Friday, March 6–Jim Wyckoff’s Morning Markets Report
Global stock markets were solidly lower overnight, following the big losses in the U.S. stock market on Thursday. U.S. stock indexes are again pointed toward sharply lower openings when the New York day session begins. Look for another very active day in U.S. markets. It’s hard to conceive the U.S. stock indexes recovering today, heading into another uncertain weekend and what next Monday may bring on the coronavirus front.
Here’s the latest on the Covid-19, or coronavirus, outbreak that continues to wreak havoc in world markets. Some U.K. factories have moved to a four-day work week. The impact on German and Euro zone automotive manufacturers is expected to be severe in the short term. Supply chain issues are creating the notion of companies securing greater supplies of critical parts and materials—also called hoarding.
Here are some selected comments from one of Friday’s market commentaries emailed to me: “Disinflationary risks mount and recession looks an increasingly safe bet (it’s simply a question of where, how deep and how long). Even Gold, normally an inflation hedge, is soaring on the basis of naked fear. Despite calming words about how this is just the flu and all will be well in a few months when the summer comes, nobody knows where we are heading with Covid-19. One thing seems pretty clear, if the market has presently priced Coronavirus in correctly, it is by sheer blind luck; probably it has not.”
Standard and Poors has forecast GDP growth in China at 4.8% in 2020 before rebounding to 6.6% in 2021.
The benchmark U.S. 10-year Treasury note yield overnight fell below 0.8% to another record low, and remains below that level. How low can the U.S. 10-year note yield go? Well, for perspective Germany’s 10-year bund is presently trading at a yield of -0.73%. There is dire concern among long-term market watchers that a U.S. and /or global economic recession looms, including the prospect of debilitating consumer and commercial price deflation.
From my 35-year markets-watching perspective: I can think of a few big market shocks that rival what is occurring now, including the Chernobyl nuclear accident in the Soviet Union in 1986, the Sept. 11 terror attacks in 2001, the 2008 global financial crisis, and the 1987 stock market meltdown. For me, only the 1987 stock market crash and the 9-11 attacks were bigger than what markets are exhibiting now. This coronavirus matter is a big deal that appears to be getting bigger.
The key outside markets today see Nymex crude oil prices sharply lower, hitting a 14-month low and trading around $44.00 a barrel in early trading. OPEC and Russia are presently wrangling regarding how much oil production the cartel should further restrict amid the falling prices. Meantime, the U.S. dollar index is trading sharply down today and hit a nine-month low.
The coronavirus scare has overshadowed today’s release of the U.S. employment situation report for February, from the Labor Department—arguably the most important U.S. data point of the month. The key non-farm payrolls number is forecast to come in up around 175,000.
Other U.S. economic data due for release Friday includes international trade in goods and services, monthly wholesale trade, and consumer credit.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are sharply down in early U.S. trading. If current losses hold it will be the lowest closing level for this market since the coronavirus scare hit the marketplace. Bears have the overall near-term technical advantage amid choppy and volatile trading. The shorter-term moving averages (4-, 9- and 18-day) are bearish early today. The 4-day moving average is below the 9-day and 18-day. The 9-day is below the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Today, shorter-term technical resistance comes in at 3,000.00 and then at the overnight high of 3,028.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at the overnight low of 2,916.25 and then at 2,900.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 2.0 (lowest ever for any intra-day market rating of any market)
June Nasdaq index futures: Prices are sharply down in early U.S. trading. Bears have the overall near-term technical advantage amid choppy and volatile trading. Shorter-term moving averages (4- 9-and 18-day) are bearish early today. The 4-day moving average is below the 9-day. The 9-day average is below the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term technical resistance is seen at 8,500.00 and then at 8,600.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 8,373.75 and then at 8,300.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 2.0.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are sharply higher and soared to another contract high in early U.S. trading. Bulls have the strong overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term technical resistance is seen at the overnight contract high of 179 21/32 and then at 180 even. Buy stops likely reside just above those levels. Shorter-term support lies at 175 even and then at the overnight low of 173 24/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 9.0
June U.S. T-Notes: Prices are solidly higher and hit a contract high in early U.S. trading. Bulls have the solid overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term resistance lies at the overnight contract high of 138.04.0 and then at 138.16.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at 137.00.0 and then at the overnight low of 136.15.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 7.0
U.S. DOLLAR INDEX
The June U.S. dollar index is sharply lower in early U.S. trading Friday. Bears have the firm near-term technical advantage. The shorter-term moving averages for the dollar index are bearish early today, as the 4-day is below the 9-day and 18-day. The 9-day is below the 18-day moving average. Short-term oscillators for the dollar index are bearish early today. The dollar index finds shorter-term technical resistance at 96.000 and then at the overnight high of 96.475. Shorter-term support is seen at the overnight low of 95.635 and then at 95.500. Wyckoff’s Intra Day Market Rating: 3.0
NYMEX CRUDE OIL
April Nymex crude oil prices are sharply lower and hit a 14-month low in early U.S. trading. Bears are in solid near-term technical control. The shorter-term moving averages are bearish early today as the 4-day is below the 9-day and 18-day. The 9-day is below the 18-day moving average. Short-term oscillators (RSI and slow stochastics) are bearish early today. Look for buy stops to reside just above technical resistance at $45.00 and then at $46.00. Look for sell stops just below technical support at the overnight low of $43.28 and then at $43.00. Wyckoff’s Intra-Day Market Rating: 3.0
GRAINS
US grain futures are lower in early US pre-market trading Thursday. Corn is around 2 cents down, soybeans around 3 cents lower, and wheat 1/2 to 3 cents lower. The global near-panic in stock and financial markets continues to be bearish for grains and keeping buyers on the sidelines. Grain traders will continue to look to the stock and financial markets for direction. Unfortunately, the coronavirus outbreak scare playing out shows no signs of abating any time soon.
IMPORTANT NOTE: I am not a futures broker and do not manage any trading accounts other than my own personal account. It is my goal to point out to you potential trading opportunities. However, it is up to you to: (1) decide when and if you want to initiate any traders and (2) determine the size of any trades you may initiate. Any trades I discuss are hypothetical in nature.
Here is what the Commodity Futures Trading Commission
(CFTC) has said about futures trading (and I agree 100%):
1. Trading commodity futures and options is not for everyone. IT IS A VOLATILE, COMPLEX AND RISKY BUSINESS.
Before you invest any money in futures or options contracts, you should consider your financial experience, goals and financial resources, and know how much you can afford to lose above and beyond your initial payment to a broker. You should understand commodity futures and options contracts and your obligations in entering into those contracts. You should understand your exposure to risk and other aspects of trading by thoroughly reviewing the risk disclosure documents your broker is required to give you.
Jim Wyckoff