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Global Market Wrap:
European Equity Trading Goes Red
Equity Futures: Dow -34.00. S&P -3.60. NASDAQ -6.50. Japanese Nikkei -3.00. German Dax -40.00.
Every stock market in Europe is trading in the red, without any exceptions as investors continue to cash in ahead of the upcoming earnings season. Moreover, the recent streak of weaker than expected macroeconomic data acted as a clear reminder that the global recovery period will be slow and lengthy.
European Trade: The markets most affected by the selling wave were the emerging markets, which so far have lost around 2%, compared to the 1% lost by the European blue chip companies. At this point, only three mature markets managed to decline less than 1%, the U.K. FTSE, which lost 0.50% together with the German Dax and Sweden OMX, both being down 0.70%.
The weakness seen in the European markets over the last two weeks of trading had a positive effect in Europe’s debt market. German bunds, which are the most liquid European debt instrument, and the second most liquid in the world after U.S. Treasuries, advanced in Friday trade, with the 10-year Bund yield losing 23 basis. For now, the German Bunds have a slightly smaller yield compared to their U.S. counterparts, even though the Fed has a much smaller key interest rate.
S&P Futures: Ahead of the NFP report, the S&P futures had a range of only 3 points during the overnight session. Ahead, it is widely expected that the S&P futures will continue trading on light momentum until the U.S. session opens. In Thursday trade, the S&P futures plunged almost 30 points, the most over the last few months of trading.
S&P Technical View: TheLFB Member Charts
4 Hour chart trend: Short. Main price points: 985-1000. Looking for: Extended wave III
Our bearish wave count on the S&P futures is doing very well as the prices are already trading around 1024 zone, after the break of 1035 wave I) low that appeared yesterday. Equity market is lower, and as long it stays this way, the dollar should benefit. On the current four hour wave count chart, we are looking for a down-trend continuation with an extended red wave III in process, which may find the lows somewhere around 985-1000 area.
Sector Moves: Every single sector declined in Europe, something also seen earlier, during the Asian session. The technology sector, closely followed by the basic resources and insurances were the worst performers of the day, declining between 1.80-2.00%. Interestingly, the insurance sector was Thursday’s best gainer. The smallest declines could be seen in the defensive health care sector, which lost only 0.50%.
Economic Moves: There was only one red flag report during the European session, the U.K. Nationwide HPI, which showed that house prices increased for the fifth consecutive month in September. Still, this had little effect in the market. Ahead, investors prepare for the infamous NFP report, which is likely to be very volatile. Analysts forecast a 179K monthly job loss in September, which would be the smallest in 12 months. However, the volatility is being added to by this week’s other employment data releases that question that small a job loss number being likely.
Crude oil for October delivery was recently trading at $69.95 per barrel, down by $0.85. Crude oil lost a few points during the European open, after a very flat Asian session. Ahead, crude oil is expected to remain trading on a weak momentum, but then pick up throughout the U.S. open.
Crude Oil Technical View: TheLFB Member Charts
4 Hour chart trend: Mixed. Main price points: 73. Looking for: Wave II)
On the four hour wave count we are still looking for a possible flat pattern in a red corrective wave II), with wave c in process. We can count three waves up in wave a, three waves down in b and now the market is currently trading in higher leg c. Leg c of a flat pattern is the only wave that is sub-divided by a five wave move. Another push higher into wave v) of a black c is expected over the coming session.
If the wave count is correct then a flat pattern of wave II) should be completed around 73 dollars per barrel.
Gold for October delivery was recently trading lower by $1.10 to $998.60. Gold is trading just above the 998.00 area, the same area that acted as a support level in Thursday trading. Over the last few days of trading, gold was not able to develop a trend on its own, and most of the time it just followed the moves seen in the forex market.