FOREX MARKET OUTLOOK

31ST DEC 2009

Sterling staged a strong broad based rebound overnight as traders pared short positions ahead of year end. Momentum in Sterling continues today which saw it staying firmly above 1.6 level against the greenback while EUR/GBP is also trading below 0.895 level. Dollar's recovery fades as gold rebounds back to above 1100 level. The development argues that dollar's consolidation is still in progress and would remain soft on the last trading day of the year.

Looking at the dollar index, the recovery from 77.33 failed below 78.45 resistance and weakens sharply today. Consolidations from 78.54 is likely still in progress and should have just started another falling leg to 77.33 support and possibly below. Nevertheless, we'd still expect downside to be contained by 38.2% retracement of 74.19 to 78.45 at 76.82 and bring rally resumption.


GBP/USD Daily Outlook

Daily Pivots: (S1) 1.5907; (P) 1.6001; (R1) 1.6169; More

GBP/USD's strong rebound from 1.5829 and the break of 1.6064 resistance indicates that a short term bottom is formed. Bias is flipped to the upside for stronger rebound towards 1.6408 resistance next. On the downside, though, below 1.6047 minor support will turn intraday bias neutral again and bring retreat first.

In the bigger picture, we're still favoring the bearish case that medium term rebound from 1.3503, which is is treated as a correction to down trend from 2.1161, has completed at 1.7043. Focus now turns to 1.5706 cluster support (38.2% retracement of 1.3503 to 1.7043 at 1.5691) for confirmation. Break there will argue that whole down trend form 2.1161 is likely resuming for a new low below 1.3503.

On the upside, break of 1.6408 resistance will indicate that fall from 1.6875 has completed and GBP/USD is still bounded in medium term range of 1.5706/7043. In other words, whole medium term rise from 1.3503 might not be finished yet and another rise could still be seen to 1.7332/8236 (50% and 61.8% retracement of 2.1161 to 1.3503) before completion.

USD/CAD Daily Outlook

Daily Pivots: (S1) 1.0458; (P) 1.0517; (R1) 1.0611; More.

Intraday bias remains neutral for the moment as USD/CAD was supported by lower trend line resistance and rebounded strongly. Note that break of 1.0744 resistance is still needed to indicate that choppy consolidation from 1.0851 has completed. Otherwise, such consolidation might still continue with risk of another fall. Below 1.0461 will flip intraday bias back to the downside again. Though, we'd continue to expect downside to be contained above 1.0205 support to conclude such consolidations and bring rise resumption.

In the bigger picture, a medium term bottom might be in place at 1.0205 with bullish convergence conditions in daily MACD. As noted before, fall from 1.3063 is viewed as a correction to long term rise from 0.9056. Such correction might have already completed with three waves down to 1.0205 already (1.0784, 1.1732, 1.0205). Break of 1.1101 resistance will confirm this case and target 61.8% retracement of 1.3063 to 1.0205 at 1.1971 at least. On the downside, break of 1.0205 will invalidate this view and bring down trend resumption to parity instead.

AUD/USD Daily Outlook

Daily Pivots: (S1) 0.8871; (P) 0.8932; (R1) 0.9007; More

AUD/USD's rebound from 0.8734 resumes after brief retreat and at this point, further rise could still be seen as long as 0.8899 minor support holds. Nevertheless, with 0.9013 resistance intact, our view remains unchanged. That is, rebound from 0.8743 is treated as correction to fall from 0.9321 only. Below 0.8899 will flip intraday bias back to the downside for 0.8734 and below. However, note that sustained trading above 0.9013 will dampen this view and mixes up the outlook. Focus will then be turned to 0.9193 resistance instead.

In the bigger picture, the break of 0.8915/8945 support zone confirm the bearish case that AUD/USD has already topped out at 0.9404 in medium term, by completing a head and shoulder top (ls: 0.9326, h: 0.9404, rs: 0.9321). Deeper decline should now be seen to correct the whole rise from 0.6008 and should target 0.7702/0.8626 support zone. Nevertheless, strong support should be seen there, at lease initially, and bring rebound. On the upside, break of 0.9193 resistance is needed to invalidate this view. Otherwise, outlook will remain bearish.

EUR/USD Daily Outlook

Daily Pivots: (S1) 1.4287; (P) 1.4324; (R1) 1.4375; More

EUR/USD's fall was contained at 1.4272 and rebounded strongly. The development indicates that correction from 1.4217 is still in progress and intraday bias is flipped to the upside for 1.4457 and above. Nevertheless, we'd still expect upside of the consolidation to be limited by 38.2% retracement of 1.5143 to 1.4217 at 1.4571 and bring resumption of fall from 1.5143. Below 1.4272 will flip intraday bias back to the downside. Further break of 1.4217 will target 38.2% retracement of 1.2329 to 1.5143 at 1.4068 next.

In the bigger picture, medium term rise from 1.2456 has completed at 1.5143 on bearish divergence conditions in daily MACD. Focus now turns to 1.3737 cluster support (50% retracement of 1.2329 to 1.5143 at 1.3736). Decisive break there will also confirm the case that three wave consolidation from 1.2329 has finished at 1.5134 too. In other words, whole medium term term fall fro 1.6039 should be resuming for a new low below 1.2329. On the upside, above 1.5143 is needed to invalidate this view. Otherwise, outlook will now remain bearish.

USD/CHF Daily Outlook

Daily Pivots: (S1) 1.0338; (P) 1.0379; (R1) 1.0408; More

USD/CHF's recovery was limited at 1.0420 as reversed. The development suggests that correction from 1.0506 is still in progress and intraday bias is flipped back to the downside for 1.0278 and below. Nevertheless, we'd still expect downside to be contained by 1.0175 resistance turned support and bring resumption of rise from 0.9916. Above 1.0420 will flip intraday bias back to the upside. Further break of 1.0506 will confirm that whole rally from 0.9916 has resumed for medium term support turned resistance at 1.0590 next.

In the bigger picture, medium term fall from 1.1963 has completed with five waves down to 0.9916 already. Also, the three wave consolidation from 1.2296 should also be finished too. Current rise from 0.9916 is expected to extend further to medium term trend line resistance first (now at 1.1032). Sustained trading above the trend line will affirm the case that long term rise from 2008 low of 0.9634 is resuming for another high above 1.2296. On the downside however, a break of 0.9959 support will invalidate this bullish view and argue that medium term down trend in USD/CHF is still in progress for 0.9634 low.

USD/JPY Daily Outlook

Daily Pivots: (S1) 91.97; (P) 92.36; (R1) 92.83; More.

USD/JPY retreats after hitting as high as 92.75 but still, with 91.12 support intact, short term outlook remains bullish. Rise from 84.81 is still in favor to extend to 100% projection of 84.81 to 90.75 from 87.36 at 93.30. On the downside, though, notice bearish divergence condition in 4 hours MACD, break of 91.12 support will indicate that rise fro 84.81 has possibly completed and will turn outlook bearish for 87.36 support in this case.

In the bigger picture, as noted before, there is no clear indication of medium term reversal yet as USD/JPY is still trading well below 55 weeks EMA (now at 94.54) as well as the trend line resistance at 94.44. Whole down trend from 124.13 could still be in progress and might extend towards 1995 low of 79.75 after completing the rebound from 84.81. However, note that sustained trading above the medium trend line resistance will be the first signal of medium term reversal and in such case, focus will turn to 101.43 resistance for confirmation.

GBP/USD Daily Outlook

Daily Pivots: (S1) 1.5907; (P) 1.6001; (R1) 1.6169; More

GBP/USD's strong rebound from 1.5829 and the break of 1.6064 resistance indicates that a short term bottom is formed. Bias is flipped to the upside for stronger rebound towards 1.6408 resistance next. On the downside, though, below 1.6047 minor support will turn intraday bias neutral again and bring retreat first.

In the bigger picture, we're still favoring the bearish case that medium term rebound from 1.3503, which is is treated as a correction to down trend from 2.1161, has completed at 1.7043. Focus now turns to 1.5706 cluster support (38.2% retracement of 1.3503 to 1.7043 at 1.5691) for confirmation. Break there will argue that whole down trend form 2.1161 is likely resuming for a new low below 1.3503.

On the upside, break of 1.6408 resistance will indicate that fall from 1.6875 has completed and GBP/USD is still bounded in medium term range of 1.5706/7043. In other words, whole medium term rise from 1.3503 might not be finished yet and another rise could still be seen to 1.7332/8236 (50% and 61.8% retracement of 2.1161 to 1.3503) before completion.

EUR/USD Mid-Day Outlook

Daily Pivots: (S1) 1.4303; (P) 1.4380; (R1) 1.4430; More

As discussed before, EUR/USD's recovery from 1.4217 should have completed at 1.4457 already after hitting 4 hours 55 EMA. Intraday bias remains mildly on the downside for 1.4217 support. Break will confirm fall resumption and should target 38.2% retracement of 1.2329 to 1.5143 at 1.4068 next. On the upside, above 1.4457 will bring another rise to extend the corrective rise fro 1.4217, but upside should be limited by 38.2% retracement of 1.5143 to 1.4217 at 1.4571 and bring resumption of fall from 1.5143.

In the bigger picture, medium term rise from 1.2456 has completed at 1.5143 on bearish divergence conditions in daily MACD. Focus now turns to 1.3737 cluster support (50% retracement of 1.2329 to 1.5143 at 1.3736). Decisive break there will also confirm the case that three wave consolidation from 1.2329 has finished at 1.5134 too. In other words, whole medium term term fall fro 1.6039 should be resuming for a new low below 1.2329. On the upside, above 1.5143 is needed to invalidate this view. Otherwise, outlook will now remain bearish.

