Global Market Wrap: U.S. Equities Test 13-Month Highs

Equity Futures: Dow +117.00. S&P +13.40. NASDAQ +24.50. Japan Nikkei +55.00. German Dax +15.00

U.S. Trade: The global equity market saw strong momentum during the early U.S. trading session, but the gang-buster start that was fueled by overnight futures trade breaking higher the momentum faded as the market approached a 13-month high. The commodity markets also advanced, while the dollar tumbled in Monday trade.

S&P futures advanced at a very strong pace throughout the European trading hours and during the U.S. cash market open. The futures index advanced almost 2% and tested the 1010.00 area, the high of the current year. Yet, despite a much better than expected Existing Home Sales report, the market failed to maintain its uptrend and had to retrace some ground from the swing point high formed in the 1010.00 area.

Earlier in the day, the Asian markets closed the trading session mixed, while the European markets started the day posting very strong gains, but lost their steam at the same time as the U.S. futures indexes.

S&P Technical View: TheLFB Member Charts
Daily chart trend: Long. Main price points: 1100-1120. 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, 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, 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 target somewhere around 950 area is expected.

On the right side of the chart, we have a different picture, with 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 around 1120 area with at least three wave push lower, since the market is trading around the top of wave 5 or wave C leg.

Sector Moves: Each of the nine sectors represented in the U.S. market advanced in Monday trade, with the strongest gains coming from conglomerates, basic materials and financials, which advanced 1.6%. The same three indexes have a very big weight in the U.S. equity market, something that is helpful for the current uptrend. Turning to industries, the strongest gains came from cement, medical practitioners, regional banks and healthcare plan companies.

The rally in the healthcare plan industry was fueled by Cigna (CI) and WellPoint (WLP), which rallied after JP Morgan upgraded the two companies to “overweight”, and at the same time said that the sector is trading at a considerable discount. Cigna, which surged 7% was the second best gainer in the S&P 500 index. At the same time, Zions Bancorporation (ZION) advanced 15% in the S&P 500 index after it announced that it would exchange 5.6 million shares in preferred stock.

Economic Moves: There was only one red-flag U.S. report in Monday trade: the Existing Home Sales. The report hit the newswires at 6.1 million in October, the most since February 2007, surging a little more than 10% from the prior month. The move was most likely triggered by the $8,000 incentive for first time buyers, and as such may result in disappointment over the coming months that are notoriously lackluster in the real estate market.

Crude oil was recently trading at $77.60 per barrel, higher by $0.15.

Gold was recently trading higher by $19.30 to $1166.10.

Treasuries traded lower in Monday trade. The short-term bill market declined, with the yield on the 3-month Treasury bill advancing 1.4 basis points, while the longer maturity Treasury notes and bonds found buyers.

Disclosure: No positions