European Closing Thoughts: 24/09/12

Since our MidSession Review was published markets rebounded from daily lows but were unable to make news highs.

US stocks followed the trend set by European markers: the Dow Jones industrial average was down 29.63 points, or 0.22 percent, at 13,549.80. The Standard & Poor's 500 Index was down 3.16 points, or 0.22 percent, at 1,456.54. The Nasdaq Composite Index was down 21.53 points, or 0.68 percent, at 3,158.44.

The real move today was in the currency market were the euro extended losses against the US dollar. The common currency traded 0.62% lower to 1.2920$ and has shed more than 1.5 percent from a four-month peak reached on September 17.

Spanish debt worries remained the dominant theme in the market. Madrid is expected to present its 2013 draft budget plan later this week and announce new structural reforms. The results of stress tests on the Spanish banking sector are also due. Yields on 10-year Spanish government bonds  were down 9 basis points to 5.65%, according to electronic trading platform Tradeweb.

Tensions are quite evident looking at the market picture in Europe:

The Stoxx 50 fell 0.74% to 2,557.89, the German Dax traded lower 0.52% to 7,413.16. In Southern Europe: Italian Ftsemib traded at 15,867.07 or 0.78% lower and Spanish Ibex led losers down 1.12% to 8,138.40. The Athens General Index tumbled 2.8% to 754.48, with National Bank of Greece SA down 5.6%.

It looks like investors did not believe to the representative from Greece's finance ministry words, who said that the country is only negotiating a 11.5-billion-euro cut in expenditures with the so-called Troika of international lenders, as well as finding a way to raise 2 billion euros in revenue, denying German Der Spiegel report that  Greece must close a budget gap of €20 billion, almost double previous estimates, to satisfy conditions for emergency aid.

This is the effect of a credibility crisis we talked about in our MidSession Review.

The main commodity markets were also moving lower as the disappointing German data and a firmer dollar pressured prices. Oil (Wti) fell 1.80% to 91.22$ a barrel and Gold traded  0.69% lower to 1,765.80$ an ounce.

For what it may concern our trading plan: the DJEurostoxx50 futures moved in a really narrow range, as I wrote in the previous posts our short bias has not been scratched by today's market action, we are currently looking for a good entry. I, personally would like to see the market behaviour around the 70 mark before taking the shot. Remember there are too much money set aside ready to be thrown to European markets.

I wish you all a very pleasant evening.

Originally posted at www.77sigmatrading.com