Monday, January 6–Jim Wyckoff’s Morning Markets Report
Global stock markets are still reeling on geopolitical fears following the U.S. drone strike late last week that killed Iran’s leading military figure. Asian and European stocks were down overnight and the U.S. stock indexes are set to open the New York day session with solid losses.
Gold prices are again sharply higher Monday and hit a nearly seven-year high overnight, at $1,590.90, basis nearby Comex futures. The key “outside markets” today see crude oil prices higher and at a 22-month high, after hitting $64.72 a barrel overnight. Meantime, the U.S. dollar index is weaker amid a five-week-old downtrend in place on the daily bar chart.
The weekend saw more saber-rattling from the U.S. and Iran. President Trump tweeted that the U.S. has 52 Iranian sites set for attack if Iran retaliates against the U.S. for the killing of its general. Meantime, Iraqi’s government voted to expel U.S. troops from Iraq, which prompted a response from Trump that the U.S. would impose economic sanctions on Iraq if such occurred. Nations around the globe issued proclamations urging restraint on the matter from both the U.S. and Iran. This is arguably the most serious geopolitical development in many years, and whose repercussions will play out for a long time to come. That will likely keep trader and investor risk aversion elevated for some time to come. That’s bullish for safe-haven assets like precious metals and U.S. Treasuries.
In other overnight news, the Euro zone producer price index for December came in at up 0.2% on the month and down 1.4%, year-on-year. Very low inflationary pressures in the world’s major economies continues to be a concern for the major central banks of the world.
U.S. economic data due for release Monday includes the U.S. services purchasing managers’ index (PMI) and the global PMI.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are down in early U.S. trading. A “key reversal” down on the daily bar chart has been confirmed, which is one technical clue that a market top is in place. The shorter-term moving averages (4-, 9- and 18-day) are bullish early today. The 4-day moving average is above 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 3,230.00 and then at 3,250.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at last week’s low of 3,206.75 and then at 3,200.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.0
March Nasdaq index futures: Prices are down in early U.S. trading. A “key reversal” down on the daily bar chart has been confirmed, which is one technical clue that a market top is in place. Shorter-term moving averages (4- 9-and 18-day) are still 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 bearish early today. Shorter-term technical resistance is seen at the overnight high of 8,795.00 and then at 8,850.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at last week’s low of 8,692.25 and then at 8,650.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are slightly up in early U.S. trading and hit a three-week high overnight, on more safe-haven demand and short covering. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term technical resistance is seen at the overnight high of 158 25/32 and then at 159 even. Buy stops likely reside just above those levels. Shorter-term support lies at 158 even and then at 157 16/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5
March U.S. T-Notes: Prices are firmer and hit a four-week high in early U.S. trading, on more safe-haven demand and short covering. 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 bullish early today. Shorter-term resistance lies at the overnight high of 129.21.0 and then at 129.28.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 129.11.0 and then at 129.06.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5
U.S. DOLLAR INDEX
The March U.S. dollar index is lower in early U.S. trading. Bears have the overall near-term technical advantage amid a price downtrend in place on the daily chart. 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 the overnight high of 96.585 and then at last week’s high of 96.795. Shorter-term support is seen at last week’s low of 96.020 and then at 95.750. Wyckoff’s Intra Day Market Rating: 4.0
NYMEX CRUDE OIL
February Nymex crude oil prices are higher and hit a 22-month high of $64.72 overnight. Bulls have the solid near-term technical advantage amid a three-month-old uptrend on the daily bar chart. The shorter-term moving averages 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 (RSI and slow stochastics) are neutral to bullish early today. Look for buy stops to reside just above technical resistance at the overnight high of $64.72 and then at $65.00. Look for sell stops just below technical support at $63.00 and then at $62.50. Wyckoff’s Intra-Day Market Rating: 6.0
GRAINS
US grain futures were weaker again overnight, amid risk aversion that is denting grain market bulls following last week’s U.S. military strike that killed in Iranian general in Baghdad, Iraq. Look for this major geopolitical development to continue to squelch buying interest in the grain futures markets for at least the near term. Corn was off around 1/2 cent, soybeans down 1 to 3 cents and wheat also around 4 cents lower. So far it appears a partial U.S.-China trade agreement is still scheduled to be signed January 15, with most thinking the U.S. military strike on Iran won’t change that event. This Friday’s monthly USDA supply and demand report will be the major focus for the grain markets this week, as estimates of the updated size of the US corn and soybean crops will be issued following a rocky harvest season that was plagued by inclement weather. Traders will closely examine Monday morning’s weekly USDA export inspections report. Last Friday’s US weekly export sales report showed corn sales of 540,000 metric tons (MT), which was better than expected. US soybean sales were 332,000 MT, which were well below forecasts, and US wheat sales were 333,300 MT, which were in line but at the low end of market expectations.
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