Trump’s administration beginning the power transition process and the news that Biden’s choice for the Treasury Secretary is Janet Yellen, former Fed Chair, is keeping the sentiment positive in the market. However, we retain our cautious stance as we see limited room on the upside in equities from here. Dow has bounced above 29500 and could test 30000 if it manages to sustain higher. DAX has come-off failing to sustain the break above 13300. This increases the danger of seeing the expected corrective fall from here itself. Nikkei has risen sharply and can test 26500-27500 before reversing lower. Sensex and Nifty can also see an extended rise than we had expected and then can see a corrective fall. Shanghai has come closer to the upper end of its range and needs to see if it can break the range on the upside or not.
Dow (29591.27, +327.79, +1.12%) has bounced back above 29500 contrary to our expectation to dip within the expected 28800-30000 range. The 28800-30000 range is likely to remain intact for now. From a bigger picture, we retain our view of 30000 and 30800-31000 being a cap on the upside and sharp corrective fall is due in the coming days.
DAX (13126.97, −10.28, -0.08%) has come-off sharply from 13312.42 yesterday. Failure to sustain the break above 13300 can continue to keep the index inside the 13000-13300 range for some more time. This also increases the danger of the corrective fall to 12400 that we had been cautioning to happen from here itself without a rise to 13400-13500 and 13850. We will have to wait and watch.
The break below 25500 o Friday did not sustain and Nikkei (26195.47, +668.10, +2.62%) has bounced-back sharply. This keeps alive the chances of seeing 26500-27500 on the upside in the coming days. Thereafter a corrective fall to 25500 or even lower is possible.
Shanghai (3406.12, −8.37, -0.25%) has come closer to the upper end of its 3180-3450 range. The price action in the coming days will need a close watch to see if Shanghai manages to break the range above 3450 or not which will turn the outlook more bullish. Inability to breach 3450 can keep the sideways range intact and can drag Shanghai towards the lower end of the range going forward.
Nifty (12926.45, +67.40, +0.52%) is moving up towards 13000. It will have to be seen if it can break 13000 and see an extended rise to 13200. Broadly we see 13000-13200 as a strong resistance zone and retain our cautious view of seeing a sharp correction going forward. A strong break above 13200 will be needed to become further bullish and also to negate our view of seeing a corrective fall.
Sensex (44077.15, +194.90, +0.44%) has risen above 44000 and can test 44500 from where we expect a corrective fall. In case of a break above 44500, we can see an extended rise to 45000 before the expected correction happens.
Crude prices have surged as positions widen on spot demand. Hopes of recovery in demand is now seen with a possible successful vaccine trials. Also OPEC meet at the end of the month is expected to extend the current production cuts to another 3-6 months. Gold is sharply down breaking below support at 1840 It may test 1800-1820 but failure to bounce from there could be further negative for the Gold. Silver is bearish towards 22-21 while below 24. Copper has dipped slightly but could test resistance at 3.30/35 soon.
Brent (46.22) and Nymex WTI (43.24) have risen sharply breaking above immediate resistances of 45 and 43 respectively. One more hurdle is seen near 47.50 and 45 respectively which if breaks could be strongly bullish for the next few weeks. Watch price action near 47.50 and 45 now on Brent and WTI respectively.
Gold (1823.50) fell sharply breaking below our expected support near 1840. The COVID 19 vaccine could be an immediate reason that could dampen the rise in Gold where investors boosted the rally through 2020 as safe haven when markets had crashed due to the pandemic. On the charts we see immediate supports at 1820-1800 which if holds could produce a bounce else a sharp fall could be in place for the coming 1-2 months.
Silver (23.33) has also broken below support at 24 after holding above it for quite some time. We may now expect a test of our lower targets of 22-21 in the medium term. View is bearish while below 24.
Copper (3.2695) has dipped a bit but could be gradually headed towards 3.30/35 soon.
Dollar Index and Euro look stable within 92-93 and 1.18-1.1920 respectively. USDJPY may trade within 104-105 just now. EURJPY has bounced and looks bullish for the very near term. Aussie and Pound have scope to re-test resistances at 0.74 and 1.34 before falling off from there. USDCNY may remain ranged within the broad 6.50-6.60 region while USDINR may bounce back from important support at 74.00 to head towards 74.40/50.
