Fundamentals:

European stocks could have a hard time making gains today even after a positive close to the U.S. session.  Positive sentiment in the States was driven by better-than-expected sales from Black Friday.  But the story in Europe could stay focused on the debt situation in the Euro zone, bringing in seller for European equities.

This story has gone on long enough at this point to show that what we are dealing with here can not be blamed on short term liquidity problems.  Rather, the market is focusing on its structural issues inside the countries with the biggest debt problems.

Over the weekend, we saw discussions about new institutional strategies for handling these types of problems but this has done little to distract the markets or change sentiment.  Apparently, the EU/IMF is not doing enough to satisfy markets and persuasively outline their economic plan for the decreasing deficits in the affected countries.

If we look at the way the situation in Greece was handled, the market will probably not change its mind unless we see substantive new strategies from the EU/IMF.  The credibility of the officiating body will probably not be raised unless we see some type of balance between long term growth and deficit reduction.

In macro data, German unemployment numbers will be released at 8:55 GMT, with markets looking for a reading of 7.5%, which would be unchanged from the previous released.  But this number is unlikely to draw much attention away from the debt issues unless we see a drastic deviation from what the market is expecting.

Technicals:

Commodities:

Gold is extending upward after bouncing off of support at 1350.  Currently, prices are threatening resistance at 1370.  Hourly indicators are bearish from above mid levels, which suggests a sell.  But given the higher lows on the hourly charts, we should not be surprised to see this resistance level break.  The major resistance is the 1383 area, which is an old high and 62% Fib retracement of the move from 1420.  A break here reinvigorates the upward momentum and from there we turn bullish again and target levels above 1400.

Currencies:

The EUR/USD is still dropping, hitting new lows at 1.3060.  The current downward momentum looks unsustainable, so we are looking for some type of corrective rally here.  But we have still pierced some major support levels on the daily charts, so we can start looking for rallies into resistance as sell areas.  At the moment, we are still long, looking for a move back toward 1.34 to square the position and turn bearish.  Dailies are bearish but oversold at 30, support comes in at 1.3060.

Stocks:

The S & P 500 is setting itself up within a descending triangle.  We have been seeing a period of consolidation for the past two weeks and the lower highs suggests that the breakout will occur to the downside.  The key level of support comes in at 1173 and if this break occurs, we expect the downside to pick up heavily.  The first target after the break is 1150 but after that, we start to target much lower, around 1105.  Hourly indicators are bearish with room to extend.  We are still short from 1195, with the stoploss at breakeven.

Fundamentals:

European equities will probably trade with a bid tone today, after the European Union was able to come to an agreement for dealing with future debt catastrophes.  In another risk positive story, China has started talks with North Korea with the hope that violence in the region will not escalate. In macro data today, we will see consumer confidence surveys from the Euro zone.

Ireland signed its agreement detailing its bailout package, giving the government some breathing room until 2013.  When looking at the specifics of the arrangement, markets will be looking at how the bailout process is restructured.  A new bailout fund has been finalized and it is larger than the one in place previously.  But this fund is different in that it will be supported by creditors in the private sector, as opposed to being supported by taxpayer dollars.  This provision will drive up borrowing costs and limit the incentive for taking out new loans.  From the German perspective, this is preferable and these circumstances will be positive for equities in the region and bring some buying back into the EUR/USD.

In Asia, we see China stepping up its rhetoric when dealing with the North Korean issue.  China is the only country with the clout and relationship with North Korea, so their ability to persuade government officials is critical.  News involving this story has a direct connection to risk appetite in the equity markets, so traders will be watching closely.

At 10:00 GMT consumer confidence data in the Euro zone will be released.  Markets expect a rise in this number but without a drastic surprise, markets will focus more heavily on the debt and North Korean stories.

Technicals:

Commodities:

Gold is trying to mount a recovery after making new lows at 1350.  We still have a bearish bias in the short term, after the hourly trendline break and the failure at 62% Fibonacci resistance at 1383.  This is the key area going forward, a break of this resistance turns the bias in the other direction and targets 1417.   But until that happens, we have to remember the bearish indicators on the 4H charts and look for a test of support at 1350, first, and then 1330.  A break here would lead to an acceleration to the downside.

