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Global Market Wrap:
Shares Mixed As Techs Decline
Equity Futures: Dow -5.00. S&P -1.00. NASDAQ -12.75. Japan Nikkei +42.00. German Dax -3.00
U.S. Trade: U.S. shares spent most of the cash session trading on an undecided note, with the S&P and the Dow Jones indexes moving up and down around the breakeven line. On the other hand, the tech-driven NASDAQ index fell a few points, dragged lower by some heavyweight companies.
Shares started cautiously in the cash session, ahead of the busy U.S. calendar. Before the U.S. opening bell, the ADP report showed that the economy lost 84K jobs in December, a little more than expected, but this is the smallest read in almost a year. At 10:00 EST, the ISM report showed that the service side of the economy expanded in December for the third time over the last four months. Still, this had little influence in the equity market because traders were expecting FOMC minutes later in the day, but even so, the report had some influence over the Treasury market.
The FOMC minutes finally hit the newswires at 14:00 EST and allowed the equity market to move higher as the Fed said that the labor market is stabilizing and that it will continue to maintain interest rates at low levels for an extended period. The stabilization seen in the labor market is an important factor, since for some time, rising unemployment numbers have been seen as the main drag on the U.S. economy.
The price structure on the daily chart is showing two valid scenarios. The left side of the chart shows an impulse structure with five waves up from the 665 lows to the current highs. If this is the case then 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 the 950 would be 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, a lower Short blue wave 5 will follow.
Overall, the price structure is signaling for an upcoming turning point (between 1125-1130) on both wave counts with at least a three wave push lower, since the market is trading around the top of a black wave 5 or black wave C leg.
Sector Moves: Most of the trading activity was concentrated on two sectors: basic materials and technology. Basic materials advanced 1.2% helped by the uptrend observed in the commodity market. The top gainers from this sector were the companies that are specialized in metals, such as Newmont, Nucor, AK Steel and Alcoa, which advanced between 3% and 3.50%.
The technology sector lost 0.90%, dragged lower by the heavyweight companies such as Verizon, which lost 4.05% and by Google, which fell 2.25%. It seems that the sell-off in the technology shares came after Verizon’s CEO said 2009 earnings will be lower than in the preceding year.
Upcoming Economic Moves:
19:30 EST Aud Retail Sales Exp. 0.4%, Prev. 0.3%
19:30 EST Aud Trade Bal. Exp. -1.79B, Prev. -2.38
Crude oil was recently trading at $83.20 per barrel, higher by $1.40.
Gold was recently trading high by $21.20 to $1,139.80.
Treasuries fell following the macroeconomic data released on Wednesday. The U.S. economy seems to be getting closer to the expansionary point, which might force the Fed to raise somewhere in the future. The yield on the 10-year Treasury notes gained 5.3 basis points, up to 3.81%.
Disclosure: No positions