November 2009

Oil, Metals Focus on Risk Trends, US Dollar into Week-End

Commodities – Energy

Oil May See Bounce with US Index Futures Higher as Prices Follow Risk Trends

Crude Oil (WTI)       $77.07       -$0.39       -0.50%
Crude has slipped below support at $78.13 as risk aversion returned across capital markets, with the door now open for a move towards downward-sloping support near the $75 mark. The economic and earnings calendars are bare, with the Baker Hughes measure of oil rigs operating in the US being the only item on the docket. The broad trajectory of risk appetite is the key going in to Friday trading, rising US index futures seem to point towards a bit of a bounce.

Commodities – Metals

Metals Focus on Risk Trends, US Dollar Outlook into Week-End

Gold       $1142.40        -$2.20       -0.19%
Technically, gold positioning in essentially unchanged from yesterday. Prices have come off from resistance at the top of a rising channel, with prices now inching lower towards initial support at $1132.10. A break below this juncture opens the door to test the channel bottom near $1125. Fundamentally, an empty economic docket points to the primacy of risk trends and their impact on the US Dollar as the key catalyst for prices in Friday trading.

Silver       $18.34       -$0.20       -1.07%
As with gold, silver is little changed from yesterday but recent highs are clearly divergent with momentum indicators, suggesting a bearish bias. Initial support lines up at $18.09. Fundamentally, broad risk trends dominate here as well.

Stocks Falter for Second Straight Day

U.S. Session Key Developments

•    U.S. Morning Data Falls Short of Expectations
•    Commodities Fall Despite OPEC Raising Growth Forecasts

US equities closed lower for a second consecutive day following worse-than-expected data and falling commodities prices.  The Labor Department announced today that the number of Americans filing claims for unemployment held at 505K last week and continuing claims fell to 5611K, higher than 5598 expected.  This data along with slightly worse-than-expected leading indicators was evidence of the sluggish nature of this U.S. economic recovery and raised concerns that equity prices have outpaced fundamentals.  Investors made a move into U.S. dollars and U.S. Treasury securities as evidenced by three-month Treasury bill yields turning negative for the first time since the market skittishness of 2008.  The Dollar Index recovered from its early-week drop below the 75 level to trade as high as 75.55.  The dollar strength was the main driver of commodity prices as crude oil traded down $2.12 (2.66 percent) to $77.46, its lowest level since last week.  The weakness in crude came despite the Organization for Economic Cooperation and Development (OPEC) doubling its growth forecast for the leading developed economies next year and a further acceleration for China’s recovery into 2011.  Altogether, equities across the globe fell today as the MSCI World Index dropped 1.7 percent but trading has been on very light volume throughout the entire week showing a lack of conviction in any stock market move right now.

DJIA 30                      10,332.44                   -93.87               -0.90%
The Dow fell nearly a full percent as the Basic Materials and Energy sectors gave back some of their gains from earlier in the week.  Alcoa Inc. declined nearly 4 percent as the prices of aluminum, copper, lead, nickel, and tin all retreated during the session.  Chevron dropped 2 percent and Exxon shed nearly a full percent as crude oil prices fell to their weekly lows.  The only Dow sector that gained was health care thanks to modest gains from Johnson & Johnson and Merck.

S&P 500                          1,094.90                   -14.90                 -1.34%
The broader S&P500 index closed lower for a second day as Bank of America Corp. downgraded chipmakers and lower commodity prices hurt stocks.  The BAC downgrade caused Intel Corp. and Texas Instruments to lose over 3 percent on the day.  Each S&P sector fell during trading today with energy stocks and Financials falling about 2 percent each.  Bank Analyst Merideth Whitney suggested that banks are still “grossly overvalued”, sending JPMorgan and Wells Fargo down 1.9 percent.

NASDAQ                         2,156.82                    -36.32             -1.66%
Trading in the tech-heavy NASDAQ led to the largest loss of the majors, while the index remains the most dominant since the start of the year with a gain of more than 39%.  The eighteen largest tech stocks on the index each fell including a 5 percent loss for Marvell and a 4 percent fall in Intel after chipmakers were downgraded.