GBP/USD Mid-Day Outlook

Daily Pivots: (S1) 1.5822; (P) 1.5945; (R1) 1.6024; More

GBP/USD recovers strongly after diving to 1.5829 earlier today. At this point, At this point, short term outlook will remain bearish as long as 1.6064 resistance holds and GBP/USD is still expected to fall further to 1.5706 cluster support next (38.2% retracement of 1.3503 to 1.7043 at 1.5691). On the upside, though, break of 1.6064 will indicate that a short term bottom is formed, possibly with bullish convergence conditions in 4 hours MACD and stronger rebound should then be seen.

In the bigger picture, we're still favoring the bearish case that medium term rebound from 1.3503, which is is treated as a correction to down trend from 2.1161, has completed at 1.7043. Focus now turns to 1.5706 cluster support (38.2% retracement of 1.3503 to 1.7043 at 1.5691) for confirmation. Break there will argue that whole down trend form 2.1161 is likely resuming for a new low below 1.3503.

On the upside, break of 1.6408 resistance will indicate that fall from 1.6875 has completed and GBP/USD is still bounded in medium term range of 1.5706/7043. In other words, whole medium term rise from 1.3503 might not be finished yet and another rise could still be seen to 1.7332/8236 (50% and 61.8% retracement of 2.1161 to 1.3503) before completion.

USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 1.0300; (P) 1.0343; (R1) 1.0407; More

As noted before, USD/CHF's pullback from 1.0506 might have completed at 1.0278 after hitting 38.2% retracement of 0.9916 to 1.0506 at 1.0281. Intraday bias is now mildly on the upside for a test on 1.0506 resistance. Break will confirm that whole rally from 0.9916 has resumed for medium term support turned resistance at 1.0590 next. On the downside, below 1.0278 will bring another fall to continue the correction from 1.0506. Nevertheless, downside is expected to be contained well above 1.0175 resistance turned support and bring rally resumption.

In the bigger picture, medium term fall from 1.1963 has completed with five waves down to 0.9916 already. Also, the three wave consolidation from 1.2296 should also be finished too. Current rise from 0.9916 is expected to extend further to medium term trend line resistance first (now at 1.1032). Sustained trading above the trend line will affirm the case that long term rise from 2008 low of 0.9634 is resuming for another high above 1.2296. On the downside however, a break of 0.9959 support will invalidate this bullish view and argue that medium term down trend in USD/CHF is still in progress for 0.9634 low.

USD/JPY Mid-Day Outlook

Daily Pivots: (S1) 91.65; (P) 91.86; (R1) 92.20; More.

USD/JPY's rally continues in early US session and breaks 92.31 resistance. As noted before, short term outlook remains bullish as long as 91.12 support holds. Current rally from 84.81 is expected to continue towards 100% projection of 84.81 to 90.75 from 87.36 at 93.30 next. On the downside, though, notice bearish divergence condition in 4 hours MACD, break of 91.12 support will indicate that rise fro 84.81 has possibly completed and will turn outlook bearish for 87.36 support in this case.

In the bigger picture, as noted before, there is no clear indication of medium term reversal yet as USD/JPY is still trading well below 55 weeks EMA (now at 94.54) as well as the trend line resistance at 94.44. Whole down trend from 124.13 could still be in progress and might extend towards 1995 low of 79.75 after completing the rebound from 84.81. However, note that sustained trading above the medium trend line resistance will be the first signal of medium term reversal and in such case, focus will turn to 101.43 resistance for confirmation.

INDIAN STOCK MARKET END SESSION

The key benchmark indices attained their highest closing level in nearly 20 months on the last trading day of calendar 2009 as Asian stocks rose. Volatility surged in late trade as traders rolled over positions in the derivatives segment, to January 2010 series from the near-month December 2009 series. The December 2009 derivatives contracts expired today, 31 December 2009. The BSE 30-share Sensex rose 120.99 points or 0.7%, off close to 65 points from the day's high.

The Sensex and S&P CNX Nifty today, 31 December 2009, scaled their highest closing level in nearly 20 months. Reliance Industries rose. Capital goods and auto stocks, also edged higher. But banking stocks pared gains. Telecom stocks were mixed. The market breadth was strong.

Rollover in Nifty futures from December 2009 series to January 2010 stood at 58% at the end of Wednesday's (30 December 2009) trade. Rollover in Mini Nifty futures stood at about 50% and the market wide rollover was about 67%.

From 4 January 2010, trading will start at 9:00 IST and end at 15:30 IST compared to the current timing of 9:55 IST to 15:30 IST. The market remains closed on Friday, 1 January 2010, for the New Year holiday.

The Reserve Bank of India (RBI) will review interest rates at its next policy review scheduled for 29 January 2010 and not before, K.C. Chakrabarty,a deputy RBI governor said on Thursday. He further said credit growth will rise to 17-18% when GDP growth reaches 8-9%.

The government is reportedly expected to sell shares in 17 to 18 state firms in each of the next two fiscal years, with an issue happening every two to three weeks. The ministry of disinvestment was consulting with administrative ministries of more than 50 state-owned firms to assess the preparedness for public offer, report said.

Meanwhile, the Thirteenth Finance Commission has suggested the path of fiscal consolidation and sharing of tax revenues between the Centre and the states, in its report submitted to President Pratibha Patil on Wednesday. The report has assessed the impact of the proposed goods and services tax (GST) on trade. It has also suggested steps to deal with the growing off-Budget expenditure, especially, oil bonds, the implications of environment and climate change, and ways to improve outcomes and outputs of public expenditure.

The report of the Thirteenth Finance Commission, headed by former finance secretary Vijay Kelkar, will be given by the President to the finance ministry, which will take it up with the Cabinet.

Food price index rose 19.83% in the 12 months to 19 December 2009, data released by the government today, 31 December 2009, showed. The primary article index jumped 15.49% and the fuel price index rose 4.45%. The worst monsoon in nearly four decades and flooding in some parts of the country have pushed up food prices.

Finance Minister Pranab Mukherjee said on Wednesday that the government needs to strike a balance between economic growth and cutting fiscal deficit. India's fiscal deficit is estimated at 6.8% of gross domestic product for 2009/10 (April-March), higher than 6.2% in the previous year as the government cut tax rates and boosted spending.

Recently C. Rangarajan, Chairman of the Economic Advisory Council to the Prime Minister, raised concern over the rising food inflation, which is at an 11-month high now, stating that the task ahead was to check food inflation. He indicated that the Reserve Bank of India could look at raising the cash reserve ratio (CRR) to suck out excess liquidity from the system, even though the central bank may watch the price movements for some more time before taking any decision on rate hike.

The focus of India's monetary policy is shifting to managing recovery and containing inflation from one concentrated on fostering growth after the global downturn, Reserve Bank of India deputy governor Shyamala Gopinath said early this week. She said rising food prices were fuelling concerns of broader price pressures in India and the policy challenge was to address the supply-side constraints.

She said effective assessment of the inflation process and using monetary policy actions at the right time would be critical. Gopinath's comments follow those from fellow Deputy Governor Subir Gokarn on Thursday, 24 December 2009, who said the January 2010 policy review would focus both on growth and inflation, instead of the previous policy focus on growth.

Finance Minister Pranab Mukherjee said last week that containing inflation and cutting fiscal deficit are the major challenges for the government in the short-to-medium term. The Indian economy can grow at 7.75% in the fiscal year ending March 2010, the Finance Minister said.

Data earlier this month showed that corporate advance tax payments for the October-December 2009 quarter shot up sharply, suggesting a higher profit growth in corporate sector in the third quarter (October-December) of the current fiscal. Corporate advance tax payments for the quarter were up 44% to Rs 48,300 crore against a 3.7% decline in April-June quarter and a 14.7% increase in July-September quarter. The company-wise break-up of advance tax collection suggests a broad-based recovery with automobiles, cement, metals and consumer goods, doing well.

European shares gained on Thursday on the final day of the year, as banks and commodity stocks gained ground amid firm risk appetite. The key benchmark indices in France and UK rose by between 0.12% to 0.29%. Stock markets in Germany were closed.

Asia stocks rose on Thursday, racking up a 68% gain for the year, as a jump in US consumer confidence reinforced views that the world's largest economy is gradually recovering. The key benchmark indices in China, Hong Kong, Singapore and Taiwan rose by between 0.45% to 1.75%.

Markets in Japan, South Korea, Thailand, Indonesia and the Philippines were closed. Most markets in the world will be closed on Friday for the New Year day holiday.

Beijing will stick to its loose monetary stance, but will try to be more flexible in implementing its policies, People's Bank of China Governor Zhou Xiaochuan said on Thursday.

Trading in US index futures indicated the Dow could gain 15 points at the opening bell on Thursday, 31 December 2009.

US stocks spent almost the entire session trading with moderate losses until some late support helped the major indices improve their position on Wednesday. Better-than-expected report on Midwest manufacturing helped sentiment. The Dow Jones industrial average added 3.10 points, or 0.03%, at 10,548.51. The Standard & Poor's 500 Index was up 0.22 point, or 0.02%, to finish at 1,126.42. The Nasdaq Composite Index gained 2.88 points, or 0.13%, to close at 2,291.28.

The Chicago purchasing-manager's index jumped to 60 in December 2009 from 56.1 in November 2009, the highest since January 2006 and well above expectations. The employment gauge also rose, hitting its highest since November 2007.

