The Bulls cannot be written off yet, but the situation is fifty-fiftyish. A strong bounce or a strong decline, both seem equi-probable. We continue to prefer the Bull side, but also think it might be best to stand back and watch for another couple of days.

Decent volatility in the Dow (24370.24, -53.02, -0.22%) yesterday, opened higher, closed lower, but managed to remain above the 24250 Support. Absolutely in the middle of a "could go anywhere" situation on the Weekly Candles, with a preference for the upside.

The Nikkei (21516) is trading just above 21500 today, helped by weakness in the Yen (113.50). If the Nikkei sustains today's rally and closes above 21600, it will help the Bulls.

Bulls are putting up a fight in the Shanghai (2605) as well. Of course, a break above 2650 is still needed to score a telling point. This could take a few more days. A break below 2570, on the other hand, may trigger bearishness.

Surprisingly, even the DAX (10780.51, +158.44, +1.49%) is also trying to claw back up (a bit like Wile E Coyote flailing to get back onto the cliff edge after running off it in the TV cartoon) and has managed to rise and close above the crucial 10700. Bullishness, however, will need a rise past 11200. which seems a tall order yet. In effect, therefore, the DAX might still be a loss-leader.

Contrary to our expectation of fall towards 10200 in the wake of the BJP's losses, the Nifty (10549.15, +60.70, +0.58%) actually closed with a small gain, after seeing a low of 10333.85. We can look for a broad indecisive range of 10200-800 for the rest of the month now. The longer term could still be bullish from January while the Support at 10200 holds.

No major movement seen in the commodity sector as prices remain stable.

Brent (60.79) and WTI (52.20) are almost stable. Both are likely to remain ranged in the 58-64 and 50-55 region for some more time. No major movement is expected this week. Recovery in global equities is positive for oil just now. Russia plans to cut its oil output by 50000-60000 bpd in January as part of the OPEC deal to cut by 220000 bpd.

Brent-WTI spread (8.12) is stable but has scope of falling towards 7 in the medium term. A fall in the spread could pull crude prices down in the near term.

Gold (1250.80) looks bullish towards 1265 while above 1240.

Copper (2.7745) almost tested 2.70 before bouncing back towards current levels. This rise is likely to continue taking the price higher towards 2.80/85 again. This sideways range is a pause period probably before a sharp rise is seen in the longer run.

Overall global currencies are stable just now. Most of them are stuck within narrow ranges that is likely to hold for a few more sessions before a sharp break is seen.

Dollar Index (97.37) is stuck in the 98-96 region and could remain so for the next 1-2 sessions. 98 is an important resistance and while that holds, the index could eventually fall in the medium term breaking below 96.

Euro (1.1332) has dipped and is testing near term support at current levels. A bounce from here if not seen today could open up chances of falling further towards 1.13-1.12 in the next 1-2 weeks.

Dollar Yen (113.44) is also stuck in the narrow 114-112 region and could be ranged for few more sessions before a break on either side is seen. Resistance near 114.0-114.50 looks strong tilting our preference of a break on the downside in the medium term.

Pound (1.2505) is falling sharply and could test 78.6% retracement of the rise from 1.19 (Oct’16) to 1.44 (Apr’18) near 1.2460. A bounce could then follow from 1.2460 in the medium term. Near term looks bearish.

Aussie (0.7215) has support near 0.71 which is likely to hold in the longer run. Note that 0.70/0.71 is a long term support and the Aussie could be nearing a medium term bottom soon.

Dollar Rupee (71.86) came off from yesterday's high of 72.4625. Overall we may see a re-test of 72.25/75 again before fresh selling comes in. Broad range of 73.25-71.50 is seen for the next couple of weeks. The pair trades at 72.32 on the NDF indicating a possible gap up opening on the onshore market today.

Sharp pick-up on the US 2Yr Yield (2.78%) yesterday from 2.71% earlier, as also across the Curve (5Yr up from 2.70% to 2.75%, 10Yr up from 2.86% to 2.89%), but the Curve got a little more inverted with the 5-2 Spread moving down from -1bp to -3bp and the 10-2 Spread moving down from +15bp to +11bp.

The pick up in Yields could be position adjustment and a corrective rally ahead of the FOMC next week, but the overall trend suggests some more downside in Yields over the rest of the month. We have to also see if the hoped for (still to be confirmed) rally in Equities can lead to some Curve Steepening.

ECB meeting tomorrow.

Shaktikanta Das is the new RBI Governor. Let us see how the market reacts to this. Yesterday, the 10Yr GOI (7.5278%) had risen to 7.7122% soon after the Open as reaction to the Urjit Patel but came back down again. Maybe some stability might come into this as well.

10:00 15:30 EU Ind Prodn (MoM)
...Kshitij Expn 0.07 % ...Expected 0.2 % ...Previous -0.3 %

12:00 17:30 IN CPI
...Kshitij Expn 2.84 ...Previous 3.31

12:00 17:30 IN IIP
...Kshitij Expn 5.15 % ...Previous 4.47 %

13:30 19:00 US CPI (MoM)
...Kshitij Expn 0.27 % ...Expected 0.0 % ...Previous 0.1 %

13:30 19:00 US Core CPI (MoM)
...Kshitij Expn 0.13 % ...Expected 0.2 % ...Previous 0.2 %


DATA YESTERDAY:-
----------------

UK Unemp
...Kshitij Expn 4.1 % ...Expected 4.1 % ...Previous 4.1 % ...Actual 4.1 %

US PPI ex Food & Energy (MoM)
...Kshitij Expn 0.21 % ...Expected 0.0 % ...Previous 0.5 % ...Actual 0.3 %

US PPI
...Kshitij Expn 0.34 % ...Expected 0.0 % ...Previous 0.6 % ...Actual 0.1 %