Dollar Index (92.48) fluctuated within 92.80-92.00 region yesterday. The 92-93 range could continue for some more time but unless a break on either side is seen it would be difficult to predict on further movement in the medium term. For now we would wait and watch for a possible break on either side of 92-93 region.
Euro (1.1842) also fluctuated within 1.1906-1.18. While below 1.1920, Euro could be ranged with downside limited to 1.18-1.1750 just now. We need to see a break on either side to set the direction for the medium term. Untill then view is ranged.
EURJPY (123.86) could test 124.0-124.4 on the upside before falling off from there again.
Dollar-Yen (104.56) has risen sharply but could be limited to 105 on the upside just now before again dipping back. While the pair has broken above 104.50, we may now look for a 104-105 range for the very near term.
Aussie (0.7312) has been ranged within 0.7250-0.7350 region and could remain so for some more time. There is scope for a test of 0.74 on the upside.
Pound (1.3325) did test 1.34 on the upside before falling off from there. We may expect a re-test of 1.34 before a sharper fall is seen towards 1.32 or lower.
USDCNY (6.5818) has risen sharply instead of falling towards 6.50. Broad view of 6.50-6.60 may hold for now while a test of 6.60 first looks more likely before the expected fall comes in.
USDINR (74.1050) tested 74.05 yesterday before losing at 74.1050. Watch support at 74 today that if holds could produce a bounce back towards 74.40/50 in the next few sessions. Watch for a possible bounce from 74 today, a break below which if seen could indicate bearishness towards 73.80 by the end of this week.
The US Treasury yields have bounced back. The news that the former Fed Chair Janet Yellen is Biden’s choice for the Treasury Secretary is supporting the yields for now. But the upside is likely to be capped and the yields can reverse lower in line with our expectation. The German yields remain lower and stable. The bearish view is intact and we expect the German yields to fall further in the coming days. The 10Yr GoI has risen above 5.90% as against our expectation to see a reversal from there. There is room to move up further before the expected reversal happens.
The US 2Yr (0.16%), 5Yr (0.39%), 10Yr (0.87%) and 30Yr (1.57%) Treasury yields have bounced-back well yesterday. However we expect the upside to be capped at 0.90%-0.92% on the 10Yr and 1.60%-1.62% on the 30Yr for now. We expect the yields to reverse lower again and keep our view of testing 1.78% (10Yr) and 1.50% (30Yr) on the downside.
The German 2Yr (-0.77%), 5Yr (-0.77%), 10Yr (-0.58%) and the 30Yr (-0.17%) yields remain lower and stable. Our view of testing -0.60% (10Yr) and -0.20% (30Yr) remains intact. As mentioned yesterday, the broader bearish view is intact and a break below -0.60% (10Yr) and -0.20% (30Yr) can drag the yields to -0.70% (10Yr) and -0.35%/-0.40% (30Yr) going forward. Thereafter a fresh bounce is possible.
The 10Yr GoI (5.9022%) has risen above 5.90% contrary to our expectation for a reversal from 5.90%. While above 5.90%, a further rise to 5.92%-5.93% is possible before the expected reversal happens. A strong rise past 5.93% will negate our earlier bearish view of seeing 5.85%-5.80% on the downside and in turn will turn the outlook bullish to see 6% on the upside.
9:00 14:30 GER IFO Business Climate Index
...Kshitij Expn 92.3 ...Expected 90.8 ...Previous 92.7
9:00 14:30 GER IFO Business Situations Index
...Kshitij Expn 89.2 ...Expected 87.4 ...Previous 90.3
9:00 14:30 GER IFO Business Expectations Index
...Kshitij Expn 94.1 ...Expected 93.8 ...Prev0io0us 95.0
14:00 19:30 US Case Schiller
...Expected 4.2 % ...Previous 5.2 %
15:00 20:30 US Cons Conf
...Expected 98.3 ...Previous 100.9
No major data release yesterday.