With many of the major market players done for the year, prices were moderately higher Wednesday for US interest rate futures even as data revealed a significant pick-up in the economy. The July 2010 fed-funds contract priced in a 76% chance for the Federal Open Market Committee to raise the Fed funds rate to 0.5% at its meeting in late June 2010. On Tuesday, the July 2010 contract had priced in a 78% chance for a 0.5% rate. The funds rate has stayed inside a record low range of 0% to 0.25% for the past year, one of many Fed actions designed to stimulate the economy.

Closer home, the BSE 30-share Sensex rose 120.99 points or 0.7% to 17,464.81 its highest closing since 5 May 2008. The Sensex gained 187.12 points at the day's high of 17,530.94 in afternoon trade. The Sensex opened with an upward gap of 21.55 points at 17,365.37, also the day's low.

The S&P CNX Nifty gained 31.60 points or 0.61% at 5201.05, its highest closing since 2 May 2008. It hit a high of 5221.85 in intraday trade

BSE clocked a turnover of Rs 4618 crore, higher than Rs 4327.29 crore on Wednesday, 30 December 2009.

The market breadth, indicating the overall health of the market was positive. On BSE, 1672 shares advanced as compared with 1210 that declined. A total of 83 shares remained unchanged.

Among the 30-member Sensex pack, 22 rose while rest declined.

A deluge of global liquidity boosted stocks across the globe this year. Governments and central banks around the world have injected trillions of dollars in the past one year to pull the world out of a most severe recession since the 1930s Great Depression. The Sensex rose 7817.50 points or 81.03% in calendar year 2009. From a 3-year closing low of 8,160.40 on 9 March 2009, the Sensex was up 9304.41 points or 114.01% as on 31 December 2009. The S&P CNX Nifty rose 2241.90 points or 75.76% in calendar year 2009.

FII inflow in December 2009 totaled Rs 10,233.10 crore (till 30 December 2009). FII had bought equities worth Rs 5469 crore in November 2009. FII inflow in the calendar year 2009 totaled Rs 83,423.90 crore (till 30 December 2009).

Coming back to today's trade, the BSE Mid-Cap index rose 0.31% and the BSE Small-Cap index rose 0.6%. Both these indices underperformed the Sensex.

Sectoral indices on BSE showed mixed trend. The BSE Power index (up 1.16%), the BSE Capital Goods index (up 1.1%), the BSE Consumer Durables index (up 1.07%), the BSE Oil & Gas index (up 1%), the BSE Auto index (up 0.96%), the BSE IT index (up 0.73%), the BSE PSU index (up 0.71%), outperformed the Sensex.

The BSE FMCG index (down 0.19%), the BSE Healthcare index (down 0.14%), the BSE Realty index (down 0.09%), the BSE Bankex (up 0.19%), the BSE Metal index (up 0.23%), the BSE Teck index (up 0.55%), underperformed the Sensex.

India's largest private sector firm by market capitalisation Reliance Industries (RIL) rose 1.34%. RIL has successfully tested the design capacity of its massive eastern offshore Krishna-Godavari basin D6 field production facilities. A flow rate of 80 million standard cubic meters was achieved through the KG-D6 facilities and delivered to the pipeline, the company said in a statement recently.

Oil exploration firms rose, after the crude oil moved past $79 a barrel. India's second biggest oil and gas exploration firm by revenue, India's biggest state-run oil exploration firm by revenue Oil & Natural Gas Corporation (ONGC) rose 0.23%. Cairn India advanced 1.19%. But, Oil India, fell 0.35%. Rise in crude oil prices would result in higher realizations from crude sales for oil exploration firms. Light, sweet crude oil gained 41 cents, or 0.52%, to $79.28 a barrel on the New York Mercantile Exchange on Wednesday, 30 December 2009 after US government inventory data showed a draw down in stockpiles last week.

Banking stocks pared early gains triggered by reports credit offtake has picked up this month. According to the latest Reserve Bank of India (RBI) figures, total loans, including food credit loans to Food Corporation of India for foodgrain procurement and non-food credit (all other loans) amounted to Rs 29,41,293.07 crore as on 19 December 2009. This represents a sequential growth of Rs 34,028 crore since 27 November 2009 compared to a growth of Rs 7,698 crore in the whole of November 2009.

India's largest bank by net profit and branch network State Bank of India rose 1.99% to Rs 2269.45. But the stock came off the day's high of Rs 2283.80. The state-run bank paid advance tax of Rs 1795 crore versus Rs 1700 crore. India's second largest private sector bank by net profit HDFC Bank rose 0.55% to Rs 1700.40. The stock came off the day's high of Rs 1708.70.

India's largest private sector bank by net profit ICICI Bank fell 0.49% to Rs 875.70. The stock came off the day's high of Rs 890. The bank is reportedly raising up to Rs 1200 crore by selling bonds.

India's largest engineering & construction firm by sales Larsen & Toubro rose 0.67% after it won two orders totaling Rs 580 crore.

Among other capital goods stocks, ABB, Bharat Heavy Electricals, BEML and Praj Industries rose by between 1.47% to 4.91%.

Auto stocks extended recent gains on the back of strong sales in the month of November 2009 and higher advance tax payment in the third quarter.

India's largest tractor marker by sales Mahindra & Mahindra (M&M) advanced 1.73%. After announcing its entry into the medium and heavy commercial space, the company is reportedly making new inroads in the mini truck segment. It is set to launch one tonner Maxximo at the upcoming Auto Expo from its light commercial vehicle (LCV) space.

From two wheeler space, Hero Honda Motors and Bajaj Auto rose by between 0.54% to 3.72%.

India's top truck maker by sales Tata Motors rose 0.61%. The company has reportedly commenced trial production of the first batch of the Nano at the new mother plant at the Sanand facility last week. The company will start commercial production of the 'People's Car' from March 2010 onwards.

Tata Motors had shifted its mother plant to Gujarat last year after facing local protests in West Bengal spearheaded by Trinamool Congress leader Mamata Banerjee.

But, India's top small car marker by sales Maruti Suzuki India fell 0.64%.

Telecom stocks were mixed after government said it will introduce mobile number portability across the country by 31 March 2010, pushing back its introduction by up to 3 months. India's largest mobile services provider by sales Bharti Airtel rose 1.01%. India's second largest mobile services provider by sales Reliance Communications fell 0.52%.

Mobile Number Portability (MNP), which allows users to retain their number even if they switch operators, was to be introduced in metro cities and the so-called Category A telecom zones from 31 December 2009 and in other areas by March 20, 2010.

India's largest thermal power generator by sales NTPC rose 1.2% on reports the government plans to allow the firm to sell around 10% of its power capacity at market-determined prices.

Among other power stocks, Tata Power Company, Torrent Powr and Power Grid Corporation of India rose by between 1.19% to 2.72%.

Consumer durables stocks gained on hopes higher sales in the ongoing festive season will boost profitability. Lloyd Electric, Videocon Industries, and Gitanjali Gems gained by between 0.98% to 5.98%.

Some FMCG stocks fell on profit taking. Tata Tea, Hindustan Unilever and United Spirits fell by between 0.26% to 1.57%.

Cement shares gained on speculation cement prices will increase in the first quarter of calendar year 2010 on rise in infrastructure activity. Ambuja Cement, UltraTech Cement, Birla Corporation ACC (up 1.17%), rose by between 0.07% to 2.92%.

Software pivotals rose on encouraging economic data in the United States. US is the biggest market for Indian IT firms. India's second largest software services exporter Infosys rose 1.01%. India's largest software services exporter TCS rose 0.91%. But, India's third largest software services exporter Wipro fell 0.26%.

Rate sensitive realty realty stocks fell on profit taking. India's largest realty player by market capitalization DLF fell 1.27%. On 16 December 2009, the company's board approved merger of its commercial realty arm DLF Assets (DAL) with itself, a move aimed at repaying some of DAL's debt.

Among other realty stocks, Housing Development & Infrastructure, Parsvanath Developers and Unitech fell by between 0.42% to 2.01%.

Metal stocks rose as the base metals traded on the Shanghai Futures Exchange racing higher as the April 2010 copper, zinc, aluminum contracts all hit new 2009 highs on fund buying. Steel makers rose as steel companies are reportedly eyeing higher prices in 2010 as stronger economic growth worldwide drives up demand for the critical building material. Tata Steel, Steel Authority of India, JSW Steel rose by between 0.01% to 1.18%.

Last week, Tata Steel raised prices by Rs 2,000 a tonne, while state-owned Steel Authority of India (SAIL) withdrew the Rs 750-1,500 per tonne rebate it had started offering in November 2009, following the increase in raw material cost.

Among non ferrous stocks, National Aluminum Company, Stelite Industries, Hindalco Industries rose by between 0.44% to 7.29%.

Cals Refineries clocked the highest volume of 2.64 crore shares on BSE. Radhe Developers (1.42 crore shares), Triplate Company (1.32 crore shares), Gammon Infrastructure (1.18 crore shares) and Ispat Industries (0.92 crore shares) were the other volume toppers in that order.

State Bank of India clocked the highest turnover of Rs 153.01 crore on BSE. Tata Steel (Rs 130.79 crore), Triplate Company (Rs 119.66 crore), Reliance Industries (Rs 78.70 crore) and Larsen & Toubro (Rs 77.94 crore) were the other turnover toppers in that order.