Written by James Russell, CFDTrading Research
Please send any comments about this report to JRussell@fxcm.com

Oil Tumbles from its Prominent Technical Ceiling Despite an Upgrade to Growth

North American Commodity Update

Commodities – Energy

Oil Tumbles from its Prominent Technical Ceiling Despite an Upgrade to Growth

Crude Oil (WTI) -  $77.55  //  -$2.03 //  -2.55%

The sharper-than-expected drop in yesterday’s US Department of Energy inventory numbers clearly had a limited impact on expectations for working down bloated supplies. Not only would the data fail to drive oil much further than the session’s highs, but it would more critically fail to breach a descending trend channel that has survived at least five notable swings over the past month. Weighing traditional fundamental influences versus speculative trends; it is an easy conclusion that risk aversion was the primary driver for the commodity today. Gauging sentiment, the Dow Jones Industrial Average fell for the first time in five sessions while the 10-year Treasury note reversed its first decline in 10 days. The US dollar (the primary instrument for pricing crude) is perhaps the best barometer for both risk and the natural resource. The world’s most liquid currency advanced through today’s session but overall, the greenback is carving out a very clear congestion pattern near its lowest levels in 15 months.

If supply-and-demand fundamentals were in charge today, the day would have likely turned out much different. Top macro event risk through the morning was the Organization for Economic Co-operation and Development’s (OECD) forecast for growth. A significant upgrade to this past June’s 0.7 percent projection for expansion through 2010, the new outlook has an outlook for 1.9 percent growth. Naturally, the upgrade to activity would translate into a rise in energy demand. Other news events crossing the wires through the day however offset positive demand forecasts with bearish supply readings. Nigerian Oil Minister Rilwanu Lukman suggested OPEC members generally wanted higher quotas and December’s meeting would not likely end in any cuts to output. Adding weight to this measured outlook, Oil Movements reported tanker shipments from OPEC through the four weeks ending on December 5 would average 22.78 million barrels a day – generally in line with the recent average.

Commodities – Metals

Gold Retraces its Early Morning Losses as Demand and Sentiment Forecasts Tilt Higher

Spot Gold  -  $1,144.70  //  -$0.80  // – 0.07%

Gold spent most of Thursday’s session in the read; but a rebound that began in the US afternoon hours prevented the commodity from what was at one point the sharpest decline since October 26th. Like most of the other benchmarks for the various asset classes, gold was taking its cues from risk appetite. However, the commodity’s recovery would be much steeper than the dollar’s pull back over the same period. The additional strength for the metal likely came through fundamental influences. The World Gold Council’s third quarter report on global demand supports a healthy bid for the commodity in the months ahead. According to the report, total demand through the three-month period rose 15 percent from the second quarter to 800.3 tons. Of that interest, ETF-based interest actually contracted slightly; while consumer, industrial and jewelry demand all rose.  In other news, European central banks reportedly sold 1.5 tons which leaves the central bank with 398.5 tons available for sales according to a new accord that caps sales among the regional banks at $400 tons a year through September 2014. According to the WGC’s (who reported the sale) figures, sales through the year ending last September were its weakest at 155 tons since the agreement went into effect back in 1999.

Spot Silver  -  $18.50  //  -$0.07  //  -0.37%

Spot silver kept its close correlation to gold through Thursday’s session. A steady and aggressive decline through the Asian and European hours was almost completely retraced through the close of the US markets. Nonetheless, the slight decline for the day would be the first down day for the commodity in five. It is interesting however to note that volume on the active futures contract has held at the elevated levels seen over the past three days – an interesting outcome considering the market has ultimately progressed little over the period.  In other news, the iShares Silver Trust (the world’s largest), increase its holds by 67.23 tons to 9,021.21 tons.

Discuss gold and oil trading with other traders in the DailyFX Forum

Written by John Kicklighter, Strategist
Questions or Comments about this article? Send them to jkicklighter@dailyfx.com

Stocks in Asia/Pacific Mixed, Japan Finance Minister Fujii Curbs Speculation for BoJ Intervention

Asia Session Key Developments

• Japan’s Leading Index Rises For the Seventh Month
• Australian Wage Growth Slows in August

The Asian equities market were mixed on Thursday, with the Nikkei 225 trading lower for a second day as Japan’s Finance Minister, Hirohisa Fujii, said the government’s effort to stem the appreciation in the exchange rate could weigh on economic growth going forward. Meanwhile, the Japanese leading and coincident index rose to 86.4 and 92.7 successively in September to the seventh consecutive monthly advance, while nationwide department store sales slumped at an annual pace of 10.5% in October after contracting 7.8% in the previous month. Moreover, the economic docket showed Australia sold A$307 million in the spot foreign exchange market during October, while average weekly wages grew at an annualized pace of 5.2% in August after increasing 6.1% in the previous month.

