Equities

Dividends Can Help Investors Navigate Volatile Markets Ahead

Equities

U.S. Equities Gain For Third Consecutive Session

U.S. Session Key Developments

•    Sovereign Debt Concerns Ease as Greece Prepares For More Deficit Cuts
•    February Vehicle Sales Announced After Market Close, Fall Short of Expectations
•    Commodities Trade Higher as Greenback Generally Weaker

U.S. stocks gained for a third consecutive day, following a strong session in Europe, as investor concerns regarding a Greece debt default continued to ease.  The broad-based S&P 500 rose 2 points to 1118, the highest close for the index since January 20.  The gains in U.S. stocks were a continuation of the European session today, in which the FTSE, CAC, and DAX each gained over 1 percent.  Sovereign debt concerns in the region eased for a second day, as yields on 10-year Greek bonds fell 10 basis points to 6.14 percent.  Leaders of the Greek government plan to announce additional cuts of $6.5 billion tomorrow to help reign in the country’s massive debt-to-GDP ratio that currently sits at three times the acceptable European Union level.  The news fueled speculation that other EU nations would provide aid to Greece and boosted risk appetite across the globe.  The positive momentum wore off by the end of the U.S. session, however, as the Dow Jones Industrial Average dipped into the red during the last hour of trading before closing slightly above even.  There was no economic data today to drive market sentiment as the only data release took place an hour after U.S. markets closed.  The data showed that domestic vehicle sales were slightly lower than expected in February and that ABC consumer confidence ticked slightly higher last week.

On the commodities front, crude oil had a strong showing and rallied over 1 percent to $79.68 a barrel.  Precious metals had an even better day as gold futures posted their largest gain in two weeks to $1137 and silver futures rose 3 percent to $17.06.  Rising metal prices coincided with a relatively weak dollar, as the U.S. Dollar Index fell for the fourth time in five days.  The greenback still managed to gain against the British Pound, however, driving cable lower for a sixth consecutive session.  Looking ahead, the ISM Non-Manufacturing Composite report and ADP employment report will be released tomorrow morning, while the Fed will release its Beige Book in the latter half of the trading day.

DJIA 30                     10,405.98                      +2.19                       +0.02%
The Dow Jones Industrial Average closed slightly higher today, led by a near half-percent gain for industrials and oil & gas stocks.  Chevron led commodity stocks with a 0.7 percent gain due to rising oil prices, while Boeing and 3M gained 0.6 percent each to lead industrials.  Disney was the best overall performer on the Dow today, adding over 1 percent as fans await the opening of Alice in Wonderland in theaters on March 5.  The main laggards of the index today were Microsoft and Bank of America, which dropped 1.9 percent and 1.5 percent respectively.  The U.S. Treasury announced yesterday its intentions to auction off $272 million warrants to buy stock in BofA.

S&P 500                       1,118.31                        +2.60                         +0.23%
The broad-based S&P 500 rose to its highest level since January as rising commodity prices helped boost basic materials and energy shares.  Massey Energy led basic materials shares with a 4 percent gain, followed by Consol Energy and Newmont Mining which added nearly 3 percent each.  The coal sector posted strong gains today amid speculation that Massey will acquire Patriot Coal Corp., the fourth-largest U.S. coal producer.  Tesoro Corp. posted a 5 percent gain to lead a strong showing for energy stocks.  Financial shares added to the bullish momentum after bank analyst Dick Bove said that bank earnings over the next few years “will soar.”

NASDAQ                     2,280.79                       +7.22                       +0.32%
The tech-heavy Nasdaq was the best performer among major U.S. indices although technology stocks posted a minimal gain.  Qualcomm led the heaviest-weighted fifteen tech stocks on the index, gaining 6.6 percent after the chip maker boosted its dividend by 12 percent and announced a $3 billion stock buyback program.  Internet search giant Google rose over 1.5 percent on news that the company agreed to purchase online photography site Picnik.

