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Global Market Wrap:
Earnings and Labor- A Bullish Delight
Equity Futures: Dow +105.00. S&P +7.80. NASDAQ +11.50. Japan Nikkei +40.00. German Dax +10.00
U.S. Trade: A drop in unemployment claims and higher productivity helped the major U.S. indexes climb higher in Thursday trade. Since the recovery phase began, investors saw the labor market as one of the biggest threats to the economic recovery. Increasing unemployment meant lower forward consumption, in an economy historically driven by the consumer actually consuming, and at a fast pace.
In this way, a drop in the weekly unemployment claims was interpreted as a bullish sign, for those who view the glass as half-full. The pessimist view will be that the 4 and 10 week averages are literally off the charts at +500K claimants, and the bears will no doubt have their day with that headline, However, today was not to be that day, and the bulls held court through the entire cash session. The acid test however will be the No-farm numbers from the U.S. on Friday.
The market showed a positive momentum, even from the overnight futures session, with all three indexes posting gains around the opening bell. However, the NASDAQ index outperformed the Dow Jones and the S&P 500, being pulled higher by the technology stocks on the back of Cisco’s quarterly results.
S&P futures are trading near to the 1060.00 area, the same place where the market topped during the last few days of the prior week of trading. A break above this level would allow the market to test the 1075 area, the last important intra-day resistance until the 1100.00 benchmark level.
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: Each of the nine sectors represented in the U.S. market advanced in Thursday trade, with the smallest gains coming from the heavyweight financials, which gained (only) 1.1%. On the other hand, industrial goods lead the gains for a third consecutive day, surging 2.4%, while technology stocks added 1.8%.
The gains in the technology stocks were led by Cisco, which said that the business was recovering after posting better than expected results. Cisco was trading up 3.00% on Thursday. In the S&P 500 index, the best performing company was IMS Health, which surged after 23% following a M&A announcement.
Economic Moves: There were two major news events during the U.S. session, the U.S. labor market data and the ECB Press Conference, with only the first one affecting the global equity market. U.S. Weekly Unemployment Claims fell to 512K during the prior week, the lowest level in 10 months. At the same time, non-farm productivity surged 9.5% in the third quarter, the most in six year. The productivity report measures the employee’s average hourly output.
Crude oil was recently trading at $79.75 per barrel, lower by $0.60.
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 $3.80 to $1091.10.
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 last week.
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 traded mixed in Thursday trade, with the Treasury notes advancing, while the longer maturity bonds declining. This happened, as investors expect the Fed to raise rates sharply over the next few years, keeping the key interest rate at very low levels for an extended period.