Updated: Jan 14
Equities are higher while the Dow and DAX hover higher and have limited room to rise from current levels. We reiterate that 31300-31500 on the Dow, 14500 on the DAX are crucial levels to watch for a reversal. On the Asian front, Nikkei, Shanghai, Sensex, and Nifty look much stronger than the Dow and DAX. Nikkei is at resistance. Shanghai has risen above the crucial level of 3600 and needs to see if it can sustain this break. Sensex and Nifty retain their momentum and continue to make record highs. Broadly, while the rally in equities can continue, we will be cautious as a turn-around could be possible at any time as the trigger for that can come in any form.
STOCKS Equities sustain higher. While the Dow and DAX hover higher and have limited room to rise from current levels. We reiterate that 31300-31500 on the Dow, 14500 on the DAX are crucial levels to watch for a reversal. On the Asian front, Nikkei, Shanghai, Sensex, and Nifty look much stronger than the Dow and DAX. Nikkei is at resistance. Shanghai has risen above the crucial level of 3600 and needs to see if it can sustain this break. Sensex and Nifty retain their momentum and continue to make record highs. Broadly, while the rally in equities can continue, we will be cautious as a turn-around could be possible at any time as the trigger for that can come in any form.
Dow (31068.69, +60, +0.19%) continues to hover stable around 31000. We reiterate that 31300-31500 can be a cap on the upside. We expect a sharp corrective fall to 29500-29000 either from current levels itself or after a test of 31300-31500. DAX (13925.06, −11.60, -0.083%) remains below 14000 but is not getting strong sellers. Immediate support at 13800 is holding well and is also keeping alive the chances of seeing 14500 on the upside. As mentioned yesterday, DAX has to break below the second support level of 13600 to confirm a reversal and fall deeper.
Nikkei (28325.95, +161.61, +0.57%) has risen to 28300 as mentioned yesterday. On the long-term chart, there is a resistance at current levels. We will have to wait and watch if the index reverses lower from here or not.
Shanghai (3615.29, +6.95, +0.19%) has risen back sharply from the low of 3517.47 yesterday and is trading above 3600. A strong and sustained close above 3600 will be very bullish from a long-term perspective. It will pave way for a test of 3800-4000 initially and even 4400 over the long-term. It will also negate our view of seeing a corrective fall to 3450 and 3420-3400 that we had mentioned yesterday.
Nifty (14563.45, +78.70, +0.54%) and Sensex (49517.11, +247.79, +0.50%) continue to make record highs. As mentioned yesterday, there is no sign of looking back and the rally can continue as long as there is a strong reversal signal in the global equities. While the current momentum sustains, a further surge to 15000 on the Nifty and 51500 on Sensex cannot be ruled out. However, we will remain cautious to see a turn-around any time.
COMMODITIES The sharp drop in the US weekly inventory data by 5.8mln barrels to 484.5mln barrels for the week ended 9th Jan’21 was released by the American Petroleum Institute that boosted a rally in oil prices. The fall was more than the analyst expectation of 2.3mln barrels. Crude prices may continue to move up in the near term towards resistance on the weekly charts at $58-60 on Brent and $55 on WTI. Silver and Gold are holding above immediate support levels and could rise in the near term towards 1880 and 27-28 respectively. Copper also looks bullish for a rise to 3.75/80.
Brent (57.16) and Nymex WTI (53.71) have rallied on crude inventory draw. We may look for a possible test of initial weekly resistance at $58 which if breaks could test $60 before a decline is seen from there. The immediate view is bullish. WTI on the other hand has similar resistance on the weekly charts at $55 from where a dip looks possible.
Gold (1862.00) is holding above 1820 and could rise towards immediate resistance near 1880 which if holds could produce a rejection to 1820-1800 again in the medium term. We do not rule out a possible test of 1760-1740 in the longer run, on a possible break below 1800. This could be pushed off by a few weeks now. An immediate trade range could be seen within 1820-1880.
Silver (25.71) is also holding well above 24.35 and while that holds, a rise to 27 or even 28 can be seen in the near term.
Copper (3.6365) has risen as expected and while it holds above 3.55, we may expect a reattempt to test 3.75/80 on the upside.
The dollar Index has dipped sharply and while the index falls towards 89, we may expect Euro to test 1.23-1.2350 again but has to break above the initial hurdle of 1.2250. USDJPY may fall towards 103 again while Aussie and Pound look bullish. USDINR may hold below 73.50 and fall towards 73.25-73.10 over today and tomorrow. Most currencies look strong against a weaker Dollar today.
Dollar Index (89.9670) has surprisingly fallen from levels below our expected 91.0-91.5 as the immediate corrective rise seems to be over and the index has resumed its downtrend. A sustained break below 89 may now take it towards 89-88 soon. This is indicative of some strength in other currencies over the near term.
Euro (1.2212) has held above 1.2130 and could test 1.2250 on the upside in the near term. Thereafter, if the currency manages to break above 1.2250, we may expect a re-test of 1.2350 on the upside else a fall back towards 1.21-1.2050 would become possible. For now, watch price action near 1.2250.
EURJPY (126.52) is headed towards 126 from where a bounce back towards 127-128 looks possible in the medium term.
Dollar-Yen (103.58) has fallen from 104.40 in line with our expectations. While the Dollar Index trades lower, we may expect a fall towards 103-102.50 again in the near term. The view is bearish.
Aussie (0.7763) trades higher as Copper has moved up. A rise to 0.78-0.7850 cannot be negated for the near term before a dip is seen again.
Pound (1.3685) has bounced well from 1.3450 over the last two sessions. A break above 1.37 may take it higher towards 1.38 in the medium term. The overall view is bullish for now. USDCNY (6.4610) could possibly attempt to fall to 6.44 over the next couple of sessions. An overall broad range of 6.50-6.40 may hold for some time.
USDINR (73.4338) could fall towards 73.25-73.10 as the resistance near 73.50 holds good for now and may sustain to hold for some more sessions. The view is bearish for the next few sessions.
The US Treasury yields, especially at the far-end have come-off sharply from their highs yesterday. The desired rise in the yields is closer to be achieved. As such we will be watching closely the price action in the coming days for a possible reversal. The German Yields have risen above their near-term resistance and can move up further. Our earlier bearish view stands negated for now. The 10Yr GoI sustains higher and has chances for moving on either side from current levels. We will have to wait and watch to get clarity.
The US 2Yr (0.14%) and 5Yr (0.49%) Treasury yields have dipped slightly while the 10Yr (1.11%) and the 30Yr (1.85%)have come-off sharply from their respective highs of 1.18% and 1.90%. The price action in the coming days will need a close watch as the expected rise to 1.20%-1.25% (10Yr) and 1.90%-1.95% (30Yr) is closer to the reach. We will be looking for a fresh fall to 1% on the 10Yr and 1.75% on the 30Yr initially and then a much deeper fall eventually over the long-term.
The German 2Yr (-0.70%) and 5Yr (-0.69%), 10Yr (-0.47%) and the 30Yr (-0.07%) have risen further. 10Yr and 30Yr have risen above -0.50% and -0.10% respectively. While this break sustains, a further rise to -0.40% and -0.02%/0% can be seen in the coming days. That in turn will negate our bearish view of seeing a fall to -0.60% (10Yr) and -0.20% (30Yr).
The 10Yr GoI (5.9330%)remains below the 5.94%-5.95% resistance zone but is not breaking below 5.92% decisively. A breakout on either side of 5.92%-5.95% will determine whether the yield can move up to 5.98%-6% or fall to 5.88%-5.86%. We will have to wait and watch.