European Trade: European shares continued to advance for a second consecutive day in Tuesday trade, even though the macroeconomic releases are not very positive. U.S. futures also added a few points overnight, with the S&P futures continue their consolidation in the 1110.00 area.
The European cash markets and the S&P futures moved higher hand in hand overnight, with trading volumes substantially stronger in the cash market. From the opening bell the U.K.’s FTSE added 0.75%, Spain’s IBEX rose 0.30%, while Italy’s MIB advanced 0.95%.
On the fundamental front, Greek debt was downgraded again, this time it was Moody’s turn to finish what Fitch and S&P had started with their earlier downgrades, in a move that now values the debt one step lower, at A2. This sparked a rally in the Greek bond market, but had little consequences in the Greek, or global, equity markets. The market had already taken into account future possible downgrades. In European trade, the Greek stock market is trading up 3.20%, being the best gainer in the Euro-zone region.
During the European session, the GDP report showed that the U.K. economy shrank 0.2% in the third quarter. This is more than the market expected, and was something that added downside pressure on the British pound. Q3 is the fifth consecutive quarter in which the U.K. economy contracted, and covers a period in which it has shed 6% of GDP.
S&P Technical View: TheLFB Member Charts
4 Hour Chart Flows: Mixed Price Points: 1084, and 1118 Looking for: An ending diagonal (reversal pattern)
Momentum: The S&P futures market confirmed a Long momentum read on Nov 11th and has built a near-term support base around 1085. The trend has flattened out, and the 1105 area will be a major resistance point to battle this week. The moves to test and hold support are impressive, and now backed with Japanese and German equity markets that are also looking bullish.
Elliott Wave: S&P futures prices are still trapped between the upper and lower ending diagonal lines.
If the S&P breaks through and holds under the lower support line of an ending diagonal at 1095, the dollar could make further gains against the major pairs. For this scenario to follow through, the wave 5) highs shown at 1118 must remain unbroken.
If there is any break through the 1118 top, we will look for a move into the 1130-1140 area (alternative, boxed wave count), with a Long reversal of the current down-trend on the major currencies to follow.
Sector Moves: Each of the sectors represented in the European markets advanced in Tuesday trade. The strongest gains came from the automobile & parts, which advanced 1.20%. Until now, this is the only sector that added more than 1% in European trade. The gains within this sector were wide-spread among the major carmaker companies, with Peugeot (OTCPK:PEUGY) adding 1.50%, and Volkswagen (OTCPK:VLKAY) advancing 1.80%.
The trading volumes remain light, and are far below the average of the last few months of trading. This greatly reduces the markets’ capacity to develop and sustain a trend, something reflected in the price that investors have to pay to buy options. As such, the market’s implied volatility has fallen to the lowest value in a more than a year.
Upcoming Economic Moves:
08:30 EST Usd Final GDP Exp 2.8%, Prev 2.8%
10:00 EST Usd Existing Home Sales Exp 6.3M Prev 6.1M
Crude oil was recently trading at $73.75 per barrel, higher by $0.05
Gold was recently trading up by $0.80 to $1097.00.
Disclosure: No positions