June 2009
European Stocks Rally Higher on Positive Economic Data
June 24, 2009 at 12:24 pm by CFDTrading Analyst · Leave a Comment
Europe Session Key Developments
• Commodities Rebound From Recent Weakness
• OECD Report Raises Prospects for Year Ahead
European Markets started off the morning hovering above breakeven before jolting higher on positive economic releases and a report by the Organisation for Economic Co-operation and Development that lifted expectations for the future. The group revised its estimates for the current and following year for contraction in its thirty member group of 4.1% in 2009 and growth of 0.7% in the year ahead. Previously, the OECD had expected weakness of 4.3% in the current year and contraction of 0.1% in 2010. The revision comes primarily from the United States, as the world’s largest economy is now expected to post a 2.8% contraction this year versus a previous call of four percent. Also, growth is predicted in 2010 of 0.9% compared to an earlier estimate for no change. The picture for the Euro-zone is not as optimistic, with the OECD predicting a contraction of 4.8% this year followed by zero improvement in 2010. Regardless, investors reacted positively today as any improvement in the overall global picture may translate to growth in Europe. Indicators released today included Italian consumer confidence rising to the highest level in 18 months while the contraction in retail sales narrowed. Also seeing improvement was the Euro-zone current account deficit. Finally, US durable goods orders lifted equities into the close as investors grew optimistic that confidence would lead to stronger sales figures. Despite the upside, European markets are still more than five percent below their recent tops, with the exception of Spain which hovers approximately one percent below its recent peak.
FTSE 100 4,279.98 +49.96 +1.18%
The British market closed higher by more than one percent as basic materials rallied higher by 6.05% with financials trailing at a 2.09% gain. Nearly 70% of stocks on the 102 member index closed in positive territory while three sectors declined at less than one percent. Leading the advance was the mining sector, with Anglo-American up more than ten percent as commodities rebound and investors buy on the prospect that Xstrata or another firm will try to take over the company. Other raw material producers included Lonmin, Kazakhmys, Eurasian Natural and Rio Tinto also saw upside ranging of more than five percent. Financials leading gains included Barclays, up 4.54% as prospects for recovery in 2010 gained following the OECD report.
CAC 40 3,184.76 +67.94 +2.18%
The French index closed higher by more than two percent as all sectors closed higher with the exception of Health Care which fell 1.50%. Basic Materials led by 4.65% followed closely by more than three percent advances in Industrials and Financials. Leading the charge was ArcelorMittal, up nearly six percent, as commodities rebounded. Also moving higher by more than four percent were seven firms including BNP Paribas and Insurer Axa. Positive indicator releases along with the ECB loaning 442 billion euros to European banks has created positive momentum in financial companies.
DAX 4,836.01 +128.86 +2.74%
The German market moved higher by nearly three percent as Consumer Goods advanced more than five percent followed by greater than three percent swings in Financials and Technology sectors. Volkswagon rose the most at 11.71% on optimism its new campaign to sell diesel cars in the US will be successful. Also rising sharply was Deutschebank, up 6.60% following an upgrade to “hold” from “sell” over at Citigroup. Conglomerate ThyssenKrupp was third on the list of gainers today at 6.31% as the company reported yesterday it sees signs of stabilization.
IBEX 35 9,617.60 +268.90 +2.88%
Trading in the Spanish market led to a higher close of nearly three percent as the index remains closest of the five majors to its recent high. All stock rose with all advances in sectors ranging as high as 4.47% in Basic Materials to as low as 1.08% in Technology. Builder Ferrovial led the index higher with a 6.81% move followed by several companies up more than five percent including steelmaker ArcelorMittal and builder Sacyr Vallehermoso.
S&P/MIB 19,040.59 +576.53 +3.12%
Italian equities rose the most of the five majors as all sectors advanced with gains ranging as high as 7.02% in Basic Materials followed by greater than three percent moves in Financials, technology, and Oil & Gas. Insurance firm Mediolanum led the pace at 7.87% as Cheuvreux raised its estimate yesterday on the firms stock to 3.3 from 2.4 euros. Other companies rising significantly included steel pipe manufacturer Tenaris, up 7.02% and 5.94% in construction firm Saipem.
