Global equity markets continue their sideways slog, albeit at yearly highs, with very little potential to easily break either way in the near-term. The Japanese Nikkei maintained its 22 session run that has it trading close to the 10500 price point area. A new sell signal has just formed on the Nikkei, with a break below 10540 targeting 10450. If equity selling can draw in momentum, downside targets will then include 10400, and 10250 on the Nikkei.
The German DAX has pushed higher to test bids around 7350 and trades now at a pivotal price point of 7300. The long trend that is in place may allow a test of support to hold, that then bounces higher, but a break below 7250 on the DAX could easily draw in an initial test of support at 7150 and subsequently 7050. European markets are at an inflection point that could determine momentum and direction for February and March, which by default will impact Usd and major currency valuations.
Seven sessions of trade on the S&P 500 futures market has maintained a bullish undertone that is holding 1310 support, but a new sell signal is developing that will move S&P trade through 1305, to initially test 1295, with a steep drop to 1265 then viable. As reported in yesterday's client note, volume and participation levels are extremely weak, which could easily lead to a change in momentum and sentiment on any given day that a Fed POMO auction is not in place.
With reports that the average hold time for any new equity position during 2010 was 22 seconds, with Monday's dominating price action and percentage returns in 2010, last minute ramps on POMO auction days hitting hard, now leaves an environment that is ripe to be taken lower once a credible sound-bite headline crosses the wires.
Such a move may force recent profits to be banked by the few algorithm trading machines that seem to be dominating market activity. As traders and investors have seen, once the algorithms get going, long or short, they are difficult to stop and reverse. A move lower through 1295 on the S&P 500 would equate to Eur/Usd trading in the 1.3250 area.