Currencies:

The EUR/USD is stalling in the low 1.32s after taking out some critical longer term support levels.  The only problem with these breaks is that we have still not seen any significant extension to the downside, so a bounce here is still possible.  We are still long from around 1.33 and will add to this position if downward momentum does no start picking up soon.  Support is at 1.3180 and the hourly indicator is still bearish.

Stocks:

The S & P 500 has lost some momentum and has started to form a small range just south of the 1200 level.  Ranges of this type do not last long and breaks tend to lead to significant follow through.  With this in mind, we will be watching the resistance level at 1192 and the support level at 1181.  Overall, the bias is bearish after the current failure at 1192.  We sold the pair last week at 1195 and have brought the stoploss to break even.  Our target is 1150.

Fundamentals:

European equities are lower Thursday, with traders focused on the sovereign debt story but, for the most part, markets are caught in tight ranges with the U.S. closed for the Thanksgiving holiday.

Germany is one market managing to make some gains after putting out strong economic data earlier this week.  Overall sentiment is negative for the Euro zone, on the debt story but the numbers that are coming out of Germany do not match the sentiment.  Because of this, German equities have to potential to outperform other indexes in the short to medium term.

Axel Weber from Bundesbank said today that the European Financial Stability Facility (EFSF) could be used to being some encouragement back to the markets.  This was unexpected because Weber’s views are generally hawkish.  But the possibility remains that Angela Merkel will distance herself from this feeling of generosity as her election comes closer.  Many Germans are likely to feel it is not their responsibility to bail out other countries and Merkel might be forced to change some of her rhetoric.

What’s more, if these injections of funds have little material effect in the short term public support for these measures could diminish quickly, making it more difficult to implement future aid packages.  A lack of success in spending efficiency also puts the re-election hopes of many European officials in jeopardy, so rhetoric from officials will be more heavily scrutinized, going forward.

Technicals:

Commodities:

Gold has dropped through its hourly uptrend line support to hit lows at 1360.  We are coming into critical support at 1355 and if this does break, we must start to assign some validity to the failure at the old highs and 62% Fib retracement level at 1380.   Indicators on the 4H chart have turned bearish and with the RSI at 40, it looks like we won’t have any problems extending to the downside.  Major support is at 1330 and that is the new area to start looking at long positions again.

Currencies:

The USD/CAD is making a strong surge after breaking support levels at 1.0120.  The rally is suspicious given the strength of the momentum and the longer term trend is clearly down, so we will start looking for contrarian sell positions looking for a test of the lows from earlier this month.  There is double top resistance as 1.0250, followed by 1.0340.  Support is at 1.0080.  Bearish indicators are nearly overbought, we sell entries are not too far off.   If we do see support breaks, the next bear target rests just below parity at 0.9975.

Stocks:

The S & P 500 failed again at major psychological levels, just as we expected. The high was 1199 and now we are looking at double bottom support around 1175 to be tested soon.  A break here would be significant because of the lower highs and the target then becomes the 38% Fib retracement at 1150.    If the Fib level breaks, we begin to target 1125 and 1105.  Indicators are neutral from mid levels, so the potential for a big drop does exist.

Fundamentals:

The S & P is attempting to make another run at the much-talked-about 1200 level after the U.S. jobs data came in better than expected.  But with a slow data day ahead of us, there is unlikely to be much motivation in the markets to push prices much higher.

We do have Bundesbank’s financial stability report at 10:00 GMT, so we will gain some insight into the German banking system.  If this report focuses on the European debt situation, equities will probably give back their recent gains.  Markets are currently concerned about whether or not the sovereign debt crisis will be seen is Portugal and Spain.

Yesterday, we saw the Irish government release more details of its for the 4-year economic plan.  The government will lower the minimum wage by 12%, decrease welfare spending and lower the current tax threshold.  This was essentially what markets were expecting but the fact that elections are currently in progress, many analysts are having doubts as to whether or not these measures will actually pass parliament.