Written by Roman Kadinsky, CFDTrading Research
Please send any comments about this report to Rkadinsky@fxcm.com
NASDAQ Vulnerable To Extended Losses As Key Support Level Broken
June 24, 2009 at 9:35 am by John Rivera · Leave a Comment
Last Thursday’s special report called the top in stocks. After an exceptional rally in the second quarter, the Dow declined impulsively from 8878 to 8461. A small correction ended at 8617 and the decline should accelerate from here. Staying below 8617 keeps the short term trend pointed lower.
The Dow slid closer to support at 8,250, where we may see some consolidation and a small retrace before a stronger leg lower as the broader index looks to form a head & shoulder’s pattern.
The S&P count is the same as the Dow count. The index declined impulsively from 956 to 904. A small correction ended at 927 and the S&P should continue lower while remaining below there.
The S&P 500 traded back up to the 200-Day SMA at 895 but may still look to test support at 880. We could se the broader index fall to as low as 826 April 21st low with a break below.
The Nasdaq is in the same position as the other US indexes. The index should remain below 1838 on its way to a new multi year low.
The Nasdaq fell below support at 1,800 strengthening our case that we may see a test of 1,665. There may be intermittent support at psychological levels of 1,750 and 1,700 before hand.
FOMC Rate Decision, Bernanke Comments Will Dictate Sentiment For Traders
June 24, 2009 at 7:56 am by John Rivera · Leave a Comment
What To Watch For In The US Session
• FOMC Rate Decision Looms
• Weaker Durable Goods Could Weigh on Sentiment
• OECD Raises Forecast on U.S. Recovery
FOMC Rate Decision, Bernanke Comments Will Dictate Sentiment For Traders
The Organization for Economic Cooperation and Development raised its forecast for the economy of its 30 member nations for the first time in two years to -4.1% from -4.3% in 2009 as the U.S. slump shows signs of easing. The improving outlook for the U.S. and China helped offset downgrades in the Euro-Zone and U.K. Meanwhile, U.S. futures are trading higher with the Dow up 35 points, but that could change with the upcoming Durable Goods Orders report forecasted to show a 0.9% decline in May. The weak demand for long lasting items is a sign that consumers and businesses remain tepid despite signs of a recovery. The biggest obstacle for a rebound in growth may be the psychological impact on businesses and consumers as they may remain tepid for sometime. Therefore, considering that prospect we could see dovish comments from Fed Chairman Bernanke after today’s policy decision. The FOMC is expected to keep the Feds Fund rate at 0%-0.25% as downside risks remain for the economy. A dour outlook from the central bank could spark risk aversion and send markets lower. Conversely, there are enough signs that a recovery is imminent with the rate of job losses slowing to 345K from 504K and improvements in manufacturing and housing. Thus, an upbeat Bernanke could raise optimism and lead to bullish sentiment.
Dow Jones 8322.91
The DJIA futures are pointing toward a higher open as the outlook for the global economy improves. However, weak durable goods and a downbeat FOMC could sink the blue chip index.
NASDAQ 1764.92
The Nasdaq index could also trade higher on the improved outlook and an Oracle’s earnings report that show the tech giant beating profits and sales expectations.
S&P 500 895.10
The S&P 500 was the only major index positive yesterday and if we see weak durable goods orders and new home sales then the broader index could be led lower.
European Stocks Consolidate After Bearish Breakout
June 24, 2009 at 1:07 am by Ilya Spivak · Leave a Comment
FTSE 100
Long-Term Technical Outlook
The FTSE is at risk of at least a pullback if not an outright reversal as daily RSI has rolled over from overbought territory. At best for bulls, the FTSE decline will be a B wave. At worst, the drop will be the next leg of the longer term bear. The rally from the low is not clearly impulsive, so the latter certainly is possible.
Short-Term Technical Outlook
The FTSE has broken below support at 4270.63, the 23.6% Fibonacci retracement level. The UK benchmark index now targets the intersection of the 50% Fib and the 100-day moving average.
