Equity Futures: Dow +99.00. S&P +12.00. NASDAQ +23.50. Japan Nikkei +80.00. German Dax +7.00
U.S. Trade: The U.S. equity market started the cash session a little firmer in Monday trade, something that it lacked over the last few trading sessions. This was a consequence of the positive news reports, which surrounded the market throughout the day.
Shares turned positive in Monday trade even from the overnight trading hours, when it emerged that Sanofi-Aventis is looking to buy Chattem Inc. for $1.9 billion. The last few months had been very active in the M&A department, with a number of multi-billion deals being signed in a relative short period. Most of the time, M&A activity points out that the economy is on the right path, and that money and liquidity are flowing through the economy’s blood vessels.
To further lift investors’ appetite for risk, Alcoa posted substantial gains during the intra-day session after it announced a $11 billion joint venture deal with Ma’aden, the mining company owned by the Saudi Arabian Government.
The S&P futures added 12.00 points since the day it started and briefly tested the 1110 area, the same place where the market topped over the last six weeks of trading. A break above this zone can only come on strong momentum, something that might not come too easy, especially now, when the market is heading towards the Christmas and New Year Holidays.
S&P Technical View: TheLFB Member Charts
Daily chart trend: Long. Main price points: 1115-1130. Looking for: Top of a Long wave 5 or C
The price structure on the daily chart is showing two valid scenarios. On the left side of the chart, it 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 area is 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 and a large Short blue wave 5 will follow.
Overall, the price structure is signaling for an upcoming turning point (between 1115-1130) 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: Chattem and Alcoa were the stars of the day this Monday, driven by higher fundamental data. Chatten surged 32% throughout the session, being the third biggest gainer in the U.S. market, after AMCORE Financial and Athersys. However, the last two companies have a market cap of only $20 million, while Chatten has a capitalization of $1.33 billion, 40% less than the offer made by Sanofi-Aventis, of approximately $1.90 billion.
Alcoa gained 8%, the biggest gain in the Dow Jones and in the S&P 500 indexes after it surfaced that the company signed a $11 billion deal with the Saudi Arabian Government. Moreover, Alcoa was raised to “buy” by Morgan Stanley, which added further positive momentum.
In the NYSE, approximately 720 million shares changed hands with most of the volume being built on advancing shares. Approximately 2100 companies advance, while 900 declined.
Upcoming Economic Moves: Clear
Crude oil was recently trading at $72.60 per barrel, lower by $0.35.
Gold was recently trading down by $34.30 to $1,1101.90.
Treasuries declined as investors are moving funds towards the higher yielding markets. In particular, the yield on the 10-year notes rose 14.2 basis points, to 3.68%, the highest level since August.