Saturday, April 21, 2018
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Market Morning Briefing: Dow Looks Weak Below 24000
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STOCKS

Dow (23533.20, -1.77%) looks weak below 24000. There could be some slight recovery towards 24000-24500 but overall the downside scope towards 22500 remains open for the longer term. A sustained rise above 24500 could negate immediate downside taking the index back towards a possible upmove. Watch price action near 24000.

Dax (11886.31, -1.77%) is almost headed to test immediate support near 11700 and could then bounce back a bit from there.

Nikkei (20513.63, -0.51%) could get some immediate support near 20200 but it has broken below long term support on the weekly candles and while the index trades lower, there could be chances of a further fall towards 19500 in the longer run. The fall could sustain if Dollar Yen (104.94) does not recover from current levels.

Shanghai (3119.08, -1.07%) fell sharply last week testing weekly support near 3100. Note that this is an important level and a bounce back from here or a break below this would indicate the course of direction for the medium term.

Nifty (9998.05, -1.15%) and Sensex (32596.54, -1.24%) may see some bounce from current levels. Some more scope on the downside is possible towards 9900 and 32250 respectively.

COMMODITIES

Brent (70.25) is headed towards the Jan’18 high of 71.28 and while that holds, the price could see a short term dip towards 69.0-68.50

Nymex WTI (65.54) is also near the Jan-high of 66.65 and could come off from there to levels near 64 in the coming sessions.

A break on the upside is needed for the Crude prices to start a fresh upward rally from here on.

Gold (1348) has been rising for the past 3-sessions and is headed to test resistance near 1354. A break above 1354, if seen immediately would take it higher towards 1360/70 levels; else a fall from 1354 could bring it back to 1330 by end of the week.

Copper (2.9685) is testing important support on the 3-day candle and if that holds, an immediate bounce from here is likely. Else a break below 2.96 could prove to be bearish for the medium term towards 2.90. Recovery in Copper price could come from some recovery in the Chinese stock index.

FOREX

Dollar index (89.43) is trading near crucial support on daily candles and on weekly line chart near 89.3-89.5. It has not been able to break below 89.40 in the last 4 weeks. After Trump’s trade war announcement last week, we could see the Dollar weaken more this week, in which case, the next downside target would be support near 88.5 on daily candles.

Euro (1.2369) has again breached immediate resistance on daily candles near 1.235. If the Dollar weakens this week, it might imply Euro moving towards higher resistance level on 3 day candles near 1.255-1.260.

Dollar Yen (104.95) dipped to a 17 months low last week and is currently trading just above support on daily and 3 day candles near 104.5-104.8. A further break of this support (which is less preferred for this week) would lead to the next downside target being near support on weekly and daily line chart near 103.75.

Euro Yen (129.81) is moving in a downward channel on daily candles. It tested support near 129 on Friday and might again move towards 130.0-130.5 in the next couple of sessions before moving down again. The next crucial downside target would be near 127.5-128.0 which was last seen in Aug ’17 and a break of which, could imply sustained bearishness.

Pound (1.4160) is moving up in a channel on daily candles and might attempt a test of resistance near 1.43 this week. If 1.43 is breached, it could move further up towards 1.46, which is seen as a crucial long term resistance.

Dollar Rupee (65.01) –Let’s watch whether Support at 64.90 holds today or not.

INTEREST RATES

We repeat Friday’s comment: “After the US Fed didn’t put up a sufficiently hawkish stance for US yields to move up, Trump’s announcement of import curbs on China has made investors move away from stocks towards safer bonds, thereby pushing yields down even further.”

Our Treasury report for Mar’18 (available on demand) had predicted a decline in yields after an initial upmove in the days post the rate hike. The decline is currently happening without the initial upmove and might just continue through Apr-May.

US 10 Yr Yield (2.8263%), 30 Yr (3.075%), 5 Yr (2.61%), 2 Yr (2.27%) :

On the short term chart, the 10 Yr yield might rise this week from channel support near 2.8% towards channel resistance near 2.88%-2.90%.

The 30 yr yield should move up further towards 3.10-3.15% in this week from support near 3.04%-3.05%.

The 5 year yield is near support at 2.6% and could see a rise to 2.7% by end of the week.

US yields have been seeing a decline post the Fed rate hike, which could continue in the medium term.

Japan 10 year yield (0.028) broke crucial support near 0.0375-0.0400 on short term charts last week and is currently near horizontal support near 0.03%. We are expecting it to rise back up from these levels towards 0.05% in the next 1-2 weeks.

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