A large portion of the Irish population is opposed to the bailout and it is possible that politicians will start paying lip-service to those voters so that their candidacies remain in favor.  Markets do not respond favorably to uncertainty so equities might be sold if this does occur in the future.  The strong negative sentiment could also motivate the European Central Bank to start buying Portuguese and Spanish government bonds as a way of encouraging stability.

Technicals:

Commodities:

Gold is having some problems overcoming the old highs and 62% Fib retracement level at 1380.  Hourly indicators are still bullish and approaching oversold territory.  1380 is really the key area here.  Technically, it is a sell until that level breaks but anyone looking to sell at this stage needs to keep stops very tight because we are obviously in a massive uptrend in this market.  If the Fib resistance overhead does break, we start to target the old highs near 1420.

Currencies:

The EUR/USD is looking very interesting at the 1.33 level.  Recently, we have been calling this an excellent long term buy area as we have strong historical resistance-turned-support, the 100 day EMA and the 62% Fibonacci retracement of the move from 1.2650 all converging in the same area.  The daily RSI is bearish but nearly oversold after the swift drop from the old highs above 1.42.  The market has stalled here, so we will enter into long positions with wide stop losses as this is a trade we will probably be scaling into if the 1.33 area does break.

Stocks:

The S & P 500 looks like it is trying to push back through resistance at 1200 after bouncing off of support at 1173.  We are looking at some pretty clear targets if we are able to move higher from here.  First, we have an hourly downtrend line which basically coincides with the double top at 1205, which is a good short term sell area.  If that area does break, we are looking at the old highs at 1223 and the next sell area.  If 1173 breaks, the next target to the downside is the Fib support at 1150.  Hourlies are bearish from mid levels.

Fundamentals:

The German IFO report and U.S. Durable Goods Orders will be the most closely watched data releases on Wednesday and then we have another heavy round on releases coming out before the Thanksgiving holiday.  Then, we will have UK GDP, US New Home Sales, and US Personal Spending.

Germany’s IFO consensus expectations are for unchanged numbers from the previous month. But with the positive data we have seen recently from Germany creates the possibility for a surprise to the upside.  German GDP yesterday came in at 0.7% quarter over quarter, but some of the details were less optimistic.

Specifically, growth in private consumption expenditures rose only 0.4%, which led Germany to increase its government spending by 1.1% for the quarter (or 4.5% annually). Investment in equipment grew 3.7% following 4.4% in the first two quarters.  Net exports rose 2.3% and imports grew 1.9%.

Yesterday, we also saw the German PMI Manufacturing report for November, which surprised to the upside at 58.9 from 56.6 previously.  This is the highest print since July and is very encouraging for the growth prospects in the industrial sector.  The service sector also came in high, at 58.6 from 56.0 previously.

US Durable Goods Orders will be seen today, but markets are not expecting much. Orders have slowed the last two quarters and if we subtract the transportation component, we are seeing quarterly growth of -1.0%.

We saw the minutes from the last FOMC meeting yesterday, but there was little in the report to change market perceptions but expectations for GDP and employment were both downgraded.  This was largely expected after the Fed chose to inject its second round of quantitative easing.  GDP is 2010 is projected to be 2.5%, where before the expectation was 3.0-3.5%.  Growth in 2011 growth is now expected to come in at 3.0-3.6%.

Technicals:

Commodities:

Gold is coming into some strong resistance with the old highs and a 62% retracement level at 1380.  Hourly indicators are solidly bullish but nearing overbought levels.  If the Fib resistance overhead does break, we start to target the old highs near 1420.

Currencies:

The EUR/USD is continuing to fall off a cliff, breaking support levels at 1.33.  We are coming into some longer term Fib support at 1.3270, which is an area that we have been waiting for to enter into long positions.  But given the strong momentum of the current drop as well as the fact that daily indicators are bearish without being oversold, it is starting to look like this area might not hold.  That said, sellers trying to enter now are late to the game.  We are still looking at this pair with a contrarian view, but entering into long positions now will require wide stop losses.

Stocks:

The S & P 500 has traded back to the 1170 support level after failing again at 1205.  Indicators on the 4H chart are bearish and the lower highs here are suggesting that support will eventually give in.  First resistance comes in at 1185, medium term target is 1150.