DAX
Long-Term Technical Outlook
The DAX pattern is the same as that of the FTSE 100. The rally does look more like an impulse (5 waves) though, so the decline underway may be a B wave.
Short-Term Technical Outlook
German shares have surpassed support at 48066, the 23.6% Fibonacci retracement level. From here, prices target the 38.2% Fib at 45759.
CAC 40
Long-Term Technical Outlook
The decline from the 2007 high in the CAC 40 is in 5 waves and either wave 1 or 5 is extended. It seems more probably that wave 5 is the extended wave because if wave 1 were extended then wave 2 would be uncommonly small. Either way, the index is most likely headed higher over the next several months but not before a sizeable correction of the gains from March.
Short-Term Technical Outlook
The French benchmark index looks to have broken below resistance-turned-support at 313490. Bearish momentum now looks to extend to test the 100-day moving average at 301610.
IBEX 35
Long-Term Technical Outlook
Same story with the IBEX 35. The rally from the low (6703) is corrective but is probably just the first leg of a larger correction. The next several months should lead to a choppy B wave decline.
Short-Term Technical Outlook
The IBEX 35 reversed sharply lower on a re-test of broken support at the bottom of a rising channel. The bears now look to overcome the 14.6% Fibonacci retracement to expose the 23.6% level at 90279.
S&P/MIB
Long-Term Technical Outlook
The FTSE MIB (Milan) index took the same structure as the CAC 40 on the way down from its 2007 high. The 200 day SMA has held as resistance and the index is headed lower in what is probable a B wave.
Short-Term Technical Outlook
Italian shares gapped below support at 18726.68, the 23.6% Fibonacci retracement level. From here the MIB targets the 38.2% Fib at 17504.66.
Dow Stocks Post Three-Day Losing Streak
June 23, 2009 at 8:36 pm by CFDTrading Analyst · Leave a Comment
US Session Key Developments
- Existing Home Sales Jump Ahead
- Banks Soar Sending Morgan Stanley Up 4.02%
Stocks Break Losing Streak, Gaining Modest Amount
Dow stocks sold off for a third straight day with the S&P 500 actually rising. Financials performed strongly after Existing Home Sales beat expectations of only a 2.4% increase in May by actually rising 3.0%. The move up adds to April’s gain which followed heavy sales losses. Home data may have sent a signal to the market that banks are actually more financial sound than had been originally anticipated as the threat of mortgage related losses may have been somewhat mitigated. Morgan Stanley surged ahead 4.02% with Bank of America leaping 2.43%.
Dow 30 8322.91 -16.10 -0.19%
Dow stocks finished the day slightly down after a mixed day saw Telecom gains paired with losses in Industrial stocks. Indeed the latter fell after Boeing fell over 6.0% on news that would be delaying the first flight of its highly anticipated 787 Dreamliner.
SPX 500 895.10 +2.06 +0.23%
S&P stocks managed to just slightly inch its way into the green after a rollercoaster day posed the threat of losses. Financials and Basic Materials kept the index afloat after home data sent a signal to the market that banks may be more stable than originally thought.
NAS 100 1764.92 -1.27 -.07%
Tech stocks, which make up about half of the NASDAQ, shed 0.11% from its equity values with Basic Materials risign 1.68% with the former being brought down by Apple’s disappointed performance today.
Commodities Daily Fundamentals: Commmodities Rebound On Dollar Weakness
June 23, 2009 at 4:27 pm by CFDTrading Analyst · Leave a Comment
Commodities – Energy
Crude Prices Fall As Expectations For Lower Demand Weighs On Prices
Crude Oil (WTI) $69.210 +$1.710 +2.53%
Crude prices rebounded as the dollar sold off sharply for the day, While there are numerous fundamental reasons for crude prices to continue to decline, countervailing factors that will offset such these pressures. Downward pressure will come from stockpiles near decade highs, lower crude demand, and OPEC countries. On the other hand, dollar weakness, a resurgence in growth in some parts of the world, and political turmoil in major oil producer countries will push up prices. Dollar declines are the largest provider of support for prices at current levels. While the dollar has rebounded a few times in past few sessions, it will likely remain at lower parity to its counterparts for some time. Record government deficits that many point to as primary reason for the selloffs will be very difficult to unwind without adverse effects on an already weakened economy. Meanwhile mounting violence and protests in countries like Iran threaten to disrupt supply chains. While these disruptions would more than likely be offset by the large amount of stockpiles on hand, turmoil will still push crude prices slightly higher. In turn, the push and pull between these factors will likely drive crude prices to range between major resistance levels of $65 and $73 a barrel for the near-term.