Nikkei 225                          9,549.47

The Japanese equity market traded lower for a third successive day, with the Nikkei 225 sliding 127.33 points (1.32%) to end the trade at 9,549.47. Consumer services plunged 3.49% to lead the decline, followed by a 1.66% loss in consumer goods, while oil & gas climbed 0.23% to taper the decline. Shares of Mitsubishi Rayon surged 29.52% to mark the biggest rally since September 1974 on speculation Mitsubishi Chemicals may look to buyout the firm for approximately JPY 200B, while Mitsubishi UFJ Financial slipped 3.72% as the firm confirmed plans to sell securities to raise as much as JPY 1T. At the same time, Mitsui Chemicals plummeted 7.08% after Credit Suisse stated the government’s Tax Commission may remove naptha, a material for petrochemical products, from duty exemption, while NEC slumped 3.15% after the firm sold JPY 117.6B in new shares to repay debt and fund business operations.

Hang Seng                        22,643.16

Hong Kong shares closed lower on Thursday, leading the benchmark equity index to shed 191.17 points (0.86%) and end the trade at 22,643.16 as 6 of the 9 components declined on the day. Shares of Industrial & Commercial Bank of China slumped 2.42% as investors turned skeptical of China Minsheng Banking Corp’s HK$30 billion share sales, which was offered at 1.77 times its book value, while China Mobile, the world’s biggest phone carrier by market value gained 1.71% as the company seeks to boost business with an agreement to sell blackberry handsets in China. Meanwhile, China Petroleum & Chemical lost 0.73% as China Finance Information reported that China won’t raise natural gas prices this year, while China Resources Enterprise advanced 3.64% as the firm announced a 55% rise on third-quarter profits.

S&P/ASX 200 Index           4,749.20

Stocks in Australia climbed higher for a second straight day, leading the S&P/ASX 200 to advance 10.20 points (0.22%) and close at 4,749.20, with 3 of the 10 components gaining on the day. Shares of Newcrest Mining, Australia’s largest gold producer added 1.55% as gold prices advanced to a new record high in New York, while Aquarius Platinum surged 7.17% as the firm seeks early approval for Phase 2 of production at its Everest mine in South Africa. At the same time, Macarthur Coal shed 2.06% as RBC Capital downgraded the company’s stock from “sector perform” to “underperform,” with Paladin Energy tumbling 3.86% after RBS lowered its rating of the company from “buy” to “hold.”

Notable Asian Session Event Risk / Economic Releases

Oil and Metals Look to OECD Outlook, Geithner Testimony as Catalysts

Commodities – Energy

Oil Testing $80 Once Again, OECD Outlook and Geithner Testimony Key Ahead

Crude Oil (WTI)       $79.14       -$0.44       -0.55%
After what looked like a bearish breakout last week, crude is back in familiar territory below triple top resistance near the $80 level. Near-term support lines up at $78.13. On the fundamental side of things, the docket presents plenty of opportunities for volatility with release of the second installment of the bi-annual OECD global economic outlook is of interest, US jobless claims and leading indicators data, as well as testimony from US Treasury secretary Tim Geithner before a joint session of Congress.

Commodities – Metals

Gold, Silver Technical Positioning Points Lower, Geither Testimony in Focus

Gold       $1136.68       -$8.83       -0.77%
Gold has come off from resistance at the top of a rising channel, with prices now inching lower towards initial support at $1132.10. A break below this juncture opens the door to test the channel bottom near $1125. Fundamentally, Treasury secretary Tim Geithner’s testimony is likely the most important catalyst to watch, with gold prices driven largely by inflation expectations that are firmly rooted in US policymakers’ policies over the past year.

