European Closing Thoughts: Doubts are mounting.

An hour into the US Market and this is the picture we are looking at: DJIA up 0.43%, S&P500 0.04% higher, Nasdaq up 0.28%. In Europe: Stoxx50 0.29% lower, German Dax 0.34% lower, Italian Ftsemib 0.15% lower and Spanish Ibex 0.32% lower.

With this numbers infront of us, we could hypothetically say that we got fresh money coming into the US market and rotten money coming out from Europe. By the way, the news coming from the macro economic side in Europe today are quite interesting.

Rising output in countries including Italy and France drove Euro-region industrial production higher for a second month in August. Output in the 17-member euro area rose 0.6 percent from July, when it also increased by that amount, the European Union's statistics office in Luxembourg said today. Economists had projected a drop of 0.4 percent, the median of 36 estimates in a Bloomberg News survey showed. From a year ago, output slipped 2.9 percent after a 2.8 percent decline in July.

Not bad overall, but let's see in detail the contribution: in Germany, industrial production fell 0.4 percent in August from the previous month, when it rose 1.3 percent, today's report showed. France and Italy reported increases of 1.5 percent and 1.7 percent, respectively. Spanish output advanced 1.3 percent, while Greece had a jump of 2.5 percent from July, when it rose 2.2 percent.

The question is given this set of data why European markets were unable to get into “the green”?

Worries are mounting on the effectiveness of the euro zone's crisis strategy.

Markets have been driven higher by hopes, economic data were not supporting equities' move what we are now seeing is the opposite: good macro data and vanishing hopes.

Yet, European markets will be towed by US markets where Macro data, true or false, are coming better than analysts expected: the University of Michigan-Thomson Reuters consumer-sentiment gauge rose to 83.1 in a preliminary October reading, the highest level since September 2007, from a final September reading of 78.3. Sentiment has been increasing since August, economists polled by MarketWatch had expected little change in October, forecasting the index to decline to 78 in the preliminary reading.

Good macro data are pushing investors to take some of the gains from their dollar holding sending the WSJ Dollar index, which measures the US unit against a wider currency basket than the ICE dollar index, to 69.72 or 0.11% lower. The common currency traded at $1.2965$ or 0.29% higher versus the greenback. The British pound too edged up to $1.6975 or 0.18%.

Gold futures supported the view that investors shun from safe-heaven assets, Gold for December delivery fell 0.25% to 1,766.10$ an ounce, the fall has a better meaning if you look at it in function of its relationship with the greenback ie a weaker dollar sent gold prices 0.3% higher on Thursday, therefore the movement has to be assessed with this new information.

The weaker dollar counterbalanced continuous tensions in the Middle East so to keep the Crude oil for November delivery along the flat line at $92.07 dollar a barrel.

We are heading into the last half-hour of trading for this week that has been quite long for all of us, the market gave us quite a lot of informations to work on,  but the Spanish dilemma is still there waiting to be solved but we had a taste of what we have to expect once the bailout is going to be asked. While analysts are still searching for the reason why traders sold JP Morgan and Wells Fargo shares on record 3Q results we as traders are searching for bits and pieces in the price action to support or to neglect our short stance.

What I'm saying is: that understanding the underlying market structure is giving you the foundation whereon you build your market hypothesis, than you look at the big picture searching for proofs. Once you got all your “bits and pieces” in line you will understand what chance you have and what can deny your hypothesis.

In wishing you a great weekend, let me say thank you to all of you that in this week have applied to join 77SigmaTrading.

Thank you.

P.

Originally posted at www.77sigmatrading.com