Tuesday, July 28–Jim Wyckoff’s Morning Markets Report
Global stock markets were mixed in overnight trading, with European indexes mostly weaker and Asian indexes mostly firmer. The U.S. stock indexes are pointed toward weaker openings when the New York day session begins. One market analyst summed up the recent stock market strength in the face of rising Covid-19 infections and a “second wave” by saying markets seem to be pricing in a return to normalcy by the end of the year, largely on hopes of a proven vaccine by then. Those market participants “taking the other side of that trade” wonder when markets will start pricing in a worsening pandemic situation and no successful vaccine on the horizon. Some argue gold and silver markets are now pricing in the latter notion.
The feature in the global marketplace this week is gold and silver prices surging to record and seven-year highs, respectively. Nearby Comex gold futures hit a new high of $1,974.70 an ounce overnight. Silver futures hit a high of $26.275. Both metals then backed off on some normal profit taking by the shorter-term futures traders. Bullish fundamental drivers of the rallies in the precious metals include a continued rise in Covid-19 infections in major industrialized countries and new shutdowns, a pending U.S. government stimulus package totaling $1 trillion, a depreciating U.S. dollar index that hit a nearly two-year low this week, rising U.S.-China political tensions, and a surge in buying of gold-back exchange traded funds.
The Federal Reserve’s Open Market Committee (FOMC) will meet Tuesday and Wednesday to discuss U.S. monetary policy. No changes in policy are expected but the Fed is expected to reiterate U.S. interest rates will remain low for a long time amid the challenges of dealing with the pandemic.
The important outside markets today see Nymex crude oil prices weaker and trading around $41.35 a barrel. The U.S. dollar index is firmer on a corrective bounce after hitting a nearly two-year low Monday. The yield on the benchmark U.S. Treasury 10-year note is currently trading around the 0.6% level.
U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the S&P-Core Logic-Shiller home price index, the Richmond Fed business survey, and the consumer confidence index.
U.S. STOCK INDEXES
September S&P 500 e-mini futures: Prices are a bit weaker in early U.S. trading. Bulls still have the solid overall near-term technical advantage amid a 4.5-month-old price uptrend in place. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are bearish early today. Today, shorter-term technical resistance comes in at the overnight high of 3,246.75 and then at last week’s high of 3,284.50. Buy stops likely reside just above those levels. Downside support for active traders today is seen at last week’s low of 3,191.50. Wyckoff’s Intra-day Market Rating: 4.5
September Nasdaq index futures: Prices are weaker in early U.S. trading. Bulls remain in firm overall technical control. However, the higher volatility at higher price levels is one clue of a topping process. Shorter-term moving averages (4- 9-and 18-day) are neutral early today. The 4-day moving average is below the 9-day and 18-day. The 9-day average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are bearish early today. Shorter-term technical resistance is seen at the overnight high of 10,758.50 and then at 10,900.00. On the downside, shorter-term support is seen at 10,500.00 and then at this week’s low of 10,401. Wyckoff’s Intra-Day Market Rating: 4.5.
U.S. TREASURY BONDS AND NOTES FUTURES
September U.S. T-Bonds: Prices are slightly down in early U.S. trading. Bulls still have the firm chart 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 neutral early today. Shorter-term technical resistance is seen at 181 even and then at last week’s high of 181 30/32. Shorter-term support lies at the overnight low of 179 30/32 and then at 179 even. Wyckoff’s Intra-Day Market Rating: 5.0
September U.S. T-Notes: Prices are near steady in early U.S. trading. Bulls have the solid 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 neutral early today. Shorter-term resistance lies at last week’s high of 139.25.0 and then at 140.00.0. Shorter-term technical support lies at the overnight low of 139.08.0 and then at 139.00.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0
The September Euro currency futures are slightly lower after hitting a nearly two-year high Monday. Bulls have the solid overall near-term technical advantage. The shorter-term moving averages for the Euro 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 Euro are neutral to bearish early today. The Euro currency finds shorter-term technical resistance at this week’s high of 1.1794 and then at 1.1850. Shorter-term support is seen at 1.1700 and then at this week’s low of 1.1655. Wyckoff’s Intra Day Market Rating: 5.0
NYMEX CRUDE OIL
September Nymex crude oil prices are slightly lower in early U.S. trading. A gentle price uptrend on the daily chart has stalled out again. The shorter-term moving averages are neutral early today as the 4-day is even with the 9-day. The 9-day is above 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 last week’s high of $42.51 and then at $43.00. Look for sell stops just below technical support at $41.00 and then at $40.00. Wyckoff’s Intra-Day Market Rating: 4.5
US grain futures are lower in early U.S. pre-market trading. There were surprisingly large increases in the good to excellent U.S. corn and soybean crop condition ratings released Monday afternoon by USDA. That’s pressuring those markets and wheat is following. Non-threatening U.S. weather and deteriorating U.S.-China trade relations are also bearish. Wheat and soybeans are still in price uptrends on the daily charts, however.
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.