Silver       $18.26        -$0.30       -1.64%
After a bit of divergence last week, a catch-up rally as brought silver back in line with trends in its more expensive counterpart. That said, the most recent highs just below the $19.00 level are clearly divergent with momentum indicators, suggesting a move lower is likely. Initial support is seen at $18.08.

A Drop in Crude Inventories Pushes Oil to the Brink of a Breakout but Hesitation Persists

North American Commodity Update

Commodities – Energy

A Drop in Crude Inventories Pushes Oil to the Brink of a Breakout but Hesitation Persists

Crude Oil (WTI) -  $79.54  //  $0.40 //  0.51%

As expected, the steady build in inventories was temporarily halted last week owing to the disruption by Hurricane Ida (the first significant storm to pass through the Gulf of Mexico). However, it seems market participants were prepared for the bullish supply-side data because oil has so far been unable to capitalize on the announcement to catalyze a meaningful break from its month-long, descending congestion pattern. Top news this morning was the US Department of Energy’s stockpile figures for the week ending November 13th. The headline figures were exactly what bulls needed to mount an assault on the steady, falling trend that has developed since the late-October high. Expected to rise a modest 300,000 barrels following the previous week’s 1.762 million increase; crude inventories actually dropped 887,000 barrels. Gasoline stores dropped 1.755 million barrels against a forecast of a 25,000 decrease while distillate inventories fell less than expected by 328,000 barrels. Historically, these are relatively modest contractions and surprises; but the data’s impact was rendered even more impotent by yesterday’s API numbers. According to the industry group’s measurements, crude inventories plunged 4.37 million barrels. In fact, the typically less-market-moving report would further outshine its government counterpart by showing crude output levels at its highest levels in four years through October while gas deliveries (a sign of demand) fell for the first time since May. Consumption through the first 10 months is down 4.5 percent from the same period a year ago.

What will be the lasting effect of this week’s DoE and API reports? These two reports showed exactly what was expected considering imports through the Gulf of Mexico dropped 16 percent due to the storm. And, just as surely as inventories contracted in response to the weather, stockpiles will rebound as things return to normal. Demand is the primary concern at this point in the game as the world’s major energy producers have indicated that they were comfortable with current levels of output as they try to offset the drop in prices on revenue by bolstering output. Taking a look at speculative trends for the day, we could have seen a very different outcome if risk appetite had advanced with any significant momentum. However, both the Dow Jones Industrial Average and US dollar would carve a path for tepid risk aversion. Considering the 20-day moving average (approximately a month) for volume is near a record high – surpassing activity through the peak in 2008 – a trend revival or reversal will likely be a major event.

Commodities – Metals

Gold Hits another Record High above $1,150 before Risk Appetite Stalls

Spot Gold  -  $1,143.70  //  $2.40  //  0.21%

Volatility would ease slightly for gold Wednesday and the session would essentially lack a defined sense of direction; but momentum would nonetheless sweep the precious metal to a new record high on an intra-day basis and through the close. However, despite the relatively stable pace for the commodity, fundamental interest actually received a boost through the session. A report released by the World Gold Council said investment in gold-based ETFs rose 68 percent in the year through the end of the third quarter to $55.5 billion. This could still be a construed largely speculative interest that has already been over-extended. Yet, today hedge fund manager John Paulson announced he plans to launch a new gold fund on January 1st with $250 million – meaning there is still speculative interest to push the market even higher.  Besides its role as a speculative asset, the metals value as an inflation hedge was bolstered by an ongoing recovery in the US consumer-based inflation data. The annual pace is now showing a modest 0.2 percent contraction – a substantial improvement from the near, six-decade low set only this past July.

Spot Silver  -  $18.52  //  $0.10  //  0.53%

Silver, keeping with the strength of its more expensive counterpart, showed considerable resiliency Wednesday to the late-session pull-back in sentiment. The commodity rose to a high of $18.84 – its highest level since July 17th last year – before retracing nearly three-fourths of its gains to close the day. For specific asset demand, ETF Securities reported its silver holdings rose another 0.1 percent to a record 22.535 million ounces.

