Global Market Wrap: Swing Point High On Global Momentum

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Global Market Wrap:

Swing Point High On Global Momentum

Equity Futures: Dow +13.30. S&P +20.00. NASDAQ +3.40. Japan Nikkei +70.00. German Dax +5.00

U.S. Trade: The three major U.S. indexes, the Dow Jones, the NASDAQ and the S&P 500 moved lower hand in hand in Tuesday trade, as investors’ confidence was shaken by poor macroeconomic results. In addition, the decline in the commodity sector had an negative contribution to the markets’ overall sentiment.

S&P futures denoted a negative momentum even from early U.S. trade, when the futures index tested the 1100.00 area and the move retraced rather violently. Eventually, they managed to find a bottom in the 1080.00 area, where a one-week-old trend=line can be found.

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, (shown 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 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 zing-sag 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: Every sector in the U.S. market is currently trading in the red, with the biggest declines coming from the basic materials companies. This followed as crude oil fell in Tuesday trade for the first time in a week. Significant declines came from the utilities and industrial goods sectors as well, even though Caterpillar managed to beat analysts’ estimations. In the utility sector, Dynegy and RRI Energy contributed with most of the declines. 

Consumer goods companies posted the smallest declines in Tuesday trade, helped by the gains seen in Ford, Altria Group, Xerox and Procter and Gamble. These four companies have the biggest weight in the sector and are the only large companies to post gains in the consumer goods sector.

Economic Moves: The report calendar played an important role in Tuesday trade, with most of the declines coming after Housing Starts numbers disappointed the market. Moreover, at 08:30 EDT a report showed that production inflation fell 0.6% in September, much more than expected. 

Most economists compare the inflation read with economic temperature. A high temperature read shows that there is molecular activity. As such, a high level of inflation denotes strong activity in the economy, but right now, most economies are recording deflation. 
Crude oil for November delivery was recently trading at $79.10 per barrel, lower by $0.50. 

Crude oil Technical View: TheLFB Member Charts
Daily chart trend: Long. Main price points: 68.00, and 82. Looking for: Wave V

On the daily chart traders will be looking for a new wave count after prices broke through the critical 74.90 resistance area recently. The technical read looks to be a triangle in a blue wave IV position, something that has been developing since June.

This new wave count now signals a technical path higher, towards $82 per barrel with wave V leg of an extended black 1. This looks solid only if the 68.00 support area is able to hold the next reversal test.

Any break of this critical zone and the lower support-line will signal that the top of the black wave 1) has already been reached. 

Gold for November delivery was recently trading up by $0.20 to $1058.30. Gold posted some important gains earlier in the session, but reversed during the U.S. session. This happened as S&P futures fell from the yearly high, while the dollar index actually gained some points.

Treasuries found an important number of buyers after the PPI read for the month of September fell 0.6%, while Housing Starts disappointed the market. The yield on the 10-year Treasury notes is currently at 3.33%, a few basis points above their European counter-parts, but still far from Australia’s 10-year notes, which are currently yielding 5.57%.