Rupee depriciating to 53 and beyong, crude above $ 105 along with ballooning fiscal deficit, its only intermarket analysis suggesting that treasuries are looking to climb the wall of worry.

The Intermarket analysis is depicting perfect deflationary set up. Euro is the leader and rest of the asset classes are taking their clues from it. It made a rising wedge and broke down out of it today for a next leg down which should drag currencies and stocks lower which in turn effect commodities lower as well and for perfect deflationary forces to take centre stage, g sec should rise against the wall of worry.

Now, coming individually at ten year benchmark paper, it has been showing positive divergence on hourly charts for quite some time and today’s move may be the start of a leg up which can drag it higher to 101.50-102 which will account for 38.2%-61.8% retracement of the previous fall respectively. I think it should sattle somewhere in this range and start its next leg down then.

For the moment, the G Sec is looking all set to rise and I am of the view of riding the rally cautiously as the market is trying to climb the wall of worry so I would look to be nimble but yet ride the rally along with the market.