Written by John Kicklighter, Strategist
Questions or Comments about this article? Send them to jkicklighter@dailyfx.com

Stocks Close Lower Following Weak Morning Indicators

U.S. Session Key Developments

•    Asia/Europe Contributes to Risk Appetite
•    Commodities Higher as Dollar Falls

US equities closed lower today following weak indicators on housing and inflation. Early on, futures had pinpointed the major indices for further upside as stocks in Europe had traded higher, but this tilted quickly on event releases at 08:30 EST. Data on housing starts showed a significant fall in October as builders pared back expansion while expecting the new homebuyer tax credit to be concluded in November. Also released was the monthly consumer price index, which showed core prices rising faster than expected to 1.7% from 1.5% in September. Further upside will affect speculation on the Fed’s policy actions and may lead to a quicker-than-expected increase in the target for the Federal Funds rate. In other markets, commodities managed to sustain gains as weekly inventories of crude and gasoline declined. Meanwhile, the greenback recovered across most of its major crosses, losing out mainly to the Swiss Franc and Euro. Ultimately, despite a strong showing in the early part of the week, stocks have now treaded into dangerous territory with the early appearance of a possible top forming. The S&P500 best shows this as a candlestick chart of the index indicates a hanging man and doji in the past two trading sessions. At the same time, one shouldn’t look to this as a clear sign of downside ahead. Fundamental indicators have overall continued to improve, while corrections in equities have, since July, been notably short and brief as sidelined liquidity buys opportunistically into gaps built by selling pressure. Regarding the overall situation, movement in the dollar continues to play a major role in trading. So long as the Federal Reserve continues to maintain its dovish tone on monetary policy, despite purportedly claiming to favor a strong dollar, further weakness appears imminent for the greenback and consequently equity gains could continue into the year-end.

DJIA 30                      10,426.31                   -11.11               -0.11%
The Dow fell from a fresh high yesterday as the index closed within 0.04 points of its open. Despite this potential warning sign, the index has rallied sharply this week with gains already at more than 1.5% in the first three sessions of trading. Overall, more than half of the 30 stocks tracked closed higher along with five of nine sectors. Health Care and Financials rose the most, while Industrials saw a drop of 1.09%. Leading gains today was a 3.68% gain in Bank of America, following Moody’s credit-rating upgrades and a circulated report from hedge fund manager John Paulson, who bullishly expects the stock to double by the end of 2012.

S&P 500                    1,109.80                   -0.52                 -0.05%
The broader S&P500 index closed lower fractionally as a 0.84% rise in Financials helped pare losses in seven of ten sectors. Major movers included greater than ten percent upside in chipmaker AMD and financial services firm MBIA. Of the ten largest firms traded, seven closed higher while moves in all ten were of less than one percent in either direction. Caution seems to be seeping into markets following the rapidity of the recent advance off the early November bottom.

NASDAQ                         2,193.14                    -10.64             -0.48%
Trading in the tech-heavy NASDAQ led to the largest loss of the five majors, while the index remains the most dominant since the start of the year with a gain of more than 39%. All sectors fell with minor losses, with the exception of a 0.24% increase in Financials, while nearly 60% of stocks closed lower. Ultimately, activity in the ten largest firms led to only Microsoft trading higher, while telecom giants Vodafone and America Movil both fell more than two percent. While the tech sector’s weighting should keep the NASDAQ as a safer play given the strength in the balance sheets of firms such as Microsoft, the index’s overall outperformance comes priced with more speculation than its broader counterparts.

Written by Roman Kadinsky, CFDTrading Research
Please send any comments about this report to Rkadinsky@fxcm.com

European Markets Pare Gains Following Dismal US Data

Europe Session Key Developments

•    Indicators Largely Affect Market Move
•    Crude Rises Following Inventory Report

European stocks had traded stronger for much of the session prior to turning sour as US data came in on housing and inflation. The releases showed housing starts declined while consumer prices rose faster-than-expected, raising concern over the Fed’s next move. In Europe, indicators proved minor to trading as construction output for the Euro-Zone fell in September, while the Bank of England Minutes revealed discord between policy makers over quantitative easing measure while lowering the deposit rate was discussed. Also affecting trading today were commodities, which moved higher with crude at approximately $80 per barrel. Overall, most indices closed lower marginally while the Spanish IBEX35 climbed to a fresh high above 12,000. Ultimately, the atmosphere for stocks remains one of concern. Following the recent correction in equities, there has been a sharp rally with several indices tracking to new highs for the year. Dollar weakness and higher commodities have largely been a factor, while improving fundamentals in the third quarter have also played a considerable role. While expectations for the coming year continue to rise, it remains questionable whether the pace of growth will continue to improve or whether there will be short-term fallout in equity markets. A so-called “jobless” recovery appears to be in the process for many of the advanced economies and this could pose some stress on the financial sector, vital to lending and credit growth.

