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Indian markets could open sharply lower in line with largely negative Asian markets today and deeply negative US markets on Wednesday.- HDFC Securities

US stocks finished sharply lower Wednesday after the release of minutes of the Federal Reserve’s last policy gathering on Dec 14-15, 2021 showed discussion around a potentially faster pace of shrinking the central bank’s massive balance sheet and raising rates. Minutes revealed robust talk among some Fed officials around the central bank potentially moving to raise rates quicker and cutting its current $8.8 trillion sized balance sheet faster than earlier anticipated to help tackle higher costs of living.

The 10-year Treasury yield has surged nearly 20 basis points in the first three trading days of 2021. The yield on the 10-year Treasury note rose 3.7 basis point to 1.703%, the highest since April 5, 2021. On the economic and policy fronts, a report on private payrolls in the US showed that 807,000 jobs were created in December, higher than forecast for a gain of 375,000. The report comes ahead of the Labor Department's more comprehensive and closely watched nonfarm payrolls data for December on Friday.

Separately, the final reading of the IHS Markit services purchasing managers index for December came in at 57.6, down from 58 in November but mostly in line from an earlier estimate.

Activity in China's services sector expanded at a faster pace in December amid higher demand and easing inflationary pressure. The Caixin/Markit services Purchasing Managers' Index (PMI) rose to 53.1 in December from 52.1 in November. Caixin's December composite PMI, which includes both manufacturing and services activity, rose to 53.0 from 51.2 the previous month.

The final au Jibun Bank Japan Services Purchasing Managers' Index (PMI) for December dropped to a seasonally adjusted 52.1 from the prior month's 53.0, which was the highest reading since August 2019. Stocks in Asia dropped Thursday after a selloff in U.S. technology shares and Treasuries accelerated once Federal Reserve minutes signaled interest-rate hikes may be more aggressive than many had expected.

Nifty rose for the fourth consecutive session on Jan 05, its longest winning streak in over two months. At close Nifty was up 0.67% or 120 points at 17925.3. In the process, Nifty was the best performing index in the Asian region.

Nifty rose for the fourth consecutive session; however the advance decline ratio is now only marginally above 1:1 suggesting likelihood of Nifty starting to correct soon under profit taking in largecaps. 17945-18023 could be the resistance in the near term while 17827 could be a support.

Daily Technical View on Nifty

Continuation upside momentum..

Observation: The upside momentum continued in the market for third consecutive sessions on Wednesday and Nifty closed the day with handsome gains of around 120 points. A reasonable long bull candle was formed on the daily chart with minor upper and lower shadow. Technically this pattern indicate a continuation of an uptrend in the market and the formation of upper and lower shadow's signal emergence of volatility at the highs. At the same time, the formation of lower shadow's of the last two sessions bull candle indicate a buy on intraday dips action in the market. However, having moved up sharply in the last four sessions, there is a possibility of a consolidation or minor downward correction from the highs.

The overall market breadth seems to have tired on Wednesday after a sharp run up of the last few sessions. The broad market indices have started to consolidate at the higher levels. The nullifying of bearish pattern recently could mean sharp trend reversal on the upside and any dips from here could be a buying opportunity.

Conclusion: The market continued with upside momentum on Wednesday, but the pace of the market seems to have reduced and the volatility has started to occur at the high. There is a possibility of consolidation movement or minor weakness from near 18K mark in the next 1-2 sessions, before showing further upmove from the dips. Immediate support is placed at 17760.

Nifty – Daily Timeframe chart

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