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Global Market Wrap:
13 Month Dow High On Risk Tolerance
Equity Futures: Dow +192.00. S&P +21.00. NASDAQ +30.25. Japan Nikkei +170.00. German Dax +30.00
U.S. Trade: U.S. shares moved up at a strong pace in Monday trade, as the ministers present at the G-20 meeting in Scotland last weekend pledged to maintain the current quantitative easing methods and low interest rate levels until the global economy is fully recovered.
This triggered a round if risk-tolerance in the financial markets, with the Dow Jones index reaching 13-months high, while the dollar index hit a 15-month low. At the same time, gold reached a new all-time high on Monday.
During the U.S. session, the three major U.S. indexes moved almost exclusively higher, advancing as much as 2% in intra-day trading. Since the day started, S&P futures added 24 points, having one of the strongest one-day rallies of the last few weeks of trading. Right now, S&P futures are trading in the 1088.00 area, close to where the market formed a swing point high in mid-October.
S&P Technical View: TheLFB Member Charts
Daily chart trend: Long. Main price points: 1080-1100. Looking for: Wave 5 or C top
The price structure on the daily chart is showing two valid scenarios. On the left side of the chart below, it shows an impulse structure with five waves up from the 665 lows to the current highs. If this is the case, the wave 4 discussed on the weekly chart, below, will be rejected, since the fourth wave is a corrective wave, which means it cannot be sub-divided by a five wave move. However, in this scenario, a three wave push lower into a corrective blue wave 2, with a targets somewhere around 950 area is expected.
On the right side of the chart, we have a different picture, with a wave count that with a zig-zag correction, which is valid for a wave 4 scenario. In this case lower blue wave 5 will follow.
Overall, the current price structure signals for a coming turning point with at least three wave push lower over the coming weeks, since the market is trading around the top of wave 5 or wave C leg.
Sector Moves: The S&P 500 heat-map was a sea of green in Monday trade, with less than 20 companies declining. In addition, each of the nine sectors represented in the U.S. market posted substantial gains, with the strongest coming from basic materials, on the back of the gains seen in the metals market. Since the day started, basic materials advanced more than 3%. A similar pattern was observed earlier in the day in European trading.
The financial sector also advanced by more than 3%, after a credit report issued by the Fed was interpreted as bullish by the market. Conglomerates advanced 2.8%, helped by General Electric, which is in advanced talks to create a joint-venture with Comcast.
Economic Moves: Clear
Crude oil was recently trading at $79.25 per barrel, higher by $1.80.
Crude oil Technical View: TheLFB Member Charts
Daily chart trend: Long. Main price points: 68.00, and 82. Looking for: Wave V top
Oil has made the latest top around the 82.00 zone, very close to the Fibonacci resistance levels shown between 83 and 84. Volume has not been strong over the last ten days, and the MACD is showing bearish divergence. All these reads are characteristics of a wave V move, which is the final sub-wave of a black wave 1), and is indicative of a reversal set-up, in this case, short.
Gold was recently trading higher by $6.80 to $1102.50.
Gold Technical View: TheLFB Member Charts
Daily chart trend: Long. Main price points: 1026.40, and 1100. Looking for: Wave III top
On the daily gold chart, the market has broken through the 1070 wave 3) top, after hitting the 1026 wave 4) bottom around the bullish trend line. This break has put wave 5) in progress, which has already reached the first target at the 1090 area as discussed the past weeks.
Once wave 5) of an extended black wave III finds the top, traders should look for a pull-back into the black, corrective wave IV.
Treasuries were little change in Monday trade, despite the strong gains seen in the equity markets. Moreover, the longer maturity notes and bonds found buyers, which made yield on the 10-year Treasury notes fall 15 basis points, down to 3.48%