FTSE 100                      5,342.13                   -3.80               -0.07%
British stocks closed lower with a minor decline as nearly half of stocks fell on the session. The move marks the second day of declines, breaking a four-day winning streak that set a new high on Monday. Leading gains was a 2.22% rally in Basic Materials as commodity prices continued to rise, while all other sectors posted minimal swings, with the exception of a 2.47% fall in Telecom. Miners Fresnillo and Xstrata each climbed nearly five percent while Vodafone was the biggest drag on the index, down more than two percent.

CAC 40                     3,828.16                  -0.90                 -0.02%
French equities closed down with little change as approximately half of stocks fell along with five of ten sectors. Gaining the most were Financials, up 0.71%, while Consumer Goods declined nearly one percent. The index remains below its mid-October highs and has now trended lower for a second day. Since the start of the month, stocks had rallied more than seven percent, and a small correction or consolidation following such a large move is not unexpected.

DAX                         5,787.61                  +9.18              +0.16%
German stocks climbed more than a tenth of one percent to extend the monthly gain to 6.88%. The index has yet to hit a new high, similar to its French counterpart, but appears poised for further upside in the near-term as global trade, evident in the Baltic Dry Index, improves while demand from Asia appears strong. Individual sector moves included greater than one percent gains in Industrials and Utilities, while Basic Materials fell 1.44%. Engineering firm Siemens climbed the most at 2.39% while drug maker Bayer fell to a similar degree as a buyout rumor by IPIC was denied.

IBEX 35                     12,034.40                   +75.00                +0.63%
Spanish stocks diverged from the rest of Europe as more than three-fourths of stocks advanced along with all sectors, with the exception of Technology. Individual leaders included wind-turbine maker Gamesa and steelmaker ArcelorMittal as commodities climbed while overall market movers included Telefonica and Banco Santander. News in Spain today included finalized third-quarter GDP, which fell three-tenths of a percent. The economy remains a grim picture with unemployment in the third quarter at nearly 18%. Ultimately, many companies in the nation depend on a large portion of revenue from Latin America and South America and global growth will lead many emerging nations to outperform advanced economies.

FTSE MIB                        23,334.74                    -46.44                  -0.20%
Italian equities fell for a second session with the largest decline of the five majors. Ultimately the move remained minimal while the index may be seeing resistance at approximately 23,700. More than half of stocks gained on the day while UniCredit, Italy’s largest bank, fell the most at 2.59% following a revision to earnings forecast by Credit Suisse and comments by Moody’s that Austria and eastern Europe remain volatile. On the other end of the spectrum, Banca Popolare di Milano Scrl rose the most at 2.64% while construction firm Impregilo climbed 2.46% following the win of a highway contract.

Written by Roman Kadinsky, CFDTrading Research
Please send any comments about this report to Rkadinsky@fxcm.com

Stocks in Asia/Pacific Mixed, PBoC Advisor Fan Gang Holds Cautious Outlook for China

Asia Session Key Developments

• Japan Machine Tool Orders Falls for 17^th Straight Month
• Australia’s Wage Cost Grow At Slower Pace in Third Quarter
• Westpac Leading Index Improves in September

The Asian Market was mixed on Wednesday, with the Hang Seng trading lower for the second day as central bank advisor Fan Gang held a cautious outlook for China. Mr. Gang continued to see excessive speculation in China’s property market and said that double-digit growth would raise the risks for an asset-bubble within the region, and forecasts the economy to expand 8% to 9% in 2010 as he anticipants the government to maintain a moderately loose policy throughout the following. Meanwhile, Australia’s Westpac leading index increased 0.9% in September to mark the fourth rise in the last five-months, while wage cost in the region grew at a slower pace in the third quarter as the index expanded 0.7% after rising 0.8% during the previous three-month period.