Commodities – Metals
Safe-haven Metals Continue Declines On Dollar Strength, Muted Inflation
Gold $926.800 +$5.800 +0.63%
Gold prices gained modestly for the session as the US dollar fell against its majors. While gold prices have fallen substantially for the past few weeks, fundamentals continue to point to gains. Inflationary pressures, though currently subdued, will likely emerge once a recovery takes hold. Meanwhile record deficits juggled during a continued recession will likely keep the US dollar subdued against its counter-parts for some time. Both of these factors stand in favor of higher gold prices. Expect gains for the near to medium term.
Silver $13.8800 +$0.1270 +0.92%
Silver prices followed suit with gold. Prices gains will likely slow if expectations for further economic contraction comes to fruition. The metal has rallied considerably since the start of 2009 largely on expectations for a recovery and if that recovery is delayed the metal could lose some of those gains. Nevertheless, safe-haven gains will still boost prices somewhat. Expect modest gains for the near-term.
-Written by Stefan Tifigiu, CFDTrading Research
Questions/Comments about this article? Send them to Stifigiu@fxcm.com
European Daily Fundamentals: Markets Flat After Sentiment From US Session Weighs On Equities
June 23, 2009 at 2:29 pm by CFDTrading Analyst · Leave a Comment
Europe Session Key Developments
- European Shares Decline Toward End Of Session Despite Modestly Better PMI Release
- Prospect For Near-term Recovery Remains Dim In US And Other Trading Partners
- ECB officials Reiterate Expectations for Weakness to Continue Well Into 2010
European shares reversed gains in late trading as negative sentiment from the US pulled spilled into the markets. While equities gained initially due to a slightly more positive Euro-zone Purchasing Managers Index, they were unable to withstand the general trend of sentiment. While slightly better, the data was little evidence of a near-term recovery. In fact, there is evidence of risks that could lead to further contraction. Financials for example remain exposed to a plethora of securities that present greater probability of losses during an extended recession. While credit spreads have improved somewhat, If losses balloon again they will deteriorate again and cut off the lifeblood for recovering businesses. Meanwhile employment issues vary wildly for country to country in the Euro-zone as some countries have heavily regulated labor markets. What this could mean is that jobs already lost are likely the ones with least protection. On the other hand, jobs with greater protection will keep wages high and make it harder for employers to expand positions in larger numbers. As new job creation lags, this will weigh on consumer spending and place further pressure on the European economy. Meanwhile, export demand will continue to decline as major trade partners continue to struggle with their own recessions. So far, evidence lays more in favor of extended weakness to last well into 2010. Equities are more and more exhibiting signs of returning to bearish sentiment. Given conditions, equities will likely decline for the medium-term.
FTSE 100 4230.02 -4.03 -0.10%
UK Equities closed lower for the day with weakness in a number of sectors. Financials declined 1.09% as investors worries resurface on earning potential for the second quarter. Given continued global contraction, UK banks may be exposed to further losses, both domestically and internationally. The outlook for this sector remains weak. Utilities and Basic Materials also declined 0.76% and 0.43% respectively impacted by revised expectations for lower demand for energy and materials use. Since the index is up considerably in the quarter compared to the other indexes, it may be due for a sharper pullback if bearish sentiment indeed takes hold.
CAC40 3116.82 -6.43 -0.21%
The French index declined as well with technology and financial stocks selling off the most, falling 1.67%, and 1.47% respectively. Consumer Services gained 1.24% and offset some of the declines. Technology is typically one of the hardest hit sectors during a downturn as consumers fear losing their jobs and curtail spending. Weakness in this sector will likely continue if contraction in the economy extends into 2010. French financials are likely to continue to decline as their interconnected nature with other countries combined with domestic exposures will weigh in on earnings.
