M&A Keeps Equities Afloat, Just

Equity Futures: Dow +00.00. S&P +2.70. NASDAQ +5.00. Japan Nikkei -20.00. German DAX +3.00.

U.S. Trade: The major U.S. indexes traded barely above the breakeven line, aided by gains in the commodity markets and by mergers and acquisitions announcements.

The global equity market saw negative momentum during the overnight session, especially around the European open, when the entire market was falling at a fast pace. However, S&P futures managed to bottom in the 1025.00 area, the same place where the market made an intra-day swing-point low in Monday trade. To some extent, this shows that the 1025.00 level was protected by several large orders.

The market traded in a very chaotic fashion around the opening bell, with the S&P 500, Dow Jones and NASDAQ indexes swinging between the breakeven level and the -0.5% moves. Eventually, the three indexes managed to swing into the black on news that Berkshire Hathaway (BRK.A - commentary - Trade Now) will buy railroad company Burlington Northern Santa Fe (BNI - commentary - Trade Now) in a transaction that will cost up to $26 billion. The last time Warren Buffett, the man behind Berkshire Hathaway, bought a company it was at the peak of the credit crisis, when it acquired a $5 billion stake in Goldman Sachs (GS - commentary - Trade Now).

S&P Technical View: TheLFB Member Charts

Daily Chart Trend: Long. Main price points: 1080-1100. Looking for: Wave 5 or C top.

The price structure on the daily chart is showing two valid scenarios. On the left-hand side of the chart, it shows an impulse structure with five waves up from the 665 lows to the current highs. If this is the case, the wave 4 on the weekly chart will be rejected, as the fourth wave is a corrective wave, which means it cannot be sub-divided by a five-wave move. However, in this scenario, a three-wave push lower into a corrective blue wave 2, with a target somewhere around 950 area, is expected.

---

At the time of publication, Hague held no position in the stocks mentioned.

Marco Hague is one of the founders and principals of The London Forex Broadsheet (commonly known as TheLFB), a global forex trader portal with headquarters in the U.S. Hague began his career with the Bank of England dealing with foreign exchange control, and he has been trading for the last three decades. He has been involved with institutional risk asset ratio analysis and the implementation and maintenance of institutional trade desks globally.