Global Market Wrap: European Market Plunge, S&P Nears Crucial Area

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Global Market Wrap:

European Market Plunge, S&P Nears Crucial Area

Equity Futures: Dow -11.00. S&P -1.50. NASDAQ -2.00. Japanese Nikkei -40.00. German Dax -6.00.

European Trade: Following the negative momentum seen over the last few days of trading, the European markets started declining from the first few minutes of trade, with most of the major European indexes down almost 1%, while the S&P futures are trading just above a three months old support trend-line.

Every major equity market moved lower in early Wednesday trade, with the Irish Overall index down 3.3% in the first few hours of trade. The heavyweights, German Dax and the U.K. FTSE lost about 0.75% as the vast majority of companies declined. The Eastern European markets also declined in Wednesday trade, extending the sell-off seen over the prior two days of trading. 

The selling in the global equity market comes as market participants consider the current rally as having outpaced, by a large margin, the prospects of the global economy to stage a dramatic continuation of growth. Since the lows touched in March, the global equity markets have surged close to 60%, making this rally one of the strongest on record, in a time when the global economy is barely moving. 

S&P Technical View: TheLFB Member Charts
4 Hour chart trend: Short. Main price points: 101.50, 1062.50, and 1098. Looking for: Move lower
 
S&P futures are still trading lower with the latest break going through the 1062.50 resistance area, which is confirming that the U.S. dollar bottom, and equity top, are temporary placed.
 
The wave count of an expanding diagonal in wave 5 or C that we have been monitoring for a few weeks now was completed at the 1098.50 top, which needs to hold if a bear market move can easily happen. As such, we will be looking for an impulse structure towards the 1011.50 area

Sector Moves: The automobile & parts together with the basic materials sector were the biggest drag on the European markets in Wednesday trade, both declining more than 2%. Important declines also came from the construction & materials sector, on the back of declines seen in the French companies Vinci and Saint Gobain. In particular, Saint Gobain shed 3.30% in Wednesday trade.

The German Dax is heading lower for the fourth consecutive day on Wednesday, lead by Infineon, which plunged 8% after rumors emerged that the company lost an important contract. Also in the German Dax, Daimler, the maker of the luxury brand Mercedes, plunged 3% as it reported a drop of 80% in its third quarter income. The sell off in the automakers sector started only after this report hit the newswires.

Economic Moves: The European calendar was clear of any important reports, but ahead, investors prepare for the Durable Goods, New Home Sales and Crude Oil Inventories reports from the U.S. These reports are likely to have a strong impact on the market. 

Crude oil was recently trading at $78.95 per barrel, lower by $0.60. 

Crude oil Technical View: TheLFB Member Charts
4 Hour chart trend: Long. Main price points: 76.60, and 82. Looking for: Wave IV)

Oil has traded lower over the last few sessions, away from the 81.95 wave III) top. The current price structure suggests that wave IV) is in progress, which may fall for at least 38.2% of the wave III) distance before the up-trend continues. In the current wave IV), prices must not trade into the wave I) territory shown around the 71.92 area, otherwise the wave count will be invalidated.

Gold was recently trading higher by $2.10 to $1037.50.

Gold Technical View: TheLFB Member Charts
4 Hour chart trend: Long. Main price points: 1043, and 1070. Looking for: Wave 4)

Gold has finally broken through the 1043 support zone of wave A, we discussed here recently. This break-out put the current wave C in play, where traders may see another 25-30 dollar drop over the coming days, to hit the 38.2% Fibonacci retracement zone, of a red wave 3) distance. In this area is a trend-line connected from August 2009 to the October lows, which may be a good support area for another bounce higher.