Global Market Wrap: 60% Twelve Month S&P Return; 5% Year-to-Date

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Global Market Wrap:

60% Twelve Month S&P Return; 5% Year-to-Date

Equity Futures: Dow +121.00. S&P +14.70. NASDAQ +19.75. Japan Nikkei +10.00. German Dax +1.00

U.S. Trade: U.S. markets continued the current uptrend on better than expected earnings estimates and on higher commodity prices. In Wednesday trade, the three major U.S. indexes gained 1.4%, with the Dow Jones closing above the 10,000-benchmark level following JP Morgan’s quarterly numbers.

Despite the gains seen in the equity markets, S&P futures had actually a very small range in Wednesday trade, of less than 1%, far below the ATR of the last few weeks of trading. The trading volume was somehow modest as well, something that makes some investors ask about the sustainability of this uptrend. 

Since March, the U.S. equity market has gained 60%, making the current rally one of the strongest on record. This happened as market participants became overjoyed about the very low valuations seen in the market. However, from the beginning of the year, the S&P 500 has gained only 5%, with the Dow Jones index posting a slightly return year-to-date return.

S&P Technical View: TheLFB Member Charts
4 Hour chart trend: Long. Main price points: 1062.50, and 1115. Looking for: Wave 5)

S&P futures have broken through the 1075.25 highs from September, which puts the red wave C in play. As such, traders may be looking for a final push of a blue wave 5) before an expanding diagonal will then be completed. The target of the current move is shown between the 1095 and 1115 region, where traders may be looking for the temporary top of a bull market. That is the technical view, and plots a good course to follow. As earnings season unfolds we are very much aware that the fundamental releases will dominate the direction of trade each day.

Sector Moves: The vast majority of gains came mainly from three sectors, the financials, basic materials and conglomerates, each advancing between 2.5% and 2.7%. The financials surged after the quarterly earnings reports of JP Morgan beat analysts estimations. With the gains seen on Wall Street the financials recovered the points lost during the prior trading session and even added some more after the reaction to Goldman Sachs downgrade to “neutral”.

The basic materials sector showed a lot of strength even from the early European session, surging almost 4% in just a few hours. The gains in this sector come as crude oil hit a new high for the current year, while gold consolidated near the $1060 area.

Economic Moves: During the U.S. session, a report showed that retail sales declined less than expected in September. However, excluding volatile items, retail sales actually increased for a second consecutive month, lifting the market’s sentiment among retail companies. At 14:00 EDT, the Fed Minutes were released for the meeting held in Sep 22 and 23 and showed that some members would have liked to increase the size of the mortgage-backed securities purchase program, up from $1.25 trillion

Crude oil for November delivery was recently trading at $75.15 per barrel, higher by $1.05. Crude oil surged to a new high for the current year, helped by the weakness seen in the greenback and helped by the gains seen in the equity markets. Crude oil is set to continue its uptrend as the global economy shows signs of growth once again. 

Gold for November delivery was recently trading down by $2.20 to $1062.80. 

Gold Technical View: TheLFB Member Charts
4 Hour chart trend: Long. Main price points: 1070. Looking for: Wave V top

Gold has reached new highs recently, which means that the blue wave V of an extended red wave 3) may not be finished going long just yet. The latest black wave V) shows a top around the $1070 resistance area. 

Traders may start to look for a corrective red wave 4) as soon the black wave IV) support is taken out.

Treasuries declined as investors moved out of the safety of the debt market, looking for higher yields. Moreover, the selling seen in the Treasury market came as the FOMC Minutes pointed out that the U.S. economy is heading towards recovery, which raises the chance, albeit still slim, of a rate increase over the next few quarters.