Find an investing opportunity every 60 seconds!
Get SMS to get the App Link
Tap here to access menu...
Tap here to Pull quick market snapshot...
Tap here to open an account...
Welcome to our brand new version...
Download our
RING Mobile App NOW!
Advantage AxisDirect
Quotes
Back To Menu
Laurence Balanco, Global Technical Analyst at CLSA
Feb 16, 2018 | Source: ET
Within the global context we should see some kind of a short-term pullback, but if you look at the setup of the breakout that we saw in September 2016, that does support a 12,000 target before the April-May time period. Again, a pullback in the Nifty would be a buying opportunity.
What we have seen historically is that high momentum is not typically a sign of a major peak. Typically, what happens before you get a major turning event, you get a high momentum peak, you will see a correction and then you will see new highs. When you get new highs without momentum confirmation, that’s a formal worrying sign. The bullish trend in global markets is intact. If you are looking through the first-half of 2018, we should see further gains.
The bank index is still our lead sector. The interesting thing is two sectors — technology and pharmaceuticals, have been big underperformers for the past two-and-a-half years are starting to stabilise and improve. They won’t be a drag on the index as they have been for the past two and a half years.
We do think there will be further strength in INR. In the very short term, we could see a rebound back to 64-and-a-half, 65 areas, but that would be an opportunity to buy rupee.
If you look at the new high that the S&P had made recently, it was associated with a higher VIX reading. What that is suggesting is that while we still see further gains into April-May, on a longer term perspective, that’s also likely to be associated with a pickup in volatility. Historically, low periods of volatility are followed by the rise in volatility. The divergence between the S&P and the VIX right now is just the indication of pickup in volatility that should likely accelerate past the April-May period.
The more significant thing for global investors, if you look at the relative performance of the US markets vs MSCI World as a benchmark, in dollar terms, is the US market is underperforming. Our expectation is for emerging markets to continue to outperform even with a 3,100 upside target for the S&P. We think emerging markets will go up more and the US market uptrend is far more mature than in emerging markets.
For global markets, a break above 3% for US 10-year yield will be a headwind. In the short term, I can see the yield continuing to trend towards that resistance area but if we have a break above it, then that would be a headwind for global equities.
We have broken below a support area that was at 91-92 on USD index. We see further dollar weakness towards the 83 area. So our message on the dollar is that any short-term rebound would be a selling opportunity.
The $70 area for Brent and $65 for WTI are key resistance areas. At this point, oil is set up for a correction and consolidation from here. It will be a $10 trading range, at a higher level than what we saw in 2016; but in the very near term, it’s vulnerable to a pullback.
Emerging Markets
nifty
Weekend Reading
VIX
US markets