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Global Market Wrap:
Mixed Trading Seen In Europe
Equity Futures: Dow -9.00. S&P -1.70. NASDAQ -4.25. Japanese Nikkei +0.50. German Dax -30.00.
European markets are currently trading mixed, even though the Asian market closed the cash session in the green. The S&P futures had a very small range during the overnight session, looking somehow bearish, but still they lacked the momentum to break lower.
European Trade: European markets are trading mixed, but the two biggest European markets, the U.K. FTSE and the German DAX are trading below the break-even line. On the other hand, the emerging European markets managed to stay slightly above the break-even line, outperforming the more developed companies.
European and global markets saw a clear downtrend over the last four days of trading, but Monday proved to be an exception, as the S&P futures turned around on M&A announcements. However, traders now seem determined to continue the downtrend, since some are saying that the current valuations are way ahead of the perspectives of the global economy. The present forecasts are for a prolonged recovery, with a continued uptick in unemployment, which does not justify the 60% rally seen in the equity markets.
S&P Futures: The trading had been very light in the S&P futures during the overnight session, with the index moving less than 5 points. Moreover, this seems to be one of the slowest overnight sessions of the last period, as the S&P futures are trading just below the 1060 resistance area.
S&P Technical View: TheLFB Member Charts:
4 Hour chart trend: Short possibilities. Main price points: 1075.25. Looking for: Wave II top
S&P futures have made a retracement after the wave I low that was established at the start of the week. As five waves down in wave I were completed, the market reacted with a sharp pull-back in wave II. Wave II is a corrective wave so it should be sub-divided by a three wave move. On the four hour chart below, we cannot see a three wave push higher in wave II, but the wave count however, remains valid so long as the market trades below the critical area of 1075.25.
The stochastic oscillator signals for a move lower over the coming hours, since the cross is shown in the over-bought area.
Sector Moves: The financial sector advanced in Europe, but the raw materials companies offset these gains. To some extent, the gains seen in the financial sector come as a surprise, since the rally started after BNP Paribas announced that it would raise $6.3 billion, or 4.3 billion euros, by issuing new shares. Investors usually see new share sales as a negative thing, because it dilutes the current shareholders, but this was not the case today since presumably, this money will be used to pay back the state loan received after Lehman’s collapse. Consumer goods companies also advanced in Europe, with Swiss’ Nestle up 0.50%.
Economic Moves: There was only one red-flag report during the European session, the U.K. Current Account numbers, which showed that the U.K. deficit reached £11.4 billion in the second quarter from the prior one. This report had little implication in the currency or in the equity markets, but the current account tends to influence the markets over the longer term. Ahead, the market is preparing for the Conference Board Consumer Confidence and for the Case-Shiller House Price Index numbers, scheduled at 9:00 EDT and 10:00 EDT respectively, in the U.S..
Crude oil for October delivery was recently trading at $65.80 per barrel, down $0.20. Crude oil barely moved during the overnight session, but things are expected to pick up rather soon. Interestingly, the overnight activity in the foreign exchange market had little effect on crude oil.
Crude Oil Technical View: TheLFB Member Charts:
4 Hour chart trend: Short. Main price points: 63-64. Looking for: Extended wave iii
On the four hour oil chart, prices hit the 38.2% retracement area in the last session or two, where the top of a blue wave iv) could be in place, as discussed yesterday. The current wave count structure signals for another push lower in wave v) which should complete an extended black wave iii somewhere around 63-64 dollars per barrel. After that we will be looking for a long pull-back in a black wave iv, before the down-trend continues.
Gold for October delivery was recently trading lower by $1.00 to $990.60. Gold tested a few times the 994.00 area, but so far, it failed to move higher. To the upside, the next important resistance area lies in the $1000 area.