European Closing Thoughts: Up in the Sky.

Fresh money coming in.

Strong US corporate earnings, more than forecasted rise in US industrial production and bullish German data sent European and US markets toward their biggest two-day gain in a month.

• Goldman Sachs Group Inc, the fifth- biggest U.S. bank by assets, reported profit that beat analysts' estimates on higher underwriting fees and a jump in the value of the firm's own investments.
• Johnson & Johnson rallied 1.1 percent after raising its 2012 profit forecast.
• State Street Corp. increased 4.8 percent to $43.58. The third-largest custody bank reported third-quarter operating profit that beat analysts' estimates as it earned higher fees for managing client money.
• Coca-Cola Co slumped 0.5 percent to $37.93. The world's largest soft-drink maker said third-quarter revenue advanced less than 1 percent to $12.3 billion, trailing the $12.4 billion average of analysts' estimates compiled by Bloomberg.
• Intel Corp., the world's largest semiconductor maker, rallied 2.4 percent to $22.24 ahead of its earnings release scheduled for after the market close.
•  International Business Machines Corp. also reports results later today. Its shares increased 0.6 percent to $210.15.

US Output at factories, mines and utilities rose 0.4 percent in September after a 1.4 percent decline in August that was the biggest since March 2009, the Federal Reserve reported today in Washington. The median estimate in a Bloomberg survey of 85 economists called for production to rise 0.2 percent. Manufacturing, which makes up 75 percent of the total, climbed 0.2 percent.

US corporate earnings and Macroeconomic data gave the boost, but the sparkle came from Spain, which is under strict surveillance: a Bloomberg report was cited to say that Germany was open to a precautionary line of credit for Spain.

The news sent the common currency to a one week high versus the greenback and a four week high against the yen and sterling. The common currency changed hands at 1.3051$, up form $1.2953 in yesterday's North American trading, the euro traded 1.07% higher versus the Japanese Yen to 102.9350 and 0.46% higher versus the British pounds to 0.8095.

The problem is that Reuters reports that one of Bloomberg's sources said his comments were “over” interpreted…but the market is still there.

On the bond side: the Spanish and Italian government bonds yield fell respectively 4.5 bps to 4.937 and 1.2 bps to 5.805, it's worth to remember that at midsession were both inching higher.

Goldman Sachs' earnings and the Bloomberg report together sent banks into the sky: in UK Lloyds Banking Group rose 6.05%, RBS rose 4.37%, Barclays PLC rose 3.91% sector heavyweight HSBC Holding PLC rose 1.78%, in Italy Unicredit rose 4.56%, Intesa SanPaolo gained 4.34%. The sector lifted benchmarks in Europe, the Stoxx50 closed 2.53% higher to 2,547.90, the German Dax was the worst performer gaining just 1.58% to close at 7,376.27, meanwhile the Italian Ftsemib rose 2.53% to 15,985.16 and the Spanish Ibex led gainers closing up 3.41% to 7,940.20.

Longs were waiting for this move to regain confidence, is this just the anticipation of the real move that will follow the Spanish bailout request?

Yet, I still got my “commodities dilemma” to solve (Read Yesterday closing thoughts for the Commodities Dilemma): Oil futures traded below 92$ a barrel today, Crude for November delivey fell 6 cents or 0.1% to $91.78 a barrel on the NYMEX, but US macro were growth supporting and therefore what's going on? November Brent crude slid 93 cents, or 0.8%, to $114.87 a barrel on ICE Futures in London. On the Gold side futures closed higher today supported by a weaker greenback: Gold for December delivery rose $8.70, or 0.5%, to $1,746.30 an ounce on the Comex. Prices had lost $22.10 Monday to settle at their lowest since mid-September.

My “commodities dilemma” is still un-solved, as we said in the MidSession review there were no bad news on the horizon today able to counteract the move that the WSJ report on Spanish Bailout request sparkled. We as traders need to recognize our bias, but we need to trade the market not our idea of the market therefore in one of our session we said: we got a short bias but if the market will try to close the gap without being able to, or will close the gap and not be able to accelerate than tapping our nose we will buy it. Why?

Because we are flexible in our thinking and un-flexible in our rules. We do not have to be right to make money, we prefer to make money other than being right.

Have a great evening.

Originally posted at www.77sigmatrading.com