GOOD MORNING! STOCKS
The global meltdown continues and the US market continues to outperform the European or Asian markets as among the major indices, only Dow (16014.38, -0.08%) still remains above the January low.
Fed Chair Yellen will be testifying before the US Congress tonight and Senate Banking Committee tomorrow. Waiting for guidance from these discussions, Dow remained inside the range of the previous session. As mentioned earlier, we wait for a breakout from the range of 15800-16600 to take a directional call.
Dax (8879.40, -1.11%) closed below our target level of 8900. As long as any short covering rally fails to take it above 9300-50, the chances of hitting the major support band of 8550-8350 remain high.
Nikkei (15699.85, -2.40%) shows no sign of slowing down its decline and as discussed yesterday, after breaking below 15900 now, the probability of dropping below 15000 looks pretty strong. Immediate resistance at 15900-16000.
Nifty (7298.20, -1.21%) may open with a gap down again and test the January low of 7240 in the opening hour itself. The old support band around 7200 (+/-20) is back into consideration and the price action at these levels may decide the short term trend just before the Budget.
Gold (1191.24) and Silver (15.213) have come off from 1201 and 15.50 just as expected. There is a slight possibility of seeing some sideways movement before rising further. A short dip is also possible to levels near 1175 and 15-14.9 respectively. See charts:
Copper (2.0330) came off sharply to levels below 2.05 contrary to our expectation. The daily channel resistance near 2.10 has held well and while that holds we have some chances of testing 2.0-1.95% in the near term. The current price movement indicates that though the bulls are yet to come in strongly. See charts: http://www.kshitij.com/graphgallery/copperma.shtml#ma
Crude prices [Brent (31.01) and Nymex WTI (28.44)] are trading low, coming back to the recent lows. Are the bears stronger than the bulls? Need to keep an eye on current levels. A failure to bounce back from the current levels could make prices more vulnerable to break previous lows. We expect a bounce from current levels in the near term. See charts:
Fed Chair Yellen’s testimony before the US Congress is eyed for some recovery in the equities and resultantly, in Dollar (95.97) too.
Still, Euro (1.1296) doesn’t show any fatigue yet, even after achieving our immediate target of 1.13 very fast. Depending on the testimony, it may well climb to 1.14 or even 1.15 by the next week.
Dollar – Yen (114.54) has hit a low of 114.18, not far away from our initial target of 114.00-113.90. The best the Dollar bulls can expect at this point would be a sideways consolidation in the range of 114-116 but the risk of a sudden decline lower may always be there.
Pound (1.4470) is coiling in the band of 1.4350-1.4550 that may be resolved by the end of the week and provide a directional move. As long as it stays above 1.4340-00, the short term strength remains intact.
Aussie (0.7048) is in a labored decline as it trades around the major support levels of 0.7050 but there is no strong bearish momentum at this point. The bias is indecisive in spite of the larger downtrend and it may be better to wait for some clarity to emerge.
Dollar Rupee (67.90) faced rejection from 68.20 levels yesterday but another attempt to 68.20-30 can’t be ruled out considering the weakness in the equities. Immediate support comes at 67.75.
Global bond investors are set into a panic mode after the introduction of the negative interest rates by Japan and the momentum with which the yields have been falling in the last few sessions. Possibly the bonds are acting as safe havens as stocks continue to fall.
The Japan 10Yr yield (-0.006%) dropped to levels below zero for the first time yesterday. The slope of the fall is steep and may need some sideways correction to recover steadily. For the very near term yields still look bearish at least for a couple of sessions more. See charts:
The US yields have also fallen but are testing immediate support levels. Need to see if these hold and help the yields to bounce back. The US 10-5Yr differential (0.54%) has come off well from the channel resistance near 0.61%. This may suggest that the 10Yr and the 5Yr may start rising in the near term, reducing the differential. See charts:
The German-US 2Yr (-1.20%) and the German-US 10Yr (-1.46%) have both risen along with the sharp rise in Euro. But the 10YR spread may test resistance near -1.44% and may come off from there. See charts:
No major data release today.
UK Trade Balance
...Expected -10.40 £ (Bln) ...Previous -11.50 £ (Bln) ...Actual -9.92 £ (Bln)