DIRECTION OF THE MARKET

Pay attention to the bond market. The ten year Treasury closed at 3.80% on Friday. It has risen 0.65% since November 27th. The yield curve difference between the two and ten year Treasury notes is the steepest on record. Thirty year fixed mortgages were 5.28% on Friday, up 0.32% in a month; six months ago the rate was 5.51%, a year ago 5.36%. A fifteen year historical average for a thirty year fixed home mortgage is close to 7.0%

The Treasury market has responded to the improving US economic performance and a modest increase in inflation. The yield on the 10 year Treasury was 3.15% a month ago. Friday’s close in the 10 year was the third highest since last fall's financial collapse, when it briefly touched 2.04%. Since that low the 10 year had reached 4.00% in June and 3.89 % in August, after each peak dropping to 3.26% and 3.15% before recovering.

For the past ten months the Federal Reserve has been actively supporting the Treasury and mortgage markets with purchases of Treasuries and Mortgage Backed Securities (MBS). These programs are ending and the credit markets have taken notice.

Mortgage Backed Securities are essentially bundled mortgages that originating institutions sell to the credit markets to obtain the capital to make new commitments and to remove the original loan risk from their own books. This market had been moribund since the credit crisis last fall until the Fed commenced its purchase programs this past March.

Private participation in the asset back market and MBS in particular has been minimal. With the renewed emphasis on credit quality and balance sheet probity by the banks and their regulators it is an open question whether private institutions will be able to replace the volume of purchases from the expiring Fed programs. A distinct possibility is that the rates of the underlying mortgages will have to rise to attract buyers to the risk of the securities. If buyers do not come forth the funds available for mortgage lending will fall as banks are unable to generate additional cash by selling old loans to the market.

In relation to the credit markets the Fed has been speaking and acting with the same purpose since the crisis began. It has targeted real rates with its various purchase programs and it has repeatedly warned that rates must stay low for an “extended period”. The two tracks of this rate policy are now beginning to diverge.

There was some anticipation before the last FOMC statement on December 16th that the governors might remove or modify the term "extended period" for the Fed Funds rate. That anticipation was thwarted. "Extended period" remained. The Fed Board and Mr. Bernanke were clearly not ready to say that the need for liquidity support for the US economy was over. Does the board have economic or financial concerns unknown to the wider markets? Probably not. Caution in public statements has been a hallmark of the Bernanke Fed.

However the FOMC statement ended with a long list of "special liquidity facilities", “most" of which "the Board of Governors anticipate will expire on February 1, 2010”. Why would the Fed include this list which is well know to the market and contains no new information?

Several things are happening at once. The US economy has left recession. Even if economic shrinkage returns sometimes in latter 2010, modest consumer spending, inventory rebuilding by industry and additional government stimulus will produce growth this quarter and probably for the first half of next year. Inflation has resurfaced even if only in the most preliminary fashion. The Produce Price Index (PPI) soared from -4.8% year on year in September to +2.4% in November. Headline CPI has shot up from -2.1% year over year in July to +1.8% in November. The Federal Reserve prefers the core Personal Consumption Expenditure (PCE) price measure as a gauge of underlying inflation. But the Fed does not set market interest rates and the credit markets pay attention to all sources and signs of inflation.

As noted earlier the two-ten curve is the steepest on record. Longer rates are moving higher in response to economic and inflation considerations. Shorter terms are adhering to the Fed Funds target of 0.0%-0.25% The credit markets will not wait for the Fed to officially end its zero rate policy; nor will they require elaborate hints from government officials that excess liquidity and inflation are now the central banks concern. The Fed Governors know that the credit markets will boost rates with or without Fed encouragement.

The most important factors inhibiting dollar strength over the past six months have been the repeated insistence by Mr. Bernanke that US rates would stay low for an “extended period” and that he backed up this rhetoric with action in the credit markets.

The dollar could not benefit from the US Government response to the recession, despite the better historical record of American economic revivals and accumulating evidence that the US recovery would be stronger (though not strong by standards of previous recessions) than Europe and Japan, because Fed rhetoric made it clear that it wanted rates low for that “extended period” and was doing what was necessary to keep them low.

The period of “extended period” has always been undefined, as was any indication of under what conditions the Fed would sanction rising rates. But the Fed does not set market rates. That was the primary reason for its entry into the Treasury and MBS markets. The Fed created these and other purchase programs because it could not control the rates in those markets through the Fed Funds target. And the reason those programs succeeded in keeping mortgage rates low is because they did not depend on Fed rhetorical prowess but on market actions.

The reserve is also true. Fed rhetoric will not be able to keep mortgage and other rates from rising if their purchase commitments are not available in those markets. Mr. Bernanke and the FOMC can repeat “extended period” as often as they choose-- without the purchases in the markets to back up their admonitions prices will fall and rates will rise. These facts are known to the Fed governors.

In listing the expiring purchase programs was the Fed telling the market watch what we do not to what we say? A mild American recovery and raising US rates,
what else are 1st quarter dollar bulls waiting for?



Dollar Soft as Stocks, Gold, Oil Remain Firm

Dollar remains soft in early US session as consolidations continues. Strength in gold is giving some pressure to the greenback as the precious metal is holding firm above 1100 level. In addition, crude oil is support by rally in equities and is staying above 78 level. Note that the strength of the rebound from 68.95 has sent crude oil well above 55 days EMA and argue that prior high at 82.0 made in October is not the top yet. Current rally in crude oil might extend beyond 82.0 level and provide some pressure on the greenback in near term.

Talking about crude oil, canadian dollar is the biggest beneficiary of rebound in crude oil. The Loonie is so far the best performer in December, rising over 6% against yen and over 5% against Euro. Following up on EUR/CAD, some consolidations was seen after the cross hit as low as 1.4972 but after all, short term outlook remains bearish with 1.5390 resistance intact. We're still expecting current fall from 1.6006 to extend further to 2008 low of 1.4716 next.
YEARLY CHART:

DAILY FOREX REPORT

Dollar Retreats ahead of Holiday

Dollar weakens overnight as traders lighten up positions following worse than expected new homes sales report from US as well as strong rebound in crude oil. Technically, the greenback should have made a short term top and we'd expect some more pull back as holiday weekend approaches. Main focus today will be on US durable goods orders which are expected to rebound in November by rising 0.5% while ex-transport orders are expected to climb 1.0%.

BoJ minutes released today revealed that many members agreed the bank would "maintain its stance of responding promptly to changes in the market situation." Also BoJ will "adopt the most effective method for money-market operations that conformed to changes in financial markets." Recently, BoJ has also made it clear that it will not "tolerate a year-on- year rate of change in the CPI equal to or below zero percent." Yen remains soft against as markets are speculating more quantitative easing measures from BoJ and yen would become the favorite funding currency in 2010 again.

Looking at the dollar index, the break of 77.86 support suggests that a short term top is in place at 78.45 and pull back should be seen in near term to lower channel support (now at 76.78). But after all, downside is expected to be contained well above 75.58 resistance turned support and bring another rise to develop and five wave sequence from 74.19. Such rally from 74.19 is still expected to extend further to 89.62 to 74.19 at 80.08 in the least bullish scenario.


USD/JPY Daily Outlook
Daily Pivots: (S1) 91.33; (P) 91.60; (R1) 91.89; More.

With 4 hours MACD crossed below signal line, an intraday top is in place in USD/JPY at 91.86 and bias is turned neutral. Some retreat should be seen to 4 hours 55 EMA (now at 90.36). But still, another rise is in favor as long as 88.96 support holds. ABove 91.86 will target 92.31 resistance first and then 100% projection of 84.81 to 90.75 from 87.36 at 93.30 next. However, note that break of 88.96 support will argue that whole rise from 84.81 has finished with bearish divergence conditions in 4 hours MACD. Focus will then be shifted to 87.36 support for confirmation.

In the bigger picture, as noted before, there is no clear indication of medium term reversal yet as USD/JPY is still trading well below 55 weeks EMA (now at 94.54) as well as the trend line resistance at 94.44. Whole down trend from 124.13 could still be in progress and might extend towards 1995 low of 79.75 after completing the rebound from 84.81. However, note that sustained trading above the medium trend line resistance will be the first signal of medium term reversal and in such case, focus will turn to 101.43 resistance for confirmation.

INDIAN STOCK MARKET MID-SESSION

Volatility struck the bourses as key benchmark indices rebounded after drifting to fresh inntraday lows in afternoon trade. Index heavyweight Reliance Industries (RIL) clawed back in the green. European shares were in a tight range early on Thursday, with equity markets due to close early for the Christmas break. Asian stocks were trading firm. The BSE 30-share Sensex was up 55.39 points or 0.32%, up 88.41 points from the day's low and off 60.99 points from the day's high.

The market surged in early trade on firm Asian stocks. The rally soon fizzled out as the Sensex slipped into the red. The market regained positive zone later. The market moved in a narrow range in afternoon trade. The Sensex hit a fresh intraday low in afternoon trade. The market staged a strong rebound in mid-afternoon trade

India's infrastructure sector grew an annual 5.3% in November 2009, Trade Minister Anand Sharma said on Thursday. Infrastructure sector output grew 3.5% in October 2009 from a year earlier. The sector accounts for 26.7% of the country's industrial output.

Food price index rose 18.65% in the 12 months to 12 December 2009, data released by the government today, 24 December 2009, showed. The primary article index jumped 14.66% and the fuel price index rose 3.95%. The worst monsoon in nearly four decades and flooding in some parts of the country have pushed up food prices.

The market breadth was strong. Index heavyweight RIL reversed direction to trade firm. However, NTPC wads trading lower profit booking after Wednesday's sharp surge. Telecom pivotals declined. FMCG stocks also declined on worries rising food inflation may crimp growth. IT stocks were mixed.

