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Global Market Wrap:
European Shares Fall Ahead of IBM And Citigroup
Equity Futures: Dow -20.00. S&P -2.10. NASDAQ +1.00. Japanese Nikkei -30.00. German DAX -12.00.
European Trade: European markets lost approximately 1% during the first part of the cash session, as investors exit the market ahead of the earnings results coming from IBM and Citigroup later in the day. The selling seen throughout the European session was aided by a number of downbeat macroeconomic releases coming from the euro-region and from the U.K.
The first economic release to hit the newswires was the U.K. CPI report, which showed that inflation jumped 1% in December 2009 from one year earlier. This is the biggest monthly gain on record and comes at a very poor moment for the BoE, when the Cash Rate is at 0.50%, which creates the perfect environment for even more inflation. Most markets analysts believe that U.K. inflation will keep rising on the medium-term, but BoE officials say that the global recession will bring down prices.
Following the U.K. CPI numbers, at 05:00 the ZEW report for the German and for the euro-area economies showed that investor confidence fell for the fourth consecutive month. This report initiated further selling in the equity cash and futures markets, creating a price-spike on the equity charts.
From the start of the cash session, the German DAX index lost 0.95%, the U.K. FTSE lost 1.00% and France’s CAC shed 1.10%. Despite the broad weakness seen in the market, Luxembourg’s LuxX index gained 0.50%, being the only developed market that managed to stay in the green in early Tuesday trade. Turning to sectors, automobile & parts lost 1.60% being the biggest decliners, while construction materials fell 1.30%. However, telecommunication companies stayed in the green, helped by the two heavyweights; Telefonica and Vodafone.
Momentum: The S&P futures market confirmed a Long momentum read on Nov 11th and built a solid near-term support base around 1095. The 1125 area will be another major support zone. The moves to test and hold support are impressive, and are backed with global equity markets that are also holding support.
Elliott Wave: S&P futures still look bearish, and have done since Friday when the latest turining point appeared. The market was unable to push prices through the 1147 resistance region at that time, where our wave v) held as a strong resistance. There was an impulse move down in a blue wave i)/a), followed by a long corrective blue ii)/b) leg, before futures fell again by almost 20 points.
We are looking for a quick Long, black wave ii reversal, before a near-term Short trend shown in a blue wave iii)/c) can continue. The target of the coming Short move is around the 1112 support zone, while the 1147 top must stay in place.
Upcoming Economic Moves:
09:00 EST Cad Int. Rate Exp 0.25%, Prev 0.25%
09:00 EST Usd TIC data Exp 30.3B, Prev 20.7B
Crude oil was recently trading at $77.60 per barrel, lower by $0.40. The last few days of trading showed that crude oil is in a retracement period. Crude oil fell over this period as the dollar index advanced, breaking the tight positive correlation seen during most of 2009, and gets things back into historical alignment.
Gold was recently trading up by $1.10 to $1134.80. Gold is trading in the 1135.00 area, where bullion trade hit a support trend-line, which has held the market for about a week. A break below this level could drive gold in the 1100.00 area, which is an important technical and psychological level.
Disclosure: No positions