Nikkei 225                          9,676.80

The Japanese equity market traded lower for a second consecutive day, with the Nikkei 225 shedding 53.13 points (0.55%) to end the trade at 9,676.80. Financials plummeted 2.77% to lead the decline followed by a 2.33% loss in oil & gas, while telecommunications rose 0.65% to taper the decline. Shares of Tokyu Land Corporation took a free fall of 10.70% on speculation the firm will look to replenish its capital holdings as Tokyo Tatemono Corporation announced it will sell new shares to fund property purchases and pay off loans, while Japan Airlines pushed 3.92% lower to its the lowest level since October 2002 as Transport Minister Seiji Maehara said there remains a risk for the firm to for bankruptcy. In addition, Softbank Corp shed 0.24% as the firm increased its stake in RockYou Inc. by $50M, while Mitsubishi UFJ Financial Group slipped 0.62% as the firm plans to sell securities to raise as much as JPY 1T.

Hang Seng                        22,840.33

Hong Kong shares closed lower on Wednesday for a second successive day after central bank adviser Fan Gang stated that the nation is among the emerging nation facing risks of market bubble, leading the benchmark equity index to fall 73.82 points (0.32%) and end the trade at 22,840.33 as 7 of the 9 components declined on the day. Shares of Hang Lung Properties dived 2.98% following the comments from Mr. Gang, while China Unicom Hong Kong, China’s official carrier for Apple’s iPhone climbed 1.90% as the CEO announced 3G revenue per user is trending up to more than 100 yuan ($14.65) per month. At the same time, China Petroleum & Chemical rose 1.47% on the back of higher commodity prices, while heavyweight China Mobile, the world’s biggest phone company by market value added 2.49% as Chairman Wang Jianzhou expects to have 3 million subscribers for its third-generation service by the end of the year from 1.66 million at the end of September.

S&P/ASX 200 Index           4,739.00

Stocks in Australia climbed higher on Wednesday, leading the S&P/ASX 200 to gain 9.60 points (0.20%) and close at 4,739.00, with 5 of the 10 components trading higher on the day. Shares of AWB shed 0.40% as the firm reported its first annual loss in nine-years, while Insurance Australia Group advanced 2.30% as the Australian Financial Review reported that QBE Insurance Group may offer a takeover bid for the firm. Moreover, Linc Energy surged 12.87% as the firm announced better-than-expected results for  its drilling site at Galilee, while Rio Tinto slipped 1.09% after JPMorgan Chase said the firm may look to get out of its joint venture with BHP Billiton as commodity prices push higher.

Notable Asian Session Event Risk / Economic Releases

S&P 500 Targeting Fibo Resistance at 1,120

As is often the case in Elliott, the picture is becoming much clearer as the rally has matured and nears its end.  The advance from the March low is a complex W-X-Y (a-b-c-x-a-b-c) rally.  Notice the broadening formation since August.  Broadening patterns almost always signal tops (called ending diagonals in Elliott terminology).  Levels to watch for resistance are 10365 and 10495 (100% extension).

The Dow broke above resistance at 10,326 the 50.0% Fibo retracement of the 14,198-6,469 decline, which leaves upside potential to 11,000. The next level of resistance is at 10,581-61.8% Fibo of 13,136-6,469.

The S&P is in a similar situation to the Dow.  The count from the March low is the same but the recent surge that propelled the Dow to a new high has yet to do the same for the S&P.  A broadening formation from the August low is evident here as well, which again does warn of a top.  A new high exposes 1110.30 (top of gap from October 2008 in December contract), then 1134 and 1159 (100% extension) in the index.

The S&P 500 broke above psychological resistance at 1,100 leaving 1,120- 50.0% Fibo of 1,576- 666 as the next barrier. We could see the broader index retrace after testing the monumental level with a retrace back to trendline support a possibility.

The NASDAQ pattern is the same as the S&P pattern in that the index has yet to make a new high.  The more volatile index also broke a support line and dropped below its October low (red line) – something that the other indexes failed to do.  Clearly, the technical situation for bulls is deteriorating.  A new high would expose 2341 (100% extension).

The NASDAQ continues to find resistance at former trendline support. Given the fact that the Dow and S&P 500 have pushed through their resistance levels we could see the tech laden look to test Fibo resistance ahead.  If weakness returns then look for a test of trendline support near 2,100.

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