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

Equities

U.S. Equities Rally For Third Day, Fed Tightens After Hours

U.S. Session Key Developments

•    Fed Unexpectedly Raises Discount Rate By 0.25 Percent After Hours
•    Commodities Advance During Market Hours, Fall After Hours on Fed Hiked
•    Philadelphia Fed Index Higher For Sixth Month, Leading Indicators Rise Slightly

U.S. stocks rallied for a third day, capping the biggest three-day rally since November for the Dow Jones Industrial Average and S&P 500.  The news of today’s trading was quickly overshadowed thirty minutes after close, however, when the Federal Reserve unexpectedly raised the discount rate by a quarter point to 0.75 percent.  During trading hours, the market moved steadily higher as investors were encouraged by further strength in commodity producing firms and generally positive economic data.  The economic docket provided an upbeat outlook for market participants as the  Philadelphia Fed beat expectations and rose for a sixth consecutive month to 17.6, while leading indicators gained for a tenth straight month.  Stocks and commodities rallied in tandem, as crude oil traded above $79 a barrel and gold held above $1120 during the session.  Commodities moved sharply lower after hours, however, as the Fed unexpectedly announced a quarter point rise in the discount rate- the rate charged to banks for direct loans from the central bank.  The rate had previously been held at 0.50 percent since 2008 as Fed policy makers maintained a dovish stance amidst the worst financial crisis since the Great Depression.  In their statement today, the central bank said that “these changes are intended as a further normalization of the Federal Reserve’s lending facilities.”  The policy statement went on further to state that the modification does not signal a change in the outlook for the economy or monetary policy, although some market participants appear to disagree.  The dollar rose nearly a full percent to $1.3510 per euro following the announcement, and gold futures sold off from their $1118-$1125 intraday range back to the $1100 level.

DJIA 30                     10,392.90                      +83.66                       +0.81%
The Dow Jones Industrial Average posted the largest gain among major U.S. equity indices, led by a 1 percent gain in financial and industrial shares.  Insurance company Travelers was the best performer on the index, adding 1.9 percent, followed by Boeing, whose shares rose 1.7 percent.  Furthering gains among financial shares were Bank of America and JPMorgan Chase, whose shares gained 1 percent each.  Procter and Gamble also traded higher, adding nearly 1 percent, after company executives reiterated its strong earnings expectations for 2010.  Walmart was the biggest laggard of the 30 Dow stocks, dropping over 1 percent after sales by U.S. stores fell 1.6 percent, worse than the company’s projection of 2 percent.  The company’s fourth quarter profit actually beat estimates, although revenues fell short of analyst expectations.

S&P 500                     1,106.75                         +7.24                         +0.66%
The broad-based S&P posted its third consecutive gain led by basic materials and industrials.  Precious metals continued their climb during the regular trading hours, pushing Newmont Mining and Freeport McMoRan higher by at least 2 percent each.  Priceline.com rose the most on the index, gaining nearly 10 percent after announcing that forecast first-quarter profit is significantly higher than analyst estimates.  Hewlett-Packard, the world’s largest personal-computer maker, rallied over 1 percent after the company posted a 25% profit jump from one year ago.

NASDAQ                     2,241.71                         +15.42                         +0.69%
The tech-heavy Nasdaq rallied for a fifth consecutive session as technology stocks gained over 0.8 percent on the day.  The fifteen largest technology companies on the Nasdaq closed higher today, with the exception of Teva Pharmaceutical.  The top performing large tech company was DirecTV, whose shares gained over 4 percent on the session.  DirecTV added customers in the fourth quarter last year despite a rise in monthly bills for customers.

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

Equities

European Equities Post Biggest Gain in Six Weeks

Europe Session Key Developments

•    Greek Bond Yields Dip Slightly After Greek Official Says Bailout Unnecessary
•    Crude Oil Posts Sixth Gain in Seven Days, Precious Metals Decline
•    Euro Resumes Bearish Trend Versus Greenback

Stocks in Europe posted their biggest gain in six weeks on renewed optimism over the Greece debt situation and better-than-expected economic data out of the U.S.  The DJ Stoxx 600 Index, a broad measure of European equities, posted its seventh gain in the past eight days.  Investors seemed cautiously optimistic that the debt problems in Greece would not threaten euro area stability after Greek Finance Minister George Papaconstantinou said yesterday that his country had “no actual need for” a bailout and was ahead of its deficit-reduction targets.  The 10-year yield on Greek bonds fell 2 basis points to 6.37 percent, reducing the excess risk premium required over equivalent German bonds by 1 basis point.  Overall, the yield on Greek bonds has increased 184 basis points this year on concern that the country would struggle to reduce the largest fiscal deficit in the euro zone.  As for the economic docket, the only major event out of Europe was U.K. unemployment, which investors managed to shrug off.  Instead, markets keyed on positive economic releases from the U.S. which showed that industrial production rose 09 percent in January and building permits beat expectations during the month.  Overall, European stocks remain 4.8 percent below this year’s high on January 19, but sentiment has clearly improved over the last week.