The market remains closed for four days in a row from Friday, 25 December 2009 to Monday, 28 December 2009. The market remains closed on Friday, 25 December 2009 on account of Christmas. It remains closed on Monday, 28 December 2009 on account of Moharram.

Finance Minister Pranab Mukherjee said on Wednesday that containing inflation and cutting fiscal deficit are the major challenges for the government in the short-to-medium term. Mukherjee added that the government is open to altering the proposed draft direct tax code further informing that sustaining high economic growth remains a priority for the government. The Indian economy can grow at 7.75% in the fiscal year ending March 2010, the Finance Minister said. He also told an industry conference in New Delhi that agriculture output must grow 4% for the economy to expand 9-10% annually.

The government will wait until the February 2010 budget to consider withdrawing some of the fiscal stimulus measures, the Finance Minister said. Growth outlook for the second half of FY 2010 looks better, he added.

Meanwhile, the latest data showed that corporate advance tax payments for the October-December 2009 quarter shot up sharply, suggesting a higher profit growth in corporate sector in the third quarter (October-December) of the current fiscal. Corporate advance tax payments for the quarter were up 44% to Rs 48,300 crore against a 3.7% decline in April-June quarter and a 14.7% increase in July-September quarter. The company-wise break-up of advance tax collection suggests a broad-based recovery with automobiles, cement, metals and consumer goods, doing well.

European shares were in a tight range early on Thursday, with equity markets due to close early for the Christmas break. France's CAC 40 index rose 0.03% while UK's FTSE 100 index fell 0.03%. The German stock market is closed all day Thursday and the UK and French equity markets close early ahead of the Christmas break.

Members of the Bank of England's Monetary Policy Committee on Wednesday unanimously backed the decision earlier this month to maintain the size of the bank's asset-purchase plan at $318.7 billion, according to minutes of the committee's 9-10 December 2009 meeting released Wednesday. The panel also unanimously backed the decision to keep its key lending rate at a historic low of 0.5%.

Asian stocks rose for a third day in a row on Thursday, 24 December 2009, led by chip-related companies and commodity producers, after an index of semiconductor prices climbed to its highest level in almost six weeks and as oil and metals rallied. Key benchmark indices in Hong Kong, China, Japan, South Korea and Taiwan, were up by between 0.79% and 2.59%. However Singapore's Straits Times was down 0.14%.

Japan's Nikkei average hit its highest in three months on Thursday, lifted by high-tech exporters on a weaker yen and after better-than-expected earnings from US peers buoyed Wall Street.

Bank of Japan (BOJ) Governor Masaaki Shirakawa today said the central bank will act promptly and decisively if financial markets destabilise. Shirakawa also repeated that weak final demand was the root cause of deflation, and that the BOJ will maintain easy monetary policy to beat sustained price falls. He made the remarks at meeting of Nippon Keidanren, Japan's top business lobby.

Taiwan's industrial production index for November rose 31.46% year-on-year, growing for the third consecutive month. According to the data released by the Ministry of Economic Affairs (MOEA), the industrial production index stood at 108.78 in November, representing the highest year-on-year growth since August 1978, an increase that the MOEA attributed to the low base last year and the recovery of the global economy.

The People's Bank of China (PBOC) said Wednesday that the economy recovery is still insufficient and that correcting structural problems for the nation's growth is urgent. The nation's economic situation is generally improving, but the internal strength of the economic recovery is still not enough, and structural contradictions still exist, making a change to the path of economic development ever more urgent, it said in a statement on its Web site, citing its fourth-quarter Monetary Policy Committee. The PBOC added it will seek to keep policy flexible and will focus on decreasing economic volatility and manage the pace of loan growth.

The Xinhua news agency on Thursday quoted Commerce Minister Chen Deming as saying China's retail sales will grow more than 15% in 2009, latest sign that the economy is on a brisk recovery path.

Wall Street ended higher on Wednesday after a dull start with weaker dollar helping stocks stage a late comeback. The Dow Jones Industrial Average rose 1.51 points, or 0.01%, to 10,466.44. The Standard & Poor's 500 index rose 2.57 points, or 0.2%, to 1,120.59, while the Nasdaq Composite Index added 16.97 points, or 0.8%, to 2,269.64.

In key economic data, new home sales tumbled 11.3% in November 2009, raising the specter that previous positive signs in the industry were the result of government stimulus and not sustainable.

Trading in US index futures showed the Dow could rise 12 points at the opening bell on Thursday, 24 December 2009

US Treasury Secretary Timothy Geithner said on Wednesday that the economy was recovering, but it may be some months yet before jobs are being created instead of lost. There were dramatically fewer job losses in November than expected, when employers cut payrolls by 11,000. But the unemployment rate still is 10% and Geithner said regaining positive job creation was vital for recovery.

Geithner said the financial crisis that began in late 2007, driving the country into a deep recession, had taken a heavy toll on Americans' optimism. But Geithner insisted that there were signs of a return of confidence and said that will help get the economy on to a sounder footing.

Meanwhile, the US Department of the Treasury on Wednesday said that it has received repayments on its Troubled Asset Relief Program (TARP) investments in Wells Fargo and Citigroup in the sum of US$45 billion, bringing the total amount of repaid TARP funds to US$164 billion. The US Treasury now estimates that total bank repayments should exceed $175 billion by the end of 2010, cutting total taxpayer exposure to the banks by three-quarters.

At 14:20 IST, the BSE 30-share Sensex was up 55.39 points or 0.32% to 17,286.50. The Sensex opened 34.36 points higher at 17,265.47. It gained 116.38 points at the day's high of 17,347.49 in early trade, its highest level since 11 December 2009. The Sensex declined 33.02 points at the day's low of 17,198.09 in afternoon trade

The S&P CNX Nifty was up 10.90 points or 0.21% to 5,155.50

The market breadth, indicating the overall health of the market was positive. On BSE, 1482 shares advanced as compared with 1273 that declined. A total of 115 shares remained unchanged. The breadth was much more robust in opening trade.

The total turnover on BSE amounted to Rs 3697 crore by 14:25 IST as compared with Rs 2736 crore by 13:25 IST

Among the 30-member Sensex pack, 17 advanced while the rest declined.

Jaiprakash Associates (down 2.48%), Larsen & Toubro (down 0.40%), and ICICI Bank (down 0.09%), edged lower from the Sensex pack.

FMCG shares declined on worries the steady rise in food inflation may crimp demand. Hindustan Unilever (down 0.23%), ITC (down 0.28%), Bata India (down 0.77%), Nestle India (down 1.2%), and GlaxoSmithkline Consumer (down 1.54%), declined.

IT shares displayed mixed trend after weak US economic data on housing. US is the biggest market for Indian IT firms. India's third largest IT exporter by sales Wipro fell 0.19% and India's second largest software services exporter Infosys Technologies declined 0.57%. India's largest IT exporter by sales Tata Consultancy Services rose 1.01%.

Oracle Financial Solutions (down 0.49%), Hexaware Technologies (down 0.42%), and HCL Technologies (down 0.13%), slipped.

Rolta India gained 0.68% after the company said it has bought back foreign currency convertible bonds aggregating $15 million. The company made this announcement during trading hours today, 24 December 2009.

Polaris Software Lab rose 1.04% after the company secured a contract for one of its software products. The company announced the overseas order win before market hours today, 24 December 2009.

The partially convertible rupee was trading at 46.72/73 per dollar, stronger than its close of 46.87/88 on Wednesday. A stronger rupee negatively impacts operating margins of IT firms as the sector earns a lion's share of revenue from exports.

India's largest realty player by market capitalization DLF gained 1.63%. The stock extended recent gains after the company a merger of its commercial realty arm DLF Assets (DAL) with itself, a move aimed at repaying some of DAL's debt.

India's largest non ferrous metal producer by sales Sterlite Industries India rose 0.89% after a 5.63% rally in its American depository receipt (ADR) on the New York Stock Exchange on Wednesday, 23 December 2009.

India's largest private sector firm by market capitalisation Reliance Industries (RIL) rebounded. It was up 0.34% to Rs 1069.50, extending Wednesday's 4.62% surge. The stock moved in a band of Rs 1050- 1076.10 so far in the day.

RIL said on Tuesday said it had made a gas discovery in one of its exploration blocks in the Krishna Godavari basin, off the country's east coast. Reliance Industries holds a 90% interest in the block, which covers an area of 3,288 square kilometres, and Hardy Exploration and Production India holds the rest.

India's largest thermal power generator by sales NTPC slipped 1.44%. The stock slipped on profit booking after surging 6.96% on Wednesday. As per recent reports, the government plans to mop up around Rs 11,000 crore from the disinvestment of 5% stake in the utility giant.

India's top listed cellular services provider by sales Bharti Airtel fell 1.10%. Citibank has reportedly sold its stake in Bharti Infratel, the telecom tower arm of Bharti Airtel, to JP Morgan, exiting without any gain from the $50 million investment it made over two years ago.

India's second largest listed cellular services provider by sales Reliance Communications fell 0.20%. The company is reportedly seeking to bolster its wireless and enterprise business with an investment of more than Rs 6300 crore, under a plan branded as Edge 2010

Auto stocks rose on strong sales in the month of November 2009 and higher advance tax payment in the third quarter. India's top truck maker by sales Tata Motors advanced 2.54% to Rs 765.65 and was the top gainer from the Sensex pack. The company's total global sales jumped 62% to 75,775 units in November 2009 over November 2008. The company paid Rs 100 crore as advance tax in Q3 December 2009 versus nil same quarter last year.

