Friday, February 23, 2018
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Market Morning Briefing: Dow Came Off To Re-Test 24000
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STOCKS

Overall view remains bearish for the near term. After a day of slight recovery, most indices are back into the red today and the bears may continue to take charge of the movements for the next few sessions.

Dow (23860.46, -4.15%) came off to re-test 24000 indicating that the fall may not be over yet. Decent support is visible in the 23600-24000 region which may hold for a few sessions.

Dax (12260.29, -2.62%) came off as expected with the resistance near 12700 holding well. We need to see if the price falls below 12200 to test 12000 in the coming sessions. A break below 12200 could take it down to the next support levels near 11870.

Nikkei (21185.76, -3.22%) came back to test support near 21000 visible on the 3-day candles. While this holds, there could be some scope of a bounce back towards 23000. But a break on the downside, if seen could make the index vulnerable to a fall towards 20500 or lower in the medium term.

Shanghai (3090.34, -5.26%) continues to fall sharply, breaking below the weekly support below 3300. While the fall continues, the index could be headed towards 3050-3000 in the next couple of sessions.

Nifty (10576.85, +0.96%) and Sensex (34413.16, +0.97%) recovered slightly but could again plunge to lower levels today. The indices are likely to re-tests immediate supports near 10380 and 33750 respectively or even lower in the next few sessions.

COMMODITIES

Brent (64.32) and WTI (60.53) are down in line with our expectation.

The crude prices look bearish for the coming sessions with Brent likely to test 63-62 levels in the near term. WTI on the other hand may move down towards 59-58, if a break below 60 is seen. We do not expect a fall below 62 and 58 respectively for now and may expect a bounce from these levels.

Gold (1317.31) tested 1310 on the downside before coming back to levels above 1315. We need to see if 1310-1315 holds in the coming sessions; else a gradual fall towards 1300 or lower could be possible next week. A bounce from 1310-1315 could take it higher towards 1340 again which would reduce possibility of coming down to 1300.

Copper (3.0665) has surprisingly broken below immediate daily support near 3.07. But note that the 3.00-3.05 could act as a medium term support which if holds could bring a bounce in the coming sessions. A break below 3, if seen could be surprising and may indicate further weakness for the medium term.

FOREX

Dollar Index (90.255) has been moving in a very narrow range (90.2-90.3) after touching a high of 90.57 yesterday. As mentioned yesterday as well, a test of resistance just below 91 (as seen on the daily candles and weekly line charts) could happen next week.

Euro (1.2259) is trading below support near 1.2275 and even saw a low of 1.2212 yesterday. The earlier mentioned lower support near 1.22 on the 3 day line chart and near 1.215-1.22 on the daily candles, could be the next target early next week. These should provide decent support.

As predicted yesterday, Dollar Yen (109) tested support at 108.5 today (this support is seen on daily, 3 day and weekly candles and on the weekly line chart as well) and is now trading above that support level. We could now see it moving towards 110.5-111 in the next week. There is resistance near 110.5-111 on the weekly line charts.

Contrary to our expectation, Euro Yen (133.59) broke support near 134 yesterday and reached lows near 132.94 yesterday. This has happened on back of Euro weakness against the dollar and corresponding Yen strength. As both Euro and Yen could weaken against the Dollar in the coming week, it needs to be seen how Euro Yen responds.

The downtrend of the last 5 days has paused for Pound (1.3940) as it even saw a high of 1.4067 yesterday. There could be some consolidation around 1.39 for the Pound before the downtrend towards support near 1.37 on daily candles resumes.

Dollar Rupee (64.40) – Important resistance to watch at 64.50-64.40 on USDINR, break of which would take it higher to 64.60.

INTEREST RATES

US 10 Year Yield (2.8312), US 30 year Yield (3.1357), US 5 year yield (2.5448), US 2 year yield (2.1054) : US longer term yields moved up 2 basis points while the nearer term yields consolidated around yesterday’s levels. Our expectation for the 4 yields to respect their long term resistance levels (2.85, 3.15, 2.6 and 2.2 respectively) and not see further volatility in this month is holding up for now. There is some likelihood for the US govt shutdown to happen again, in which case there could be some volatility for a few days.

Both US 30-10 Year Yield Spread (0.304) and US 10-5 Year Yield Spread (0.2864) have moved up further and could continue this upmove gradually in the coming days. There could be some resistance near 0.33 for the 10-5 Year yield spread in the weeks to come.

German 10 Year bond yield (0.76) is testing resistance near 0.76 on the medium term chart currently and should keep ranging between 0.7 and 0.76.

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