FTSE 100                         5276.64                     +32.58                     +0.62%
British stocks posted the smallest gain among major European indices after U.K. unemployment claims unexpectedly rose in December to the highest level since 1997.  The ILO unemployment rate for the last three months of 2009 held at 7.8 percent, as expected.  Despite the disappointing news, shares on the FTSE rallied for a third consecutive day and nine stocks gained for each that fell on the index.  Barclays gained 2.9 percent to lead banking shares higher, a day after announcing earnings that soundly beat analyst expectations.  RBS raised its recommendation on the company’s shares from “hold” to “buy” and Bank of America Merrill Lynch raised its price target.  RBS and Lloyds Banking Group gained 3.2 percent and 1.9 percent respectively, on anticipation of their earnings reports due out next week.  Further driving the FTSE today was Man Group, the largest publicly traded hedge fund, which added 5 percent on the day.  Some investors have speculated that the firm may receive a takeover bid from asset manager BlackRock.

CAC 40                             3725.21                     +56.17                     +1.53%
The French index added at least 50 points for a second consecutive session today, led by strength in financials, industrials, and technology shares.  Aerospace and defense leaders EADS was the biggest individual gainer on the index, adding 4.9 percent on news that the company’s seven government clients will pay additional costs for the A400M military plane.  Accor posted the second-largest gain, adding 4.2 percent on news that the hotel operator would increase its operable capacity by over 45 percent.  BNP Paribas, France’s largest bank, led financial shares higher after recording its fourth consecutive quarterly profit.  The bank’s shares rallied 3.9 percent after the company reported 1.37 billion euros of fourth quarter net income, above the 1.06 billion estimate of bank analysts.

DAX                                   5648.34                        +56.22                     +1.01%
The German index rallied for a third consecutive session as financials and industrials gained at least 1.4 percent each.  Deutsche Boerse, Europe’s largest exchange by market value, gained 3.7 percent to lead financials higher after the company announced a significantly smaller fourth quarter loss than analysts expected.  Deutsche Bank followed suit, adding 2.1 percent to its highest close in two weeks, after the German bank announced a sale of wealth manager BHF-Bank.  Industrial shares were led higher by mailing company Deutsche Post, which gained 2.3 percent, and Siemens, which rose 1.6 percent.  Siemens, a leader in electronics and electrical engineering, rallied on speculation that the company may acquire some components suppliers this year.

IBEX 35                          10498.60                     +104.70                 +1.01%
Shares in Spain added a full percent today, led by a 6 percent gain for Obrascon Huarte and a 4 percent increase in Grifols.  Shares of Obrascon Huarte, the Spanish building and infrastructure firm, had dropped in the four prior sesssions on weakness in the construction sector.  Grifols, a plasma firm, gained after its Australian peer CSL confirmed its full-year profit forecast.  Financial shares in Spain followed their global counterparts higher today, led by a 2.8 percent gain in Mapfre, and a 1.4 percent gain for Banco Santander.

FTSE MIB                     21650.81                     +361.61                   +1.70%
Italy’s FTSE MIB posted the biggest gain among major European indicies, rising nearly 2 percent on the day.  Trading in Milan led to a 4.6 percent gain for Fiat, after Italian Industry Minister Caludio Scajola said there are 14 offers for a company plant in Italy.  Intesa Sanpaolo gained over 4 percent on a potential unwinding of an investor agreement between Generali and Credit Agricole.  Fondiaria-Sai fell for a second straight day, dropping nearly 1 percent, after Banca Akros downgraded the insurance firm.

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

Equities

FTSE Near-Term Positioning Favors The Downside

The FTSE is testing channel support and a break below would strongly suggest that the advance from the 2009 low is complete.  The rally is in 5 waves and is therefore probably just the first wave of a larger correction (b wave underway now).  Initial support is 4955.

FTSE near-term positioning favors the downside as prices trend lower in a falling channel. Near-term resistance is seen at 5511.66, the channel top, while support is found in the 5440.22-5455.37 congestion region. A below this barrier exposes 5390.58.

The DAX is in the same position as the FTSE.  The index is testing channel support now and dropping below would suggest that the rally from the 2009 low is complete as an A wave.  Initial support is 5159.