India's top small care maker by sales Maruti Suzuki India rose 0.21% on reports the company is expecting sales to grow by 18-20% for the fiscal year March 2010. Car sales in India have picked up since January 2009 and the sector has seen double-digit growth for the past five months, the report added.

India's top tractor marker by sales Mahindra & Mahindra (M&M) rose 1.58%.

Escorts advanced 3.24% after the company said one of the promoter group companies revoked a small portion of shares which it had pledged earlier. The company made this announcement during trading hours today, 24 December 2009.

Radico Khaitan jumped 4.20% on reports a joint venture of the company with Diageo has received Foreign Investment Promotion Board's nod for 100% foreign direct investment.

INDIAN STOCK MARKER PRE-SESSION

The market is likely to extend Wednesday's (23 December 2009) solid surge on firm Asian stocks. The S&P CNX Nifty futures for December 2009 expiry were trading 2.5 points lower in Singapore. The government will today unveil data on some wholesale price indices for the year through 12 December 2009 viz. the food price index, the primary articles index and the fuel price index

However, trading volumes are likely to take a hit today, 24 December 2009, as the market remains closed for four days in a row from Friday, 25 December 2009 to Monday, 28 December 2009. The market remains closed on Friday on account of Christmas. It remains closed on Monday, 28 December 2009 on account of Moharram.

The government will wait until the February 2010 budget to consider withdrawing some of the fiscal stimulus measures, Finance Minister said on Wednesday. Mukherjee said inflation and fiscal consolidation are major challenges in short to medium term. Growth outlook for the second half of FY 2010 looks better, he added. The finance minister said farm output must grow 4% for the economy to expand 9-10% annually. He said industrial production has started picking up. The finance minister said the economy can grow 7.75% in the fiscal year that ends in March 2010 (FY 2010).

The finance minister said sustaining higher growth remains a priority for the government. The government is open to making changes in the draft direct tax code, Mukherjee said. The draft code has proposed various reform measures, including cutting in corporate tax rate to 25% and streamlining tax laws.

Meanwhile, the latest data showed that corporate advance tax payments for the October-December 2009 quarter shot up sharply, suggesting a higher profit growth in corporate sector in the third quarter (October-December) of the current fiscal. Corporate advance tax payments for the quarter were up 44% to Rs 48,300 crore against a 3.7% decline in April-June quarter and a 14.7% increase in July-September quarter. The company-wise break-up of advance tax collection
suggests a broad-based recovery with automobiles, cement, metals and consumer goods, doing well.

Asian stocks were trading slightly higher today, 24 December 2009 on rise in commodity prices. Key benchmark indices in Hong Kong, South Korea, China, and Taiwan, were up by between 0.95% to 1.87%.

Wall street ended higher on Wednesday after a dull start with weaker dollar helping stocks stage a late comeback. The Dow Jones Industrial Average rose 1.51 points, or 0.01%, to 10,466.44. The Standard & Poor's 500 index rose 2.57 points, or 0.2%, to 1,120.59, while the Nasdaq Composite Index added 16.97 points, or 0.8%, to 2,269.64.

In key economic data, new home sales tumbled 11.3% in November 2009, raising the specter that previous positive signs in the industry were the result of government stimulus and not sustainable.

US Treasury Secretary Timothy Geithner said on Wednesday that the economy was recovering, but it may be some months yet before jobs are being created instead of lost. There were dramatically fewer job losses in November than expected, when employers cut payrolls by 11,000. But the unemployment rate still is 10 percent and Geithner said regaining positive job creation was vital for recovery.

Geithner said the financial crisis that began in late 2007, driving the country into a deep recession, had taken a heavy toll on Americans' optimism. But Geithner insisted that there were signs of a return of confidence and said that will help get the economy on to a sounder footing.

Closer home, key benchmark indices spurted on Wednesday after Finance Minister Pranab Mukherjee said that the economy can grow 7.75% in the fiscal year that ends in March 2010 (FY 2010). Higher advance tax payment by India Inc and firm global stocks, also underpinned sentiment. The BSE Sensex jumped 539.11 points or 3.23% to 17231.11, its highest closing since 17 October 2009. The S&P CNX Nifty rose 158.75 points or 3.18% to 5,144.60, its highest closing since 8 December 2009.

As per provisional data on NSE, foreign funds bought shares worth Rs 769.53 crore and domestic funds bought shares worth Rs 13.02 crore on Wednesday, 24 December 2009.






Mid-Day Report: Swissy and Loonie Soar in Quiet Markets

Markets are rather mixed in thin holiday trading today. Broad based strength is seen in Swissy and Loonie. EUR/CHF finished a rather brief consolidation and resumes recent fall to as low as 1.4879 so far. Canadian dollar also maintains recent strength and surges to new multi-month high against Aussie and Euro. October GDP report from Canada missed expectations slightly but the Loonie remains supported by extended recovery in crude oil as well as speculations that China and Russia may increase Canadian dollar in their reserve holdings. Dollar remains steady against Euro after personal income and spending came in slightly below expectations.

Personal spending in US grew 0.5% in Nov while income grew 0.4%. Both were below expectation of 0.5% and 0.3% respectively. Headline PCE rose 1.5% yoy versus consensus of 1.6%. Core PC was unchanged at 1.5% yoy. Canadian GDP rose 0.2% mom in October, below expectation of 0.3% mom. German Import price rose 0.4% mom, dropped -5% in November. New Zealand GDP released overnight rose 0.2% qoq in Q3, below expectation of 0.4% qoq.

The BOE's minutes for the meeting on December 9-10 unveiled that MPC members have voted unanimously (9-0) for maintaining the policy rate at 0.5% and the asset purchase program by 200B pounds. Policymakers acknowledged improvement in economic outlook and forecast that the country will return to grow in 4Q09. However, weaknesses including growth in money supply remain a drag. The committee will discuss about change in monetary policy in February, the month when the quarterly Inflation Report is published. 2 MPC members, Miles and Dale, voted against expanding the Asset Purchase Program by +25B pound to 200B pound in November. However, both of them opted for consensus and agreed to keep the program unchanged.

Looking at the dollar index, while upside moment continues to diminish with 4 hours MACD staying below signal line, further rise is still mildly in favor as long as 77.86 minor support holds. Current rally from 74.19 is still expected to extend to 38.2% retracement of 89.62 to 74.19 at 80.08. A break below 77.86 will suggest that a short term top is formed and bring some pull back, probably to 4 hours 55 EMA (now at 77.24) before rally resumption.



USD/CHF Mid-Day Outlook
Daily Pivots: (S1) 1.0452; (P) 1.0478; (R1) 1.0513; More

USD/CHF dips after failing to take out 1.5060 resistance. Consolidations from there is still in progress and deeper pull back to 4 hours 55 EMA (now at 1.0389) could be seen. But downside the current consolidations is expected to be contained well above 1.0175 resistance turned support and bring resumption of whole rise from 0.9916. Above 1.0506 will target medium term support turned resistance at 1.0590 next.

In the bigger picture, medium term fall from 1.1963 has completed with five waves down to 0.9916 already. Also, the three wave consolidation from 1.2296 should also be finished too. Current rise from 0.9916 is expected to extend further to medium term trend line resistance first (now at 1.1078). Sustained trading above the trend line will affirm the case that long term rise from 2008 low of 0.9634 is resuming for another high above 1.2296. On the downside however, a break of 0.9959 support will invalidate this bullish view and argue that medium term down trend in USD/CHF is still in progress for 0.9634 low.



Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
21:45 NZD GDP Q/Q Q3 0.20% 0.40% 0.10%
21:45 NZD GDP Y/Y Q3 -1.30% -1.30% -2.10%
07:00 EUR German Import Price Index M/M Nov 0.40% 0.30% 0.50%
07:00 EUR German Import Price Index Y/Y Nov -5% -5.20% -8.10%
09:30 GBP BoE Meeting Minutes 0--0--9 0--0--9 0--0--9
09:30 GBP Index of Services 3M/3M Oct -0.20% 0.30% -0.10% -0.20%
13:30 CAD GDP M/M Oct 0.20% 0.30% 0.40%
13:30 USD Personal Income Nov 0.40% 0.50% 0.20% 0.30%
13:30 USD Personal Spending Nov 0.50% 0.70% 0.70% 0.60%
13:30 USD PCE Deflator Y/Y Nov 1.50% 1.60% 0.20% 0.10%
13:30 USD PCE Core M/M Nov 0.00% 0.10% 0.20%
13:30 USD PCE Core Y/Y Nov 1.40% 1.50% 1.40%
15:00 USD New Home Sales M/M Nov 1.90% 6.20%
15:00 USD New Home Sales Nov 438K 430K
15:00 USD U. of Michigan Confidence Dec F 74 73.4
15:30 USD Crude Oil Inventories -1.5M -3.7M

DISCLAIMER: Daily Market Commentary is provided for informational purposes only. The information contained in these reports is gathered from reputable news sources and is not intended to be used as investment advice. we assumes no responsibility or liability from gains or losses incurred by the information herein contained.

INDIAN STOCK MARKET QUICK REVIEW

The key benchmark indices edged higher, snapping last three days' losses, as global stocks rose. Higher advance tax payment by India Inc also underpinned sentiment. The BSE Sensex was provisionally up 91.57 points or 0.55%, off close to 60 points from the day's high and up close to 45 points from the day's low. Index heavyweight Reliance Industries pared iintraday gains in volatile trade. The company today, 22 December 2009, announced a gas discovery at one of its exploration blocks in the Krishna Godavari basin.

