Wednesday, July 31–Jim Wyckoff’s Morning Markets Report
Asian and European stocks were steady to weaker overnight. U.S. stock indexes are pointed toward modestly higher openings when the New York day session begins. Global equities traders and investors have been taken back a bit this week by the apparent setback in the U.S.-China trade negotiations, which resumed at a high level this week in Shanghai.
The Euro zone gross domestic product in the second quarter was released today and came in at up 0.2% from the first quarter and up 1.1%, year-on-year. Those numbers were about in line with market expectations.
In other overnight news, Germany auctioned its 10-year bond (bund) for a record low average yield of -0.41%. The results reflect two important factors: still-very-low inflation in the major economies of the world, and European investors’ worries about the health of the European Union economy.
The main economic event of the week concludes Wednesday afternoon when the Federal Reserve’s Open Market Committee (FOMC) issues its statement on U.S. monetary policy. The Fed is expected to lower interest rates. Most market watchers think a 0.25% interest rate reduction is in the cards, but a few do look for a bigger 0.5% rate cut.
On Friday the U.S. employment situation report for July is out. The key non-farm payrolls number is expected to be up around 165,000. In June, non-farm payrolls were up 224,000.
The key “outside markets” today see Nymex crude oil prices higher and trading around $58.50 a barrel. The U.S. dollar index is slightly up and not too far below the new high for the year hit on Tuesday.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, the employment cost index, the Treasury quarterly refunding announcement, the ISM Chicago business survey, and the DOE liquid energy stocks report.
–Jim
U.S. STOCK INDEXES
September S&P 500 e-mini futures: Prices are slightly up in early U.S. trading and not far below last week’s contract and record high. Bulls have the solid overall near-term technical advantage. There are no early chart clues of a market top being close at hand. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are neutral early today. Today, shorter-term technical resistance comes in at the contract high of 3,029.50 and then at 3,050.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at 3,000.00 and then at 2,987.50. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.5
September Nasdaq index futures: Prices are firmer in early U.S. trading and not far below last week’s record and contract high. Bulls have the solid overall near-term technical advantage. Shorter-term moving averages (4- 9-and 18-day) are bullish early today. The 4-day moving average is above the 9-day. The 9-day average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is seen at this week’s high of 8,031.75 and then at the contract high of 8051.75. Buy stops likely reside just above those levels. On the downside, short-term support is seen at this week’s low of 7,928.25 and then at 7,900.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5.
U.S. TREASURY BONDS AND NOTES FUTURES
September U.S. T-Bonds: Prices are higher in early U.S. trading. Bulls have the firm overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is even with the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term technical resistance is seen at this week’s high of 155 3/32 and then at last week’s high of 155 18/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 154 23/32 and then at 154 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
September U.S. T-Notes: Prices are higher in early U.S. trading. Bulls have the firm overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is even with the 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term support lies at this week’s low of 127.07.5 and then at last week’s low of 127.01.0. Sell stops likely reside just below those levels. Shorter-term technical resistance lies at this week’s high of 127.17.5 and then at 127.22.0. Buy stops likely reside just above those levels. Wyckoff’s Intra-Day Market Rating: 6.0
U.S. DOLLAR INDEX
The September U.S. dollar index is slightly higher in early U.S. trading. Bulls have the solid overall near-term technical advantage. The shorter-term moving averages for the dollar index are bullish early today, as the 4-day is above the 9-day. The 9-day is above the 18-day moving average. Short-term oscillators for the dollar index are neutral to bullish early today. The dollar index finds shorter-term technical resistance at this week’s contract high of 97.960 and then at 98.250. Shorter-term support is seen at this week’s low of 97.640 and then at 97.500. Wyckoff’s Intra Day Market Rating: 6.0
NYMEX CRUDE OIL
September Nymex crude oil prices are higher and hit a two-week high in early U.S. trading. Bulls are having a good week. The shorter-term moving averages are neutral early today as the 4-day is above the 9-day. The 9-day is below the 18-day moving average. Short-term oscillators (RSI and slow stochastics) are bullish early today. Look for buy stops to reside just above technical resistance at $59.00 and then at $60.00. Look for sell stops just below technical support at the overnight low of $57.97 and then at $57.00. Wyckoff’s Intra-Day Market Rating: 5.5
GRAINS
U.S. grain futures prices were steady to weaker in overnight trading. Corn was near steady, soybeans down around 3 cents and wheat was 2 to 3 cents weaker.
There are growing notions among US grain traders that the corn and soybean crops, despite the record late plantings this year, are faring pretty well heading into the critical growing month of August. And the weather forecasts for the next 10 days are not threatening to the crops, with seasonal temperatures but still a bit dry.
The US-China trade front is also getting a bearish read from grain traders. High-level talks in Shanghai this week have apparently produced no breakthroughs, and President Trump said on Tuesday China cannot be trusted and may stall the trade talks until after the 2020 presidential elections. Chinese and US trade negotiators will reportedly meet again in the US in September.
Key near-term technical price levels were breached on the downside in corn and soybeans on Tuesday, which has the attention of the chart-based traders, most of whom are now looking to be on the sell side.
The bearish bent in the grain futures markets this week has also emboldened the big speculative “fund” traders to take out fresh short positions in the grain futures markets.
Trade in the US grain markets could be choppy and sideways for the next two weeks, ahead of the all-important Aug. 12 monthly USDA report, at which time the size of the U.S. crops will be updated, as well as revised planted acres for U.S. corn and soybeans.
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