DAX 4707.15 +13.75 +0.29%
The German index was one of two to gain modestly for the day. Consumer Goods gained 2.16%and Utilities gained 1.48%, offsetting declines in the Industrials and Technology sectors, which declined nearly 1.0%. The rebound in consumer goods is likely to be temporary. A rising Euro will boost domestic demand but demand for exports will likely decline for the same reason. Meanwhile, the German IFO institute expects contraction to continue for the economy. Since a large portion of the economy is centered around producing exports, this does not bode well for most of the gaining sectors of the day. German financials are heavily exposed to international exposures, especially in Eastern Europe. Given the extended nature of global contraction, this could weigh heavily on results for the quarter.
IBEX35 9348.70 +10.20 +0.11%
The Spanish Index was the second to gain modestly for the day. Weakness was seen in most sectors including basic materials, financials and consumer services, which declined 1.06%, 1.04%, and 0.57% respectively. These declines fall in line with expectations for further contraction but gains of 1.83% in Utilities and 1.07% in telecoms buoyed the index. Since Telefonica makes up such a large portion of the economy, eyes will be on how the firm performs in the coming months as a sign of an increase in consumer activity. Given Spain’s rigid labor market rules however, lost jobs may rebuild slowly and hamper spending on such goods and services.
FTSE MIB 18464.06 -77.24 -0.42%
The Italian Index declined the most of the indexes, pushed down by a sharp 4.57% decline in technology stocks and a 1.77% decline in the Oil&Gas sector. Strength was seen in the Consumer Goods sector however, which helped offset some of the declines. Italy remains one of the more hard-hit members of the Euro-zone following the crisis. Unemployment remains high and wages will likely stagnate for some time. In this regard, gains will likely reverse in the near-term.
-Written by Stefan Tifigiu, CFDTrading Research
Please send any comments about this report to Stifigiu@fxcm.com
Dow Losses May Continue After Brief Consolidation As H&S Forms
June 23, 2009 at 8:53 am by John Rivera · Leave a Comment
Last Thursday’s special report called the top in stocks. After an exceptional rally in the second quarter, the Dow declined impulsively from 8878 to 8461. A small correction ended at 8617 and the decline should accelerate from here. Staying below 8617 keeps the short term trend pointed lower.
The Dow bulls finally gave up sending the broader index toward a test of support at 8,250. We may see some consolidation there with a small retrace before a stronger leg lower as the broader index looks to form a head & shoulder’s pattern.
The S&P count is the same as the Dow count. The index declined impulsively from 956 to 904. A small correction ended at 927 and the S&P should continue lower while remaining below there.
The S&P 500 broke below the 200-Day SMA at 896 and is now looking to test support at 880. We could se the broader index fall to as low as 826 April 21st low with a break below.
The Nasdaq is in the same position as the other US indexes. The index should remain below 1838 on its way to a new multi year low.
The Nasdaq fell below support at 1,800 strengthening our case that we may see a test of 1,665. There may be intermittent support at psychological levels of 1,750 and 1,700 before hand.
Improvement in Existing Home Sales Could Help Reverse Stock Losses
June 23, 2009 at 7:49 am by John Rivera · Leave a Comment
What To Watch For In The US Session
• Risk Appetite Rebounds Overnight
• FOMC Starts Policy Meeting
• Existing Home Sales and Richmond Fed On Tap
Improvement in Existing Home Sales Could Help Reverse Stock Losses
The U.S. May existing home sales report is scheduled for release and is forecasted to show and improvement to 4.82 from 4.68 million. A positive print could provide support for equities as a rebound in housing is critical for an economic recovery. Futures are already pointing toward a higher open as global markets saw a reversal in risk sentiment overnight with European markets erasing losses of as much as 4%. The FOMC will start their two day policy meeting where they will discuss the possibility of extending their asset purchase program which stands at $300 billion. Despite expectations that they will keep the benchmark rate near zero, traders will be looking for any signs of when they may begin tightening. Meanwhile, the Richmond Fed manufacturing release is expected to show a positive reading fro a consecutive month which will also provide optimism that a recovery is underway. The Redbook department and chain store sales report is due and will provide evidence of whether improving confidence is translating into stronger consumer demand.