German shares have trended lower since breaking below rising trend line support, with price action guided by a well-defined falling channel. Prices have come off the bottom of the formation to re-test support-turned-resistance at 59350. Renewed bearish momentum from here will target another test of the channel’s lower boundary, this time at 58452.

The CAC 40 has dropped below trendline support and a large B wave may be underway now towards 3398.  Favor the downside against the January high.

As with its German counterpart, the CAC has broken below rising trend line support and is being guided lower by a falling channel. A bounce from the channel bottom has stalled below support-turned-resistance at 3979.15, with renewed selling to target 3933.91.

After reversing in January, the IBEX has declined in impulsive fashion.  Additionally, RSI divergence on the weekly suggests that the top is important.  Favor the downside.  The next support is 993.

Madrid issues are positioned broadly in line with the DAX and CAC: prices have taken out rising trend line support and are trending lower bounded by a falling channel. Near-term support has been found at 1185.46, the 50% Fibonacci retracement level, with an upswing to aim for the 38.2% Fib at 1194.56. Alternatively, a break lower exposes the 61.8% Fib at 1176.35.

The FTSE/MIB reversed from the 38.2% retracement of the decline from the 2007 high and has fallen beneath channel support.  The drop below channel support indicates that the path of least resistance is lower.  The next level of support is 20702.

Italy’s benchmark index seems to be stalling behind its counterparts in Germany, France and Spain. Indeed, while those indexes have broken lower, the FTSE/MIB continues to test rising trend lie support, with the hurdle reinforced by the 23.6% Fibonacci retracement level. Nonetheless, cues from other major exchanges suggest the path of least resistance leads lower, with the next level of relevant support on a breakdown past current levels found at the 38.2% Fib (23040.84).

Equities

NASDAQ Threatens Trendline Support, Exposing Additional Losses

The pace of the Dow’s decline has slowed but it remains on track to test the significant psychological level of 10,000. A break below support would expose 9,679-11/2 low but that may follow a period of consolidation.

The S&P 500 decline has started to pick up steam following a brief period of consolidation sending it below former congestion at 1,085. The below leaves support at 1,029-11/2 low.

The NASDAQ has also seen its losses accelerate and is now threatening rising trend line support near 2,147 which would leave  2,113-11/27 low as support. The tech laden index appears on course for an ultimate test of 2,024-11/2 low.

Equities

European Equities Decline Broadly for Third Day This Week

Europe Session Key Developments

•    Greek Debt Concerns Continue to Weigh on European Equities
•    European Confidence Indicators Generally Improve, German Unemployment Holds at 8.2%
•    Commodities Continue Slide, Dollar Gains Against European Currencies

Generally better-than-expected confidence readings for the Euro-Zone failed to buoy the region’s stock markets, which fell for a sixth time in the last seven trading days.  Losses took place across all sectors and pushed the broad Dow Jones STOXX 600 Index to its lowest close since December 10.  In the early going, European shares appeared to be headed higher after the European Commission released its latest confidence readings.  The data showed that the index of executive and consumer sentiment improved for a tenth month to 95.7, beating economists’ 92.3 expectation.  Shares failed to hold, however, as investor uncertainty returned due to the Greece debt problems and weaker-than-expected durable goods orders in the U.S.  Greek Prime Minister George Papandreou claimed today that the nation never asked for financial assistance from other EU countries and had no need for such aid; however, the country’s bonds and credit-default swaps suggest investors do not believe the rhetoric.  Greek  bonds have declined over 10 percent in the last three months, while credit-default swaps tied to the country are trading at similar levels to Dubai in December.  Furthering the decline in European stocks was an announcement from the U.S. that durable goods orders rose 0.3% in December, far short of the 2.0 percent expected for the month.  Overall, risk aversion was evident across the globe, as investors sold off stocks and commodity holdings in favor of bonds and U.S. dollars.  The greenback gained against both the Euro and British Pound during the session.

FTSE 100                      5145.74                   -71.73                    -1.37%
British stocks fell for the sixth time in seven days as the Basic Materials and Health Care sectors each declined over 2.6 percent.  BHP Billiton and Rio Tinto each fell over 2 percent as commodity prices continued to show weakness across the board.  Health care shares were led lower by AstraZeneca, after the drugmaker announced that its fourth-quarter earnings per share fell short of analyst estimates.  Overall, the FTSE has dropped nearly 5 percent this year due to a revival of investor uncertainty regarding global growth.

