Daily Market Analysis

Markets Have A Strong Negative Cue

Yesterday as the Chinese entered the markets there was selling seen in the base metal space though it did recover in the evening session, I remain skeptical of the price recovery and technically it looks as if markets have turned bearish and at this point in time it is sell at rise market. We will need more confirmation before taking this plunge. China reported their Caixn Manufacturing PMI which came in at 49.6 against expectations of 50.1. This is a poor data and shows that the economy is slowing down despite state spending as overall demand remain weak. A figure less than 50 indicates contraction in the economy. Gold has found a bid with some Fed officials making some what dovish statements ahead of the Fed meet .Dollar has strengthened as technical bounce back was over due .However with Trump at the helm the bears will get enough opportunities in the near future and political tensions in the US will keep the fire burning.Crude oil has been better bid today as API data suggested larger draw of barrels than expected. Yesterday’s mauling of the bulls have brought some relief in the form of data. The silver lining was that it failed to maintain below the $ 48 a barrel mark and made a quick recovery. Today’s data will give us an insight of the demand going forward. Equity markets initially was sold off but recovered later in the day to remain unchanged. Iron ore and rebar essentially remains unchanged after seeing both way action from yesterday’s close.

Zinc had a negative price action with selling evident throughout the day. However a late bounce back helped the metal to close just around 2600 and a key technical level. Technically a sell of yesterday has dampened the spirits of bulls and a close below 2600 or a break of yesterday’s low will not bode well for the counter in the short run. Inventory though has seen physical delivery from LME controlled warehouses.Spreads have remained on the offer side. Open interest has seen sharp reductions.

Support 1 – 2565 ( yesterday’s low and technically important )
Resistance 1 – 2600 ( psychologically important zone )
Support 2 – 2549 ( basis 22 Dec’16 low )
Resistance 2 – 2620 ( today’s high )

Lead had a very positive price action with buyer’s aggression seen in the counter. Prices look to have gained in strength after the metal held off 2070 area . Technically a strong close but the important point to note has been it’s failure to scale above 2130. This level may be broken if sentiments are positive but for me the bigger challenge lies around the 2150 area and a close above this will change the negative picture of the metal in the short run. Spreads however has seen offers emerge. Inventory has seen declines.

Support 1 – 2100 ( remain psychologically and technically important )
Resistance 1 – 2130 ( has become a strong trading resistance for the counter )
Support 2 – 2090 ( basis 05 Jan’17 high )
Resistance 2 – 2150 ( strong mid term resistance zone )

Aluminium was a tale of two halves with prices initially breaking the 1910 levels and than making a strong recovery in the evening session. Prices touched intra day high before
the 2nd ring close. Technically a good close with buyers aggression seen in the counter. Spreads remain well bid . Inventory has been declining for many months now ,giving a fillip to the counter. A close above 1941 will bode well for the counter and on the downside prices below 1917 will attract further selling.Open interest has reduced sharply .

Support 1 – 1917 ( lot of material changed hands )
Resistance 1 – 1936 ( yesterday and today’s high at the time of writing )
Support 2 – 1909 ( Yesterday’s low )
Resistance 2 – 1941 ( remain technically important )

Nickel had recovered into the close but as reiterated earlier has failed to conquer the 9000 levels. As mentioned yesterday it remains a sell on every rise and looks set to make new lows before it could recover. Price action has been poor with seller’s aggression seen in the counter. Spreads have also remained offered .A price below yesterday’s low will attract further selling in the counter. Inventory has seen a rise indicative of weak demand even at lower prices.

Support 1 – 8790 ( basis 24 June’17 low )
Resistance 1 – 8970 ( today’s high )
Support 2 – 8730 ( basis 06 June ’16 high and strong zone )
Resistance 2 – 9000 ( psychologically and technically important )

Copper has been very well bid with buyer’s aggression seen in the counter. BHP has stated that Escondida mines are set to open as the Force majeure has been lifted indicating that the mine is about to start production.On the wires is also a report that some Chilean Copper mines are facing a shut down with labor union problems brewing up. Inventory has seen a decline. Spreads sees two way action Technically a strong close . A close below 5650 will attract selling in the counter in the short term.

Support 1 – 5650 ( technically strong level )
Resistance 1 – 5702 ( yesterday’s high and strong technical resistance )
Support 2 – 5625 ( basis 16 May’17 high )
Resistance 2 – 5720 ( basis 22 May’17 high )

Tin remains in it’s range though at one point in time had gone below the 20200 mark but failed to remain a seller. Technically a good close . Spreads have seen both way of action. Inventory has been at an all time low with continuous draw down’s seen in the metal’ albeit in a small quantity.The failure of the counter to scale above 19500 levels could bring in sellers. A close below 20200 will attract further selling in the metal.

Support 1 – 20200 ( congested zone and important support zone )
Resistance 1 – 20430 ( today’s high )
Support 2 – 20000 ( remain psychologically important )
Resistance 2 – 20500 ( remain strong mid term resistance for the counter )

On the macro economic parameter Italian and French PMI were below expectations meanwhile German and Spanish PMI were above expectations. Italian GDP figures were robust , beating street expectations.Later in the day in US we have Manufacturing PMI, ADP Non Farm Employment Change, Initial Jobless Claims, Total Vehicle Sales, ISM Manufacturing New Orders and Prices and EIA Crude Data. Today a slew of data will guide us whether this month we will see a rate rise or not . Also it will make us better prepared for the all important Non Farm pay rolls tomorrow. Volumes and volatility has returned and there is an under lying sense of negativity in the markets .We will watch before coming to the conclusion that markets look stretched at these valuations and a healthy correction is due before it can start it’s up move.