Banking and realty stocks gained. Metal stocks also rose tracking higher metal prices on the London Metal Exchange on Monday, 21 December 2009. Shares of public sector oil marketing companies rose after Finance Secretary Ashok Chawla said the government may offer cash instead of bonds to state-run oil firms for compensating them for selling fuel at lower than market price. The market breadth was strong.

The market surged in early trade tracking firm Asian stocks. It soon trimmed gains. The market regained strength in mid-morning trade. The Sensex surged to a fresh intraday high in mid-morning trade. The market cut gains later as Chinese stocks fell extending their recent losses. The Sensex pared gains soon after hitting a fresh intraday high in afternoon trade.

The government could improve upon its aims to slow the growth of greenhouse gas emissions by 2020, the environment minister said on Tuesday after returning from climate change talks in Copenhagen. The government said it was willing to rein in its "carbon intensity" -- the amount of carbon dioxide (CO2) emitted per unit of economic output -- by between 20 and 25% by 2020, from 2005 levels.

The government has signed two loan agreements totalling $850 million with the Asian Development Bank (ADB), the finance ministry said in a statement on Tuesday. The ADB will provide a $700-million loan, in three tranches in as many years, to state-run India Infrastructure Finance Company to fund the country's infrastructure programme. The Manila-based bank will lend $150 million in four tranches over a period of three years, the statement added, for the restructuring and development of Khadi industry, which makes India's traditional handspun fabric.

Corporate advance tax payments for the October-December 2009 quarter shot up sharply, suggesting a higher profit growth in corporate sector in the third quarter (October-December) of the current fiscal, pointing to a firm broad-based economic recovery. Corporate advance tax payments for the quarter were up 44% to Rs 48,300 crore against a 3.7% decline in April-June quarter and a 14.7% increase in July-September quarter. The company-wise break-up of advance tax collection suggests a broad-based recovery with automobiles, cement, metals and consumer goods, doing well.

The sharp surge in food prices reflects the impact of the drought and inefficient distribution, which could not be addressed by monetary policy, the deputy head of India's Planning Commission Montek Singh Ahluwalia said on Tuesday. While the increase in food prices was to some extent expected, it was a concern -- food prices rose an annual 20 percent in early December -- but they should decline in January 2010, Ahluwalia said today.

"From January 2010 you will see a decline a food prices. What you see now is speculative, probably due to the drought situation. The stock situation is relatively OK," Singh said. "Problems such as this cannot be tackled by blunt instruments like monetary policy." "Price increase at the retail level is much more than the increase at the wholesale level. This is because of dysfunctionality in the distribution system," Ahluwalia said. "The ministry is looking into it, but whenever required, we should import," he added.

India's food-price inflation cannot be tackled through monetary and other policy steps, while inflationary expectations will not stay long, Finance Secretary Ashok Chawla said on Monday. Earlier on Monday, the Prime Minister's economic advisor C Rangarajan said India's central bank may have to raise the cash reserve ratio (CRR) to drain money from the banking system if prices do not decline in December.

India is battling soaring food prices after a poor monsoon and then flooding in parts of the country hit crops. "Unlike previous inflation, this is very sector specific. It is a very peculiar inflation which needs to be attacked at the level of the sector," said Kaushik Basu, chief economic advisor to the finance ministry.

India's central bank governor D Subbarao had earlier said that monetary policy is not the right tool to fix supply problems such as food shortages, but added that if not contained soaring food prices would stoke inflationary pressures in the broader economy.

Food prices surged an annual 20% in early December and rising food prices contributed to a faster-than-expected 4.78% increase in the wholesale price index in November 2009. Last week, Mukherjee had said containing inflation is high on the government's agenda and it is monitoring the price situation.

In overseas news, rating agency Moody's cut Greece's debt to A2 from A1 on Tuesday over soaring deficits, becoming the third major rating agency to downgrade the highly-indebted country's rating this month. Moody's kept Greece on a negative outlook. Its rating is still two notches above that of Fitch and S&P, which earlier this month cut their rating on the indebted country to BBB+, the euro area's lowest level.

European shares advanced for a second straight session on Tuesday, tracking sharp gains on Wall Street and in Asia, with banks featuring among the top gainers. The key benchmark indices in Frnace, Germany and UK rose by between 0.43% to 0.82%.

Britain's gross domestic product contracted by 0.2% in the third quarter, the Office for National Statistics said Tuesday. That's compared to an earlier estimate of a 0.3% quarterly decline.

Asian stocks rose on Tuesday as a weaker yen boosted the earnings outlook for Japanese makers of electronics and cars and after metal prices advanced. The key benchmark indices in Hong Kong, Indonesia, Japan, South Korea, Singapore and Taiwan rose by between 0.69% to 1.91%. But China's Shanghai Composite fell 2.32% on concerns more initial public offering subscriptions by the year-end could impact market liquidity.

The yen hit a fresh 7-week low against the dollar in Asia Tuesday, as rising long-term US interest rates prompted hedge funds to buy the higher-yielding currency.

Trading in US index futures indicated Dow could gain 37 points at the opening bell on Tuesday, 22 December 2009.

US stocks gained on Monday with the Nasdaq closing at a new 15-month high. Positive earnings and upgrades for Alcoa and Intel triggered gains despite the dollar index gradually gaining traction. The Dow Jones Industrial Average was up 85.25 points, or 0.83% at 10,414.14. The Standard & Poor's 500 Index gained 11.58 points, or 1.05%, to 1,114.05. The Nasdaq Composite Index rose 25.97 points, or 1.17%, to end at 2,237.66, its highest close since September, 2008.

As per provisional figures, the BSE Sensex was up 91.57 points or 0.55% to 16692.77. The Sensex rose 136.92 points at the day's high of 16,738.12 in afternoon trade. The Sensex opened with an upward gap of 32.61 points at 16,633.81 which was also the day's low.

The S&P CNX Nifty was up 38.30 points or 0.77% to 4,990.90 as per provisional figures. It hit a high of 4997.30.

The market breadth, indicating the overall health of the market was strong. On BSE, 1636 shares advanced as compared with 1152 that declined. A total of 93 shares remained unchanged.

Among the 30-member Sensex pack, 18 rose while rest fell.

The BSE Mid-Cap index rose 0.88% and the BSE Small-cap index rose 1.03%. Both these indices outperformed the Sensex.

BSE clocked a turnover of Rs 3616 crore lower than Rs 3878.06 crore on Monday 21 December 2009.

India's largest private sector firm by market capitalisation Reliance Industries (RIL) witnessed alternate bouts of buying and selling to end flat for the day at Rs 1017. It hit a high of Rs 1029 and a low of Rs 1011.60. Reliance Industries said on Tuesday it had made a gas discovery in one of its exploration blocks in the Krishna Godavari basin off the country's east coast. Reliance Industries holds a 90% interest in the block, which covers an area of 3,288 square kilometres, and Hardy Exploration and Production India holds the rest.

RIL's plans to gain control of the bankrupt petrochemical major LyondellBasell may reportedly come undone if rival billionaire Len Blavatnik has his way. Reliance Industries' (RIL) bid fails to factor in the potential turnaround gains of the bankrupt petrochemicals-maker, said a top official of the part-owner of the LyondellBasell, signalling that RIL may have to revisit its offer, if it has to realise its dream of becoming one of the world's biggest petrochem players. The official from Access Industries, promoted by Russian-born billionaire Len Blavatnik, said the $12 billion at which RIL has reportedly valued LyondellBasell was too low.

Meanwhile, Reliance Industries may reportedly face a probe by the Registrar of Companies (RoC) in a matter related to purchase of shares in it by a group of privately-owned promoter companies in 2000, allegedly using its own funds. The expected probe follows the Securities & Exchange Board of India's report to the government earlier this month seeking 'appropriate action' on those transactions conducted nearly a decade ago.

RIL's advance tax payment rose 82.89% to Rs 834 crore in Q3 December 2009 over Q3 December 2008.

Banking shares rose on firm American depository receipts on Monday. Banking stocks had drifted lower in the past few days on a likely monetary tightening by the RBI. India's largest private sector bank by net profit ICICI Bank rose 2.05% as its ADR rose 1.31% on Monday. ICICI Bank has launched a home-loan scheme under which 8.25% interest rate will be fixed for the first two years. The floating rates will apply after 2 years. These rates will be applicable to loans sanctioned between December 2009 and January 2010.

ICICI Bank's advance tax payment declined by 51.8% to Rs 301 crore in Q3 December 2009 as compared with Rs 625 crore in Q3 December 2008.

India's largest bank by net profit and branch network State Bank of India rose 0.87%. The state-run bank's Q3 advance tax rose 5.59% to Rs 1795 crore over a year ago.

Among other PSU stocks, Punjab National Bank, Bank of Baroda and Bank of India rose by between 0.89% to 3.04%.

But, India's second largest private sector bank by net profit HDFC Bank fell 0.69% even as its ADR rose 1.77% on Monday.

Metal stocks rose after LMEX, a gauge of six metals traded on the London Metal Exchange, rose 1.5% on Monday, 21 December 2009. Sterlite Industries, Hindalco Industries, Hindustan Zinc, Steel Authority of India, National Aluminum Company rose by between 0.49% to 7.39%.

India's largest steel maker by sales Tata Steel rose 4.42% The company's Q3 advance tax rose 160% to 650 crore. The company's European unit Corus recently secured a 350 million euro contract to supply rails tracks to French railway operator SNCF.

Realty stocks rose on bargain hunting after recent fall. Indiabulls Real Estate, Unitech and Omaxe rose by between 0.38% to 1.94%.