CAC 40                           3688.79                   -71.01                    -1.89%
Trading in Paris today resulted in a near 2 percent decline as falling commodity prices hurt the Basic Materials and Oil & Gas companies.  Only six of the forty CAC stocks avoided the bearish trading that pushed every French sector into the red.  Commodity companies were the worst performers on the index due to macro concerns regarding curbed lending in China and a potential slowdown in growth as a result.  Steel producer ArcelorMittal dropped over 3 percent during trading and Vallourec S.A. fell nearly 3 percent.

DAX                                 5540.33                   -102.87                -1.82%
German stocks declined for a second session on weakness in Telecommunications and Industrials.  The DAX fell to its lowest level in nearly three months as nine stocks fell for each that gained on the index.  Siemens AG, the largest engineering firm in Europe, fell about 3 percent to lead the decline in industrial shares.  The lone telecom stock on the index, Deutsche Telekom, fell 2.6 percent.  The best performer on the index was Infineon, which gained over 2 percent after investors forced the chipmaker’s chairman-designate to guarantee an early exit from the post.

IBEX 35                       10829.30                   -212.90                 -1.93%
The Spanish index posted the biggest loss of the major European indices for a second consecutive day as information technology firm Indra Sistemas fell over 5 percent.  Only three of the thirty-two IBEX stocks managed to close above water today as investors remain concerned that the pace of Spain’s recovery is slowing.  Spain is likely headed for a second year of economic contraction and remains weighed down by debt problems not unlike those in Greece.  Spanish Finance Minster Elena Salgado announced today her intention to cut the budget deficit by two thirds by 2013.

FTSE MIB                     21603.13                  -394.46                 -1.79%
The Italian benchmark index fell over 1.7 percent today to mark its third losing day this week.  Luxury goods maker Tod’s fell over 8 percent today after posting gains in the prior three trading sessions this week.  Ansaldo STS also experienced its first losing day this week, declining over 2 percent after Intermonte Sim downgraded the shares to “outperform” from “buy”.

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

Equities

European Equities’ Precipitous Stumble Erases 2010 Gains

Europe Session Key Developments

•    German and Euro-zone PMI Manufacturing Beats Expectations, Hints of Inflationary Pressures
•    U.K. Money Supply Expands at Slower Rate than Anticipated
•    Commodities Fall on Weaker Demand, Stronger Dollar

European markets continued their fall on Thursday, dropping the second consecutive day to erase this year’s advance. Early in the session, bearish appetite flourished following the Chinese Gross Domestic Product data, which showed 10.7 percent growth for the emerging market. Speculation arose that the output expansion, which exceeded analysts’ expectations, will trigger further interest rate tightening down the road. U.K M4 Money Supply data showed an expansion but less-than-expected, which fueled a Dollar and Euro rally against the Pound. Additionally, U.S. jobless-benefits claims, coupled with speculation, which held to accurate, on President Obama’s plan to reign in risk-taking by banks fueled bearish sentiment worldwide. Following the speech by President Obama, which occurred after the European session closed and suggested that banks would be strictly prohibited from running proprietary trading operations or investing in hedge funds and private equity funds, European market equity futures tumbled anywhere between one and three percent each.

Looking ahead, light economic data is expected to end the week. Midway through the session, investors will be looking at French Business Confidence for January (expected 90.0), as well as British Retail Sales data for December (expected 1.1 percent increase from November, expected 3.0 percent increase from December 2008).

FTSE 100                      5335.10                   -85.70               -1.58%
British stocks fell for the second consecutive day, dropping just over one and one-half percent to erase this year’s gains. Basic Materials and Financials fell the most, down 4.31 percent and 2.72 percent each, after data later in the session showed that American jobless claims increased, a sign that the U.S. unemployment situation may be worsening. With investors speculating on weak consumer demand for the next few months, eight of ten sectors fell on the FTSE, with five sectors posting losses greater than one percent. Anglo American and Kazakhmys, both mining companies, led shares lower amid doubt that high demand for commodities will continue. RBS, Lloyds Banking Group, and Barclays lost more than five percent each ahead of President Obama’s speech on bank regulation. Among the gainers on the day were airline companies EasyJet and British Airways, which posted 5.2 percent and 3.6 percent gains, respectively, amid data beating internal forecasts.

