Global Market Wrap: European Markets Extend The Selling

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Global Market Wrap:

European Markets Extend The Selling

Equity Futures: Dow -41.00. S&P -4.90. NASDAQ -6.50. Japanese Nikkei -40.00. German Dax -67.60.

Following the strong sell-off seen after the FOMC meeting in Wednesday trade, the European markets had already lost about 1% in futures valuations. The Asian equity markets closed lower, but the Japanese Nikkei managed to stay in the green, after being closed for the last three days of trading.

European Trade: European markets are down approximately 1% in early Thursday trade, extending the global sell-off that started shortly after the FOMC meeting. Interestingly enough, the global markets had a positive initial reaction to the FOMC statement, but then investors started a wide sell-off, which continued during the overnight session. 

For now, the developed markets, usually positioned in Central and Western Europe are leading the declines, but the emerging markets are following closely. This is rather strange, since the emerging markets are usually the ones that underperform the developed market in risk-aversion periods, due to their increased volatility. The German Dax has shed 65 points, or 1.20%, so far, while the Eastern European blue chip companies have fallen 0.70%. 

S&P Futures: There was a muted attempt to move higher during the early Asian session, but as soon as the futures index hit the 1060 area, the downtrend started once again, with the S&P futures falling as much as 10 points. For now, the S&P index is trading in the 1055 area, close to the 23.6% retracement of the uptrend that started at the beginning of September.

S&P Technical View: TheLFB Member Charts:

4 Hour chart trend: Short possibilities. Main price points: 1075.25. Looking for: Move lower

S&P futures reached new highs after the Fed decision on Wednesday, when the rates were unchanged. The market reached new high in our blue wave V of an extended red wave V perfectly, before the turning point appeared. The prices slid for 20 points in just an hour and a half from the 1075.25 highs, when the market also broken through the lower support line of a trading channel. This could be a temporary short signal with the following move down, towards 1025 zone, that may be reached over the next few trading days. If the wave count is correct then top of a huge black wave 5 or C, shown on the daily chart, is in place.

Sector Moves: The financial sector added strong downside pressure in the European indexes, especially in the U.K. FTSE, where Mr. King, the head of the BoE, said that two banks were within hours of collapse in October last year. Presumably, the two banks are Royal Bank of Scotland and HBOS. In German Dax trade, only three companies found the strength to trade in the green, but neither one advanced more than 1%. Moreover, the declines were led by the financial sector, with Commerzbank, Deutsche Bank and Allianz being today’s worst performers.

Economic Moves: The economic calendar was relatively empty in European trade, with only one red-flag report, the German IFO Business Climate. The report failed to reach the market’s expectations, although it was an improvement on the previous month the market had a poor reaction to the news report. Ahead, investors prepare for the U.S. Unemployment Claims and Existing Home Sales, scheduled at 08:30 EDT and 10:00 EDT respectively. 

Crude oil for October delivery was recently trading at $68.20 per barrel, down $0.70. Crude oil is trading slightly above the $67 level, which was the support area of the last few weeks of trading. A break below this level will shift crude oil’s outlook to the downside, forcing it to retrace some of the recent moves. 

Crude oil Technical View: TheLFB Member Charts:

4 Hour chart trend: Short. Main price points: 67.00, 69.00-69.50 and 73. Looking for: Move lower

On a four hour chart, we can see how powerfully the market has broken through the 69.00-69.50 support area, which was the key for a move down to recent lows around 67.50. The prices also broke through the black wave i low, which means that an extended black wave iii with a sub-wave ii) should be in progress now. If so, then we can expected much lower prices in the coming days and weeks, especially once the 67.00 red wave I) low is out.

This bearish wave count will be valid so long as the black wave ii and red wave II) highs at $73 per barrel can hold.

Gold for October delivery was recently trading lower by $3.60 to $1010.80. Gold traded in volatile fashion during the overnight session, but still it failed to move anywhere decisively. For now, the precious metal is still trading within the range of the prior day of trading.