Dow Jones 8339.01
The DJIA futures are pointing toward a higher open as improvements in manufacturing and sentiment in Europe and higher stock markets in China and Europe are leading to a brighter outlook for the global picture.
NASDAQ 1766.19
The Nasdaq index could benefit from a brief return of risk appetite as tech stocks remain the favorite especially with the lingering uncertainty of a U.S. recovery.
S&P 500 893.04
The S&P 500 has turned negative for the year with yesterday’s sell off and that could inspire some bulls to jump back. Improvement in housing and manufacturing should add support but will it be enough to prevent a turn lower by the end of the day.
European Stocks to Extend Losses as Support Disintegrates
June 23, 2009 at 12:28 am by Ilya Spivak · Leave a Comment
FTSE 100
Long-Term Technical Outlook
The FTSE is at risk of at least a pullback if not an outright reversal as daily RSI has rolled over from overbought territory. The rally from 3461 is likely to extend much higher over the summer months. But, will the advance carry more or less in a straight shot from current levels or will a pullback occur before the next advance? Remaining above 4295 keeps the FTSE 100 on a path towards 5106-5495 (50% and 61.8% of previous decline). A drop below 4295 would lead to a deeper decline in what is probably a B wave.
Short-Term Technical Outlook
The FTSE has broken below support at 4270.63, the 23.6% Fibonacci retracement level. The UK benchmark index now targets the intersection of the 50% Fib and the 100-day moving average.
DAX
Long-Term Technical Outlook
The DAX pattern is the same as that of the FTSE 100. Staying above 4653 keeps the index headed higher towards 5870-6409. These levels are defined by the 50% and 61.8% retracements of the decline from the 2007 high. The 100% extension of the first leg of the advance (wave A, from 3589-4980) is in this zone at 6045.
Short-Term Technical Outlook
German shares have surpassed support at 48066, the 23.6% Fibonacci retracement level. From here, prices target the 38.2% Fib at 45759.
CAC 40
Long-Term Technical Outlook
The decline from the 2007 high in the CAC 40 is in 5 waves and either wave 1 or 5 is extended. It seems more probably that wave 5 is the extended wave because if wave 1 were extended then wave 2 would be uncommonly small. Either way, the index is most likely headed significantly higher over the next several months. The target zone is the former 4th wave, which is 441-5142. The 61.8% is in the middle of this zone at 4754. Near term, staying above 3115 keeps the trend pointed up. Coming under there would lead to a deeper decline in what is probably a B wave.
Short-Term Technical Outlook
The French benchmark index looks to have broken below resistance-turned-support at 313490. Bearish momentum now looks to extend to test the 100-day moving average at 301610.
IBEX 35
Long-Term Technical Outlook
Same story with the IBEX 35. The rally from the low (6703) is corrective but has more room to run. Staying above 8829 keeps wave C headed higher towards 1137-1247. This zone is defined by the 50%-61.8% retracements of the decline from the 2007 high. Wave C would equal wave A near the lower end of this zone at 1159.
Short-Term Technical Outlook
The IBEX 35 reversed sharply lower on a re-test of broken support at the bottom of a rising channel. The bears now look to overcome the 14.6% Fibonacci retracement to expose the 23.6% level at 90279.
S&P/MIB
Long-Term Technical Outlook
The FTSE MIB (Milan) index took the same structure as the CAC 40 on the way down from its 2007 high. The index is currently testing the 200 day SMA, which should give way as the target zone for the index is not until 30062-34711 (former 4th wave….wave 5 is extended). Remaining above 18752 keeps the trend pointed higher. Coming below there would lead to a deeper decline (next support would be 17133) before the next leg up.
Short-Term Technical Outlook
Italian shares gapped below support at 18726.68, the 23.6% Fibonacci retracement level. From here the MIB targets the 38.2% Fib at 17504.66.
