STOCKS
A strong surge in the Dow and DAX yesterday on the US Election day and that has reduced the danger of seeing a deeper fall that we had been mentioning for some time. We will have to se how the market reacts as the election results come out. On the charts, the Dow can move up to 28500-29000 again while above 27200 now. DAX also has room to test 12400 on the upside. Asian are trading mixed. Nikkei has risen sharply and can now test the crucial long term resistance levels of 24000 and 24500 from where it can reverse lower again. Shanghai is trading lower within its broad 3180-3450 range. Sensex and Nifty have risen well yesterday and are looking bullish to move up further to test 41000 and 12000-12100 in the coming days.
Dow (27480.03, +554.98, +2.06%) has risen sharply breaking above 27200. While the Dow sustains above 27200 the view will be bullish to see a strong rise past 27500 and a fresh rise to 28500-29000. It will also negate the danger of seeing 26000 on the downside that we had been expecting.
DAX (12088.98, +300.70, +2.55%) has surged and indeed has closed above 12000. The expected reversal from 12000 seems to have got negated and the danger of seeing 11200 and lower levels stands reduced now. While above 11800, DAX can move up further to 12400 in the coming days. However, from a bigger picture DAX will have to break above 12400 in order to become completely bullish and rule out any fresh fall.
Nikkei (23649.36, +353.88, +1.52%) has risen sharply breaking above 23500 and can now test 23800-24000 in the near-term. The levels of 24000 and 24500 are strong resistances and can cap the upside. As such we can expect Nikkei to reverse lower again from anywhere between 24000 and 24500.
Shanghai (3255.27, −15.81, -0.48%) has come-off slightly on early trades today. A break below 3250 can drag it to 3200 again. However, broadly, the 3180-3450 range is likely to remain intact and we expect Shanghai to move up towards the upper end of this range in the coming weeks.
Nifty (11813.50, +144.35, +1.24%) has risen to 11800 as expected. While the break above 11800 sustains a further rise to 12000-12100 can be seen in the near-term. A strong rise past 12100 is needed to boost the bullish momentum and open the door to test 12500 on the upside. The danger of seeing 11500-11350 on the downside stands reduced.
Sensex (40261.13, +503.55, +1.27%) has also risen above the key level of 40200 and can revisit 41000 levels while it sustains above 40000 now. A strong rise past 41000 will be needed to trigger a fresh rise towards 42000 and higher levels eventually.
COMMODITIES
The American Petroleum Institute (API) reported a major draw in crude oil inventories of 8.01mln barrels for the week ended 30th Oct against analyst expectation of an inventory build of 890,000 barrels. This has aided a rise in crude prices today. We may expect volatility in the crude prices ahead of the US election results and EIA’s crude inventory report due today. Gold has faced rejection from 1920 and could be headed towards 1880-1860 in the very near term. Silver looks ranged for now and Copper could be limited to 3 on the downside with an eventual rise towards 3.20/25 on the cards.
Brent (40.10) and Nymex WTI (38.06) have both risen well from recent lows. Upside could be limited to 43.50 on Brent and 41 on WTI just now and unless these levels break on the upside, we would remain fairly bearish on rude prices for November. Immediate support is seen at 32.50 on WTI and 35 on Brent.
Gold (1891.50) has just declined sharply from 1917 as immediate resistance at 1920 holds for now. While below 1920, view is bearish for Gold towards 1880-1860-1840.
Silver (23.71) has fallen below 24. Only while above 24, we may expect a possible rise towards 26 in the medium term. Else we may expect some ranged trade within 24.50-22.50 for sometime.
Copper (3.0525) is trading low just now but downside could be limited to support at 3.0. On the upside, however there is enough room for a rise towards 3.25. A slow and steady rise towards 3.20 could be on the cards for the medium term.
FOREX
Currency markets remain volatile ahead of the US election results. Dollar Index may rise towards 95.20 while Euro, EURJPY look bearish. Aussie and Pound remain within a broad range and needs to break on either side to indicate a firm directional view. USDINR looks bullish towards 75 while above 74.50. USDCCNY and USDJPY both look bullish for the near term.
Dollar Index (94.1620) has risen well and could be headed towards 95.20 on the upside before again falling from there. Watch interim resistance at 94.40 which if breaks could take it higher to 95.20.
Euro (1.1624) has immediate support at 1.16 which if holds could produce a bounce to take the pair back to 1.17 or higher. Else, failure to sustain above 1.16 could drag it lower towards 1.15-1.14 soon.
EURJPY (122.35) has risen after a test of 122 on the downside. View is not clear just now and we may expect the movement to remain volatile. A possible fall to 121-120.50 is kept intact.
Dollar-Yen (105.19) rose sharply. It needs to break above 105.30 in order to keep the upside momentum intact and take the pair up towards 106-107 in the medium term. Failure to rise above 105.30 could drag the pair down again towards 104.
Aussie (0.7117) has been fluctuating within 0.7222-0.7000 and looks ranged for now without any clue of which direction to take. We would wait and watch for now before taking any firm stand on further directional view.
Pound (1.2988) also is ranged within the broad 1.29-1.31 region and unless a break on either side is seen, it would be difficult to decide which direction the Pound would take.
USDCNY (6.7099) tested 6.749 on the upside and a re-test of 6.75 looks likely in the near term. View is bullish for the pair in the near term.
USDINR (74.4150) closed above 74.40 again yesterday indicating that the pair may continue to trade higher. With markets expected to be volatile over the next 1-2 sessions, we may expect a break above 74.50/60 to test 74.80/90-75.00 on the upside before falling back again to lower levels. Failure to break above 74.50 could keep it ranged within 74.25-74.45 but view is biased towards the higher side for the day.
INTEREST RATES
The US Treasury yields have moved up further and are heading towards their key resistances as expected. We expect the resistances to cap the upside and trigger a fresh fall in the coming days. The German Yields have bounced slightly but it is likely to be short-lived. The downtrend remains intact and we expect the yields to extend the fall. The 10Yr GoI will have to break above the immediate resistance in order to see an extended rise from here before reversing and resuming the broader downtrend.
The US 2Yr (0.16%), 5Yr (0.38%), 10Yr (0.88%) and 30Yr (1.68%) Treasury yields are moving up in line with our expectation. The 10Yr is heading towards 0.90% and the 30Yr is coming closer to 1.70%. We expect the yields to reverse lower from the above mentioned levels. In case of a break above 0.90% (10Yr) and 1.70% (30Yr) we may have to allow for an extended rise to 1% (10Yr) and 1.73%-1.75% (30Yr) before the expected reversal happens.
The German 2Yr (-0.80%), 5Yr (-0.81%), 10Yr (-0.62%) and the 30Yr (-0.22%) yields have bounced across tenors. However, we expect it to be short-lived and the upside to be capped. While below -0.60% (10Yr) and -0.20% (30Yr) the bearish view of seeing a fall to -0.70% (10Yr) and -0.40% (30Yr) will remain intact. Thereafter a strong bounce-back move can be seen.
10Yr GoI (5.8995%)failed to sustain the break above 5.90% and has come-off from the high of 5.9160% yesterday. Inability to rise past 5.90% immediately can drag the 10Yr GoI to 5.85%-5.80% from here itself. It will also negate the chances of seeing 5.93%-5.95% on the upside that we had been mentioning for some time.
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