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Global Market Wrap:
Banks Drag European Shares Lower
Equity Futures: Dow -5.00. S&P -1.10. NASDAQ -1.00. Japanese Nikkei +30.00. German Dax +7.00.
European Trade: European shares retreated in Tuesday trade, with the vast majority of declines coming from the banking sector. Earlier in the day, the Asian stock markets reached the highest level in 13-months, while S&P futures are trading close to the high of the current year, in the 1070.00 area.
Finland’s OMX Helsinki index is the only major market that is trading above the break-even line in Europe, while all the other indexes are in the red. In Eastern Europe, Hungary’s stock exchange surged almost 1%, led by the gain seen in MOL and OTP. The biggest declines were seen in Spain’s IBEX index, which lost about 1% and in Norway’s OBX index, which is down 0.7%. The Eastern Europe blue chip companies lost 0.6%, while their Western European counterparts, declined 0.4%.
S&P Futures: The S&P futures saw a very small range during the overnight session, something that has become a trend lately. For now, the S&P futures are trading in the 1070.00 area, very close to the high of the current year.
Ahead, investors expect the earnings results from Intel (INTC) and Johnson & Johnson (JNJ), which will have a crucial influence in today’s price action.
S&P Technical View: TheLFB Member Charts
4 Hour chart trend: Long. Main price points: 1058, and 1075.25. Looking for: 5)
The potential technical corrective retrace in wave B, noted at the end of last week did not follow through, after the markets reacted positively to initial earnings reports out of Europe. Prices are extremely bullish, to the extent that the 1075.25 highs from September could be thoroughly tested as resistance. In this case, traders may be looking for a final move up of an expanding diagonal triangle with the first target shown around the 1090 area, followed by a second around the 100% Fibonacci projection zone of the wave A) distance at the 1114 area.
The wave count will be valid so long as the 1058 wave B) low holds.
Sector Moves: The vast majority of declines came from the financial sector, with banks shedding 1% from the European markets. This happened after Meredith Whitney Assoc. cut Goldman Sachs to “neutral”, while Lloyds continued its losing streak as the market speculates the bank wants to exit the U.K. Government’s Asset Protection Scheme. This would cost the bank an impressive $3.2 billion, which, according to some analysts will add further strains on the bank’s balance sheets. More banks are soon expected to follow in Lloyd’s footsteps, and exit the government’s rescue plans.
The only sector that managed to post substantial gains in Tuesday trade was the media, which advanced on U.K.’s SKY and WPP.
Economic Moves: During the European session, the German ZEW Economic Sentiment report came in worse than expected. Moreover, the report showed that October’s numbers were actually lower than the ones released in September, being the first time monthly drop since July. Ahead, the U.S. session is clear of any red flag reports.
Crude oil for November delivery was recently trading at $73.65 per barrel, higher by $0.35. Crude oil managed to reach the highest value since late August, even though the dollar index did not move anywhere importantly over the last few trading sessions.
Crude Oil Technical View: TheLFB Member Charts
4 Hour chart trend: Short possibilities. Main price points: 73.00, and 74.90. Looking for: Wave II) top
Oil is trading higher, and already above the previous $73 resistance area and approaching $74.90 highs. The wave count however, stays valid so long as the market trades below the wave 1) top at $75.00. Wave two must never make a retrace for more than 100% of the wave one distance.
Traders will be looking for a new wave count on a daily and four hour chart if the $74.90 high is taken out anytime soon. Until then, the red wave II) correction outlook may still be the case.
Gold for November delivery was recently trading up by $6.10 to $1063.60. Investor’s quest for alternative investments helped gold reach a new record high in Tuesday trade, surging above the previous top, in the 1061.00 area. Gold is among the only assets that have a very small rate of depreciation in time (almost inexistent) and this gives the precious metal a unique status in the investment world.