CAC 40                     3862.16                   -66.79                 -1.70%
Trading in Paris netted losses across all sectors, dragging the CAC below 3900 points. The 1.70 percent contraction, led by Basic Materials and Financials, marked the second time this week the index has fallen. Seven of ten sectors lost more than one percent, while four sectors lost more than two percent. Overall, ninety-five percent of all equity securities traded on the French index posted losses on the day. Societe Generale followed banking shares around the world down, ending the day in the red by 4.7 percent. Eiffage, France’s third largest construction company dropped 4 percent after its shares were downgraded to “neutral” at Exane BNP Paribas. Other movers on Thursday included ModeLabs, a French mobile-phone maker, which dropped 11 percent, and Icade, after Societe Generale cut its recommendation on the stocks from “hold” to “sell.”

DAX                         5746.97                    -104.56             -1.79%
German stocks posted the second largest decline across Western Europe on Thursday, down over one hundred points to 5746.97. Basic Materials dropped nearly three percent, while Financials, Technology, Industrials, and Consumer Goods fell by 1.71 percent, 1.90 percent, 1.92 percent, and 1.99 percent, respectively. Financials pushed lower later in the session amid American banking regulation concerns, with Commerzbank leading the losses at 3.8 percent. Deutsche Bank skid 2.5 percent, while Siemens fell 1.7 percent. Overall, all nine sectors posted losses on the day, pushing the DAX down 3.53 percent overall in the new year.

IBEX 35                     11444.00                   -265.00                 -2.26%
Spanish stocks fell the most among the five major European equity markets, down over two and one-quarter percent, a 265 point loss. As the IBEX now sits at 11444.00, it has lost 4.15 percent on the year and sits at its lowest level since November 4. Nine of ten sectors dropped on Thursday, with Consumer Goods posting a meager gain of 0.14 percent. Technology, Basic Materials, and Financials all dropped more than three percent, while seven of ten sectors lost more than one percent overall. The losses mark the second consecutive day of bearish movement for the index. Banco Santander fell the most since May, contracting 4.2 percent. Cementos Portland Valderribas, a unit of the Spanish builder Fomento de Construcciones & Contratas, dropped 2.2 percent, for its fourth loss in five days. Other movers included Gamesa Corporacion Tecnologica, which slumped 3.3 percent after its shares were cut to “hold” from “buy’ at Societe Generale.

S&P/MIB                        22876.46                     -249.56                 -1.08%

Notable Europe Event Risk / Economic Releases

Written by Christopher Vecchio, CFDTrading Research
Please send any comments about this report to Cvecchio@fxcm.com

Equities

Dow Upside Increases With Break Above Fibo Resistance

The Dow has traded sideways / slightly up since the beginning of November.  Trading higher from the sideways consolidation favors additional upside with the next level of resistance being 10828.  Daily oscillator studies warn of a turn however (waning momentum since the summer).  Coming below the support line would be the earliest signal that the trend has reversed but a drop under 9679 is needed in order to break the series of higher lows.

The Dow continues to be held in check by resistance at 10,581-31.8% Fibo of 13,136-6,470. Although the value chip index is trading above the technical level it hasn’t broken clean from it which maintains its relevancy and leaves open the door for a possible retrace. We expect that the current triangle formation will continue with a possible test of 11,000.

The S&P is in a similar situation to the Dow in that the index has traded higher following a sideways consolidation.  A measured level at 1159 is potential resistance, which is followed by 1200 (former support).  The S&P has traded below its support line already – watch the underside of the line for resistance.  The line is at 1150 this week and increases 11 points a week (1161 next week).

The S&P 500 has traded along trendline support since breaking above resistance at 1,120- 50.0% Fibo of 1,576- 666 to test 1,150. If support holds then look for a break above 1,150 to test 1,200.

The NASDAQ has been a beast, already rallying through its 61.8% retracement of the decline from 2862.  The next level of potential resistance is the 100% extension of 1266-1880 / 1727, at 2341.  Like the S&P, the NASDAQ is trading below its former steep support line.  This line is now probable resistance.  The line is at 2392 now and increases 26 points per week (a blow off perhaps?).

The NASDAQ has broken above Fibo resistance at 2,251which could now serve as support. The tech laden index continues to trade along trendline support which has it on target to 2,500.

