STOCKS

Dow needs to hold above 36250/000 to keep the uptrend intact while Dax also needs to hold above 16000 to keep bullish momentum intact in the short to medium term. Nikkei and Shanghai have fallen and unless both hold above 29500 and 3450, the view is bearish in the near term. Nifty and Sensex have bullish reach intact as they are above 18,000 and 60,000 respectively.

The Dow (36319.98, -112.24, -0.31%) moved lower after testing yesterday’s high of 36,565.73. A fall below 36250/000 is required for our view to turn bearish. Above 36000/250 we can expect a test of 36,500 and 37,000 eventually.

The DAX (16040.47, -6.05, -0.038%) was slightly lower today but although above 16000 the view remains bullish to see a crucial stress test at 16400.

The Nikkei (29200.04, -84.63, -0.29%) broke below support at 29500. Although below 29500, a dip to 28000 is possible in the next few sessions before seeing a further rebound. Our previously mentioned bullish view towards 30,000 / 31,000 is canceled while below 29,500.

Shanghai (3461.98, -48.62, -1.28%) fell sharply below the previously mentioned resistance of 3475. A further fall below 3450, if observed, will be bearish towards 3400. A strong break above 3475/3500 is needed to see a rise towards 3550+.

Nifty (18,044.25, -24.30, -0.13%) closed above 18,000 yesterday. While above 18000 the view is bullish to see a test of 18200/250. A fall below 18000 can bring it back to 17600. The overall picture is bullish.

Sensex (60433.45, -112.16, -0.19%) looks bullish to test 61000-62000 while above 60,000. Watch closely for short term price developments.

BASIC PRODUCTS

Crude prices have increased as the United States has opened its borders to international travel, indicating increased demand for jet fuel in the future. Brent may move up to 87.50 while WTI may move up to 86 in the near term. Gold has fallen slightly below 1835/40, but it must soon break higher to continue to climb over the next few sessions. Copper has dipped below 4.45 but may rebound again from 4.25 soon. Silver is heading towards 24.65-25 while it is above 24.

Brent (85.20) and WTI (84.34) rose sharply as the United States reopened the country’s borders for international travel, a sign of increased demand for jet fuel going forward. It may be necessary to forecast a rise to 87.50 and 86 on Brent and WTI respectively.

Gold (1830.30) has fallen from 1832.72 and has provisional resistance in the 1835-1840 region which, if maintained, may cause a decline around 1810-1800 on the downside before seeing again a sharp increase. Otherwise, an immediate breakout above 1835/40 is needed to add weight to further optimism. This, if seen, could call into question the downtrend since 2100 (August 20).

Silver (24.32) seems stable at the moment and although above 24 there is a possibility of upside to 25. Intermediate resistance is seen near 24.65 / 70 which if it holds, may lead to a drop to 24-23 in the medium term.

Copper (4.3615) tested 4.45 yesterday before coming out of there. As mentioned yesterday, 4.45 can act as a decent resistance in the short term, pushing the price towards 4.30 / 25 before trying again to bounce back towards 4.45 / 50 in the medium term.

FOREX

The Dollar Index and the Euro seem stable at the moment. The Dollar Index is holding above support near 93.65 while the Euro is lower while below decent resistance near 1.16-1.1650. The Aussie, EURJPY, Pound and Yen Dollar all look strongly bearish in the short to medium term. The USDCNY may be in the range 6.3750 / 38-6.40 while the USDINR may attempt to rise to 74.20 / 25-74.40 / 50 before dropping from there.

The Dollar Index (94.023) has rebounded from 93.87 and although above 93.75 / 60, the index may remain higher in the 93.65-94.25 region. A short-term break on either side will indicate a new direction.

The euro (1.1583) tested 1.1609 yesterday before falling from there. Although below the 1.16-1.1650 region, we can keep our bearish view of seeing a test of 1.15-1.14 intact.

EURJPY (130.71) has support near 130.50 which, if held, may produce a rebound to 131.50-131.75 before the cross resumes its downtrend towards 130- 129.50.

The Aussie (0.7364) has fallen sharply and may continue to fall below 0.74. The view is strongly bearish for a target of 0.7350-0.7315.

The pound (1.3559) was down to 1.36 but fell sharply from there. Below 1.36, a fall to 1.35 is possible. Unless a breakout on either side of 1.36-1.35 is noted, it may remain in a lateral consolidation. The wide range of 1.37 to 1.33 can hold for a few weeks.

The dollar-yen (112.85) has fallen below 113. The view is strongly bearish right now and there is a possibility of a fall to 112.55-112 in the medium term.

The USDCNY (6.3935) tested 6.3869 yesterday and bounced back from there. A range of 6.40 to 6.3750 / 38 may hold in the short term before a decisive rise is observed.

USDINR (74.02) rebounded well yesterday from 73.84 and managed to close above 74. We expect the upside to extend towards 74.20 / 25 or even 74, 40/50 on the upside before another drop occurs. We expect a wide range of 73.50 to 74.50 for the next few sessions with a sell-on rally environment.

INTEREST RATE

US Treasury yields remain stable in the short term while those at the far end have fallen further. There is room for 10-year and 30-year-olds to dive further to test their main supports, and then bounce back again. We expect the Treasury yield to stay in a wide side-range for some time. German rates came down to their intermediate supports much faster than expected. A corrective rebound is possible in the coming days before the wider decline resumes. The 10-year and 5-year GoIs fell again yesterday and hold intact our bearish view of a further decline from here on out.

The yields on 2-year (0.43%) and 5-year (1.09%) US Treasuries remained stable while the 10-year (1.46%) and 30-year (1.83%) yields were slightly lowered. Our point of view remains the same. 1.4% -1.35% (10 years) and 1.8% -1.75% (30 years) are important supports that can be tested in the short term. We expect yields to rebound from there and will stay in a wide range of 1.35% -1.65% (10 years) and 1.75% -2.1 / 2.2% (30 years) for a while.

The German 2-year (-0.76%), the 5-year (-0.59%), the 10-year (-0.30%) and the 30-year (0.0%) again fell sharply across all the tenors. The 30Yr dipped to -0.3% as expected and has the option to extend the decline to -0.4% before rebounding again. The 30Yr has come down to 0% much faster than expected and can see a corrective 0.1% rebound from here and then a further fall to -0.1% and -0.2% can be seen.

India’s 10-year GoI (6.2925%) fell below 6.3% as expected. It remained lower but stable yesterday. Although below 6.3% the view is bearish to see 6.2% and even lower in the coming weeks.

The 5-year GoI (5.6655%) may extend the fall to 5.62% -5.6% on a break below 5.66% in the coming days.


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Al Worden

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