India's largest realty player by market capitalization DLF rose 1.44%. DLF recently announced a merger of its commercial realty arm DLF Assets (DAL) with itself, a move aimed at repaying some of DAL's debt. The new structure involves the merger of DLF subsidiary DLF Cyber City Developers with Caraf Builders and Constructions, which is the holding company of DAL. The valuation ratio approved by the board for Cyber City and Caraf is in the ratio of 60:40.

This means that DLF shareholders will have access to 60% and promoters to 40% of the merged entity. However, this will be a cashless transaction. DLF sells commercial property to DAL, which is controlled by KP Singh who owns 78% in the latter along with his son and DLF promoter Rajeev Singh. DAL buys commercial property from DLF and collects lease rentals from it. With this merger, the debt on DLF's books would be an additional Rs 2,460 crore.

Shares of public sector oil marketing companies rose after Finance Secretary Ashok Chawla said the government is likely to offer cash instead of bonds to state-run oil firms before 31 March 2010 for compensating them for selling fuel at lower than market price. Indian Oil Corporation, BPCL and HPCL rose by between 1.87% to 2.76%.

The oil ministry has sought Rs 20,000 crore of bonds for state-run firms as compensation during the full fiscal year ending March 2010.

PIVOT POINT

A pivot point is a price level of significance in technical analysis of a financial market that is used by traders as a predictive indicator of market movement. A pivot point is calculated as an average of significant prices (high, low, close) from the performance of a market in the prior trading period. If the market in the following period trades above the pivot point it is usually evaluated as a bullish sentiment, whereas trading below the pivot point is seen as bearish It is customary to calculate additional levels of support and resistance, below and above the pivot point, respectively, by subtracting or adding price differentials calculated from previous trading ranges of the market.

A pivot point and the associated support and resistance levels are often turning points for the direction of price movement in a market. In an up-trending market, the pivot point and the resistance levels may represent a ceiling level in price above which the uptrend is no longer sustainable and a reversal may occur. In a declining market, a pivot point and the support levels may represent a low price level of stability or a resistance to further decline



Calculation

Several methods exist for calculating the pivot point (P) of a market. Most commonly, it is the arithmetic average of the high (H), low (L), and closing (C) prices of the market in the prior trading period:

P = (H + L + C) / 3.

Sometimes, the average also includes the previous period's or the current period's opening price (O):

P = (O + H + L + C) / 4.

In other cases, traders like to emphasize the closing price, P = (H + L + C + C) / 4, or the current periods opening price, P = (H + L + O + O) / 4.

SUPPORT AND RESISTANCE LEVELS

Price support and resistance levels are key trading tools in any market. Their roles may be interchangeable, depending on whether the price level is approached in an up-trending or a down-trending market. These price levels may be derived from many market assumptions and conventions. In pivot point analysis, several levels, usually three, are commonly recognized below and above the pivot point. These are calculated from the range of price movement in the previous trading period, added to the pivot point for resistances and subtracted from it for support levels.

The first and most significant level of support (S1) and resistance (R1) is obtained by recognition of the upper and the lower halves of the prior trading range, defined by the trading above the pivot point (H − P), and below it (P − L). The first resistance on the up-side of the market is given by the lower width of prior trading added to the pivot point price and the first support on the down-side is the width of the upper part of the prior trading range below the pivot point.

R1 = P + (P − L) = 2×P − L
S1 = P − (H − P) = 2×P − H
Thus, these level may simply be calculated by subtracting the previous low (L) and high (H) price, respectively, from twice the pivot point value:[1]

The second set of resistance (R2) and support (S2) levels are above and below, respectively, the first set. They are simply determined from the full width of the prior trading range (H − L), added to and subtracted from the pivot point, respectively:

R2 = P + (H − L)
S2 = P − (H − L)
Commonly a third set is also calculated, again representing another higher resistance level (R3) and a yet lower support level (S3). The method of the second set is continued by doubling the range added and subtracted from the pivot point:

R3 = P + 2×(H − L)
S3 = P − 2×(H − L)
This concept is sometimes, albeit rarely, extended to a fourth set in which the tripled value of the trading range is used in the calculation.

Qualitatively, the second and higher support and resistance levels are always located symmetrically around the pivot point, whereas this is not the case for the first levels, unless the pivot point happens to divide the prior trading range exactly in half.
Support and resistance is a concept in technical analysis that the movement of the price of a security will tend to stop and reverse at certain predetermined price levels
Support :
A support level is a price level where the price tends to find support as it is going down. This means the price is more likely to "bounce" off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely to continue dropping until it finds another support level.

Resistance :
A resistance level is the opposite of a support level. It is where the price tends to find resistance as it is going up. This means the price is more likely to "bounce" off this level rather than break through it. However, once the price has passed this level, by an amount exceeding some noise, it is likely that it will continue rising until it finds another resistance level
Identifying support and resistance levels
Support and resistance levels can be identified by trend lines. Some traders believe in using pivot point calculations.

The more often a support/resistance level is "tested" (touched and bounced off by price), the more significance given to that specific level.

If a price breaks past a support level, that support level often becomes a new resistance level. The opposite is true as well, if price breaks a resistance level, it will often find support at that level in the future.
Using support and resistance levels
This is an example of support switching roles with resistance, and vice versa:

If a stock price is moving between support and resistance levels, then a basic investment strategy commonly used by traders, is to buy a stock at support and sell at resistance, then short at resistance and cover the short at support as per the following example

When judging entry and exit investment timing using support or resistance levels it is important to choose a chart based on a price interval period that aligns with your trading strategy timeframe. Short term traders tend to use charts based on interval periods, such as 1 minute (i.e. the price of the security is plotted on the chart every 1 minute), with longer term traders using price charts based on hourly, daily, weekly or monthly interval periods. Typically traders use shorter term interval charts when making a final decisions on when to invest, such as the following example based on 1 week of historical data with price plotted every 15 minutes. In this example the early signs that the stock was coming out of a downtrend was when it started to form support at $30.48 and then started to form higher highs and higher lows signalling a change from negative to positive trending

TREND LINE TECHNICAL ANALYSIS

A trend line is formed when you can draw a diagonal line between two or more price pivot points. They are commonly used to judge entry and exit investment timing when trading securities.
A trend line is a bounding line for the price movement of a security. A support trend line is formed when a securities price decreases and then rebounds at a pivot point that aligns with at least two previous support pivot points. Similarly a resistance trend line is formed when a securities price increases and then rebounds at a pivot point that aligns with at least two previous resistance pivot points. The following chart provides an example of support and resistance trend lines:
Trend lines are a simple and widely used technical analysis approach to judging entry and exit investment timing. To establish a trend line historical data, typically presented in the format of a chart such as the above price chart, is required. Historically, trend lines have been drawn by hand on paper charts, but it is now more common to use charting software that enables trend lines to be drawn on computer based charts. There are some charting software that will automatically generate trend lines, however most traders prefer to draw their own trendlines.

When establishing trend lines it is important to choose a chart based on a price interval period that aligns with your trading strategy. Short term traders tend to use charts based on interval periods, such as 1 minute (i.e. the price of the security is plotted on the chart every 1 minute), with longer term traders using price charts based on hourly, daily, weekly and monthly interval periods.

However, time periods can also be viewed in terms of years. For example, below is a chart of the S&P 500 since the earliest data point until April 2008. Please note that while the Oracle example above uses a linear scale of price changes, long term data is more often viewed as logarithmic: e.g. the changes are really an attempt to approxiamate percentage changes than pure numerical value. If we were to view this same chart linearly, we would not be able to see any detail from 1950 to about 1990 simply because all the data would be compressed to the bottom.Trend lines are typically used with price charts, however they can also be used with a range of technical analysis charts such as MACD and RSI. Trend lines can be used to identify positive and negative trending charts, whereby a positive trending chart forms an upsloping line when the support and the resistance pivots points are aligned, and a negative trending chart froms a downsloping line when the support and resistance pivot points are aligned.

Trend lines are used in many ways by traders. If a stock price is moving between support and resistance trendlines, then a basic investment strategy commonly used by traders, is to buy a stock at support and sell at resistance, then short at resistance and cover the short at support. The logic behind this, is that when the price returns to an existing principal trendline it may be an opportunity to open new positions in the direction of the trend, in the belief that the trendline will hold and the trend will continue further. A second way is that when price action breaks through the principal trendline of an existing trend, it is evidence that the trend may be going to fail, and a trader may consider trading in the opposite direction to the existing trend, or exiting positions in the direction of the trend

TRADING TOOLS

The pivot point itself represent a level of highest resistance or support, depending on the overall market condition. If the market is direction-less (undecided) prices will often fluctuate greatly around this level until a price breakout develops. Trading above or below the pivot point indicates the overall market sentiment. It is a leading indicator providing advanced signaling of potentially new market highs or lows within a given time frame.
The support and resistance levels calculated from the pivot point and the previous market width may be used as exit points of trades, but are rarely used as entry signals. For example, if the market is up-trending and breaks through the pivot point, the first resistance level is often a good target to close a position, as the probability of resistance and reversal increases greatly
Many traders recognize the half-way levels between any of these levels as additional, but weaker resistance or support areas.[2] The half-way (middle) point between the pivot point and R1 is designated M+, between R1 and R2 is M++, and below the pivot point the middle points are labeled as M- and M--. In the 5-day intra-day chart of the SPDR Gold Trust (above) the middle points can clearly be identified as support in days 1, 3, and 4, and as resistance indays 2 and 3.