Equities

European Equities Mixed After Bank of England Rate Decision, Chinese Move to Curb Lending

Europe Session Key Developments

• Bank of England Holds Rates, Announces Corporate Bond Purchases
• British House Prices Rebound in November
• Euro-zone, German Retail Sales Disappoint

European markets were mixed during Thursday’s session, following worse-than-expected Retail Sales data from Germany and the broader Euro-zone region. German Retail Sales, adjusted for inflation, fell by 1.1 percent in November from October, surprising analysts who predicted a 0.3 percent gain month-over-month. From a year earlier, sales had fallen 2.8 percent. German Factory Orders gained 0.2 percent in November after falling 1.9 percent in October, the Economy Ministry said today, helping offset losses. The biggest news on the day came from the British Isles, however, after the Bank of England announced that it would continue its quantitative easing policies by holding the key benchmark interest rate at 0.50 percent and announcing that it would begin purchasing corporate bonds. News from China also jolted indices worldwide today, after selling three-month treasury bills at a higher interest rate for the first time in nineteen weeks, in a move to control lending and fight inflation.

Looking ahead to Friday, January 8, 2010, there is heavy volume of data for Europe. Swiss unemployment is due, with an expected increase to 4.4 percent in December. German and French Trade Balance data are released, both of which are expected to show decreases. Later in the day, Producer Price Index data for Great Britain are expected to show month-over-month and year-over-year increases for December. Finally, final gross domestic product numbers for the Euro-zone from the third quarter of 2009 are due, followed by the Euro-zone Unemployment rate, which was expected to have increased to 9.9 percent in November.

FTSE 100                      5526.72                   -3.32               -0.06%
Despite news that the Bank of England would begin buying corporate bonds in order to ease trading for banks and investors, the FTSE closed slightly lower, down to 5526.72. The Monetary Policy Committee of the Bank of England held the benchmark interest rate at 0.50 percent, and pledged to spend the rest of the 200 billion Pound Asset Purchase Programme in order to help the economy recover from the recession. The index is up a modest 1.27 percent in the first week of the year. Sustained low interest rates have helped housing prices rebound, which gained 1.0 percent in December, according to a report by Halifax. Five sectors posted gains while five sectors posted losses on the day, with Technology gaining the most, up 1.85 percent, and Telecommunications down the most, sliding 2.30 percent. Retailer Sainsbury gained 3.2 percent during trading hours, the biggest gain in more than two months. UBS raised Wolseley’s rating from “neutral” to “buy,” helping the stock rally for a fifth consecutive day, up 2.6 percent. JD Sports Fashion, another retailer, gained 12.0 percent in its biggest gain since April 2009.

CAC 40                     4024.80                   +7.13                 +0.18%
Trading on the French market on Thursday resulted in six of ten sectors gaining, netting a 0.18 percent climb to 4024.80. Telecommunications weighed on the index, dropping 1.25 percent, as France Telecom dropped following disappointing 2009 earnings data from Verizon Communications. Havas gained 6.1 percent after it was upgraded to “conviction buy” at Goldman Sachs Group. JCDecaux also had its rating raised by Goldman, pushing the equity security up 9.0 percent.

DAX                         6019.36                    -14.97             -0.25%
After surprising news that retail sales in Europe’s largest economy dropped for the first time in three months, the German index dropped one-quarter of a percent. Retail Sales data for November showed a decline of 1.1 percent, before broader Euro-zone Retail Sales data indicated a 4.0 percent decline from the year previous. German retailers Metro and Praktiker plunged 4.0 percent and 8.3 percent, respectively, following the news. Overall, seven of ten sectors fell on the day, with Telecommunications and Consumer Services leading the decline with 1.90 percent and 1.29 percent losses each. Auto-industry companies Volkswagen and Continental gained 1.2 percent and 13.0 percent, respectively, while Commerzbank, Germany’s second largest lender, posted a 4.1 percent gain, making it the best performer on the DAX for the day.

IBEX 35                     12166.30                   -56.20                 -0.46%
The Spanish market fell for the first time in the new year, just under one-half of one percent, down to 12166.30. Six of ten sectors fell on the day, though Basic Materials and Consumer Goods each rose more than 1.2 percent each. Top gainers on the day included telecommunications and media companies Gestevision Telecinco and Promotora de Informaciones, climbing 1.3 percent and 5.4 percent, respectively, after each company had their stock recommendations upgraded by advisors. Actividades de CyS stumbled 1 percent after it was downgraded by AlphaValue, and Ferrovial fell for the first time in a week, down 0.5 percent.

S&P/MIB                        23709.01                     +86.72                 +0.37%

Notable Europe Event Risk / Economic Releases

Written by Christopher Vecchio, CFDTrading Research
Please send any comments about this report to Cvecchio@fxcm.com

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