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Global Market Wrap:
Financials Drop After GS, C Results
Equity Futures: Dow +18.00. S&P +1.30. NASDAQ +0.75. Japan Nikkei +60.00. German Dax +25.00
U.S. Trade: After a strong sell-off during the pre-opening hours, the U.S. markets closed just above the breakeven line. The overnight sell-off came after Goldman Sachs’ and Citigroup quarterly reports hit the wires, and investors “bought the rumor, sold the news”.
The Dow Jones and the S&P 500 indexes led the gains in Thursday trade, while the NASDAQ index followed at some considerable distance, as Nokia’s results acted as a major drag. In Thursday trade, Nokia fell 10%, after it posted an unexpected loss in Q3. This made investors remain cautious on the technology-heavy NASDAQ index, ahead of IBM and Google results that hit the news wires after the close.
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, above, 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 38.2%-50% Fibonacci support levels, is expected.
On the right side of the chart, we have a different picture, with a wave count that has a clear 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, near the Fibonacci resistance levels.
Sector Moves: The financial and the technology sectors were the biggest drag on the market, both declining 0.5%. However, the basic materials sector managed to offset some of these declines, helped by crude oil’s surge during the U.S. trading hours. The basic materials sector is now trading up almost 1%, with the strongest gains coming from Weatherford International, Vale and Valero Energy Corp.
The two financial companies that reported today, Goldman Sachs and Citigroup fell 2% and 5.80% respectively, while Bank of America, which is expected to report tomorrow plunged 3.10%, being the second worst performer in the financial sector, after Citigroup.
Economic Moves: The U.S. calendar was loaded with important news reports, something that was reflected in the market activity. Among the news reports expected today, crude oil inventories had the strongest effect in the market, helping oil surge $2.5 to reach a new high for the current year. At 08:30 EDT, the CPI read for the month of September was up 0.2%, in-line with the market’s expectations, but the core read was a little higher, 0.2% compared to the expected 0.1%. At the same time, the unemployment claims fell to 514K for the prior week.
Crude oil for November delivery was recently trading at $77.50 per barrel, higher by $2.40. Crude oil surged at a very strong pace after the inventories report showed that stockpiles fell 5.23 million barrels last week. With this trend, crude oil surged to one year high even though the dollar showed signs of strength during the U.S. session.
Gold for November delivery was recently trading down by $13.60 to $1051.10.
Gold Technical View: TheLFB Member Charts
Daily chart trend: Long. Main price points: 1070. Looking for: Wave 3) top
On a daily gold chart, the market reached a new top recently around $1070 per ounce, where an extended red wave 3) should be completed soon. The market is currently trading around a significant Fibonacci extension resistance area, where a move lower into the corrective wave 4) may follow over the coming days and weeks, towards the $1000 support zone. The stochastic oscillator also signals for a move lower after the bearish cross in the over-bought area.
Treasuries continued to lose some ground in Thursday trade, as investors think that the economy is slowly heading towards the expansion phase. Today, the yield on the 10-year Treasury notes reached three weeks high.
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