. However, any late moving corporate flow actions can skew, albeit temporarily, the prices to upside or downside.
Euro (1.2501) was rejected sharply above 1.2520s, its September-support-turned-resistances zone. The short term charts have positive divergence, and profit in Dollar gains have supported Euro for now. If Euro can hold above 1.2500, it has better chance of moving up, else the downtrend would resume as volumes comes back into the market. German CPI data would be keenly watched.
Pound-Dollar's (1.5789) moved higher on good GDP numbers. Market expects the UK economy to recover at faster rates as it has been able to sustain this level for several quarters. However, the economy is still weak for any rate hikes and this will weigh on any GBP gains.
Dollar-Yen (117.50) has drifted down after it was rejected two times above 118 levels. For immediate term, we are likely to see a drop to 117, and even 116.
Dollar-Rupee (61.84) is expected to stay range bound as market expects the RBI decision. It is now generally accepted that RBI would like to stay on the course and look for a rate cut post-budget. However, surprises are also not ruled out as there have been slew of 'surprise' rate cuts and stimulus measures across the globe. The month-end flows and hedging related moves before the RBI event could move the Rupee to its range boundaries of 62.10-61.65.
Aussie-Dollar (0.8564) achieved the expected target of 0.8475 (low 0.8480) and has bounced sharply off the lows. However, Aussie has been a tough read with frequent pull backs into the range and Chinese rate surprise spike helping Aussie. Though we have a lower low, now at 0.8480, we are probably still not in a trend. Most likely this will pullback into the range of 0.86-0.87, its range mids.
Globally interest rates are down.
The US 5Yr (1.56%), 10Yr (2.24%) and 30Yr (2.95%) have been falling since the last few sessions. The US 10-5Yr (0.66%) has fallen further today from 0.68% well maintaining the mid-term fall. We may see a fall to 0.65%-0.60% in the coming sessions. Overall the yields may fall while the curve flattening is in the formation.
The German 10 Yr (0.735%) has fallen a bit from 0.74%. Overall the German yields are heading downwards in the coming sessions.
The Indian 10Yr GOI (8.14%) has also fallen breaking below 8.15%. We may now expect a fall towards 8% in the near term.
10:00 GMT or 15:30 IST EU Biz Climate
...Expected 100.3 ...Previous 100.7
...Expected 0.70 % ...Previous 0.67 % ...Actual 0.67 %
US Personal Income
...Expected 0.4 % ...Previous 0.2 % ...Actual 0.2 %
US PCE Price Index M/M
...Expected 0.40 % ...Previous 0.03 % ...Actual 0.23 %
US Durable Goods Orders
...Expected -0.4 % ...Previous -0.89 % ...Actual 0.4 %
US New Home Sales
...Expected 471 K ...Previous 455 K ...Actual 458 K