Thursday, May 20–Jim Wyckoff’s Morning Markets Report
Global stock markets were mixed but mostly lower overnight. U.S. stock indexes are pointed toward lower openings when the New York day session begins. There is keener risk aversion in the marketplace late this week. Traders and investors are debating when the Federal Reserve will rein in its very easy monetary policy, following the FOMC minutes on Wednesday afternoon that contained included wording on the FOMC committee discussing tapering its bond-buying program when economic conditions warrant such—but not yet. At the last FOMC meeting in late April the Fed still believed rising inflation was transitory. And price action this week in several raw commodity markets makes the case for the Fed being correct on that assumption. Crude oil prices have backed well down from a two-month high scored earlier this week, copper prices have pulled back from a 10-year high and the grain futures markets have swooned. Iron ore prices in Asia are also dropping, while U.S. lumber futures have dropped over 25% from their highs seen recently. Still, there are many veteran market watchers, including this one, that believe the inflation genie is already out of the bottle, to suggest generally rising consumer and producer prices for some time to come—and likely inflation that is problematic.
Bitcoin and other crypto currencies have stabilized Thursday after a huge sell off Wednesday that was precipitated by China stating it will not allow payment for goods and services to be conducted with Bitcoin. Wednesday’s price action in cryptos reminds of the time-tested notion that major bull markets many times end when the rules of the game are changed. The crypto world should indeed shudder when the globe’s largest population and second-largest economy that is state-controlled sees its leadership take a major step toward nullifying cryptos’ authenticity.
The key outside markets today see the U.S. dollar index weaker. Meantime, Nymex crude oil prices are lower and are trading around $62.50 a barrel. Crude oil has sold off sharply this week, in part on reports heretofore sanctioned Iranian crude oil may be coming back onto the world market. The yield on the benchmark 10-year U.S. Treasury note is presently fetching around 1.659%.
U.S. economic data due for release Thursday includes the weekly jobless claims report, the Philadelphia Fed business survey, and leading economic indicators.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are weaker in early U.S. trading. Bulls have the overall near-term technical advantage. However, a near-term price uptrend on the daily chart was negated recently to suggest a market top is in place. The 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 is below the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are bearish early today. Today, shorter-term technical resistance comes in at Wednesday’s high of 4,123.00 and then at 4,150.00. Buy stops likely reside just above those levels. Downside support for active traders is seen at this week’s low of 4,055.50 and then at the May low of 4,029.25. Sell stops likely reside below those levels. Wyckoff’s Intra-day Market Rating: 4.0
June Nasdaq index futures: Prices are weaker in early U.S. trading. The near-term price uptrend on the daily chart was negated last week to suggest a market top is in place. Shorter-term moving averages (4- 9-and 18-day) are neural early today. The 4-day moving average is even with the 9-day. The 9-day average is below the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is seen at the overnight high of 13,259.75 and then at this week’s high of 13,448.50. Buy stops likely reside just above those levels. On the downside, shorter-term support is seen at 13,000.00 and then at the May low of 12,915.00. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are firmer in early U.S. trading today. Bears still have the overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are bearish early today. The 4-day moving average is below the 9-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is seen at 157 even and then at this week’s high of 157 14/32. Buy stops likely reside just above those levels. Shorter-term support lies at this week’s low of 155 25/32 and then at the May low of 155 14/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5
June U.S. T-Notes: Prices are firmer in early U.S. trading. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is below the 9-day. The 9-day is even with the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term resistance lies at the overnight high of 132.09.0 and then at 132.14.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at this week’s low of 131.30.0 and then at 131.27.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5
EURO CURRENCY
The June Euro currency futures are higher in early U.S. trading. The shorter-term moving averages for the Euro are bullish early today, as the 4-day is above the 9-day and 18-day. The 9-day is above the 18-day moving average. Short-term oscillators for the Euro are neutral to bullish early today. The Euro currency finds shorter-term technical resistance at this week’s high of 1.2251 and then at the February high of 1.2271. Buy stops likely reside just above those levels. Shorter-term support is seen at the overnight low of 1.2174 and then at this week’s low of 1.2133. Sell stops likely reside just below those levels. Wyckoff’s Intra Day Market Rating: 6.0
NYMEX CRUDE OIL
June Nymex crude oil prices are lower in early U.S. trading. Bulls still have the overall near-term technical advantage but are fading late this week. Prices earlier this week tried to push to a new high for the year but could not push above resistance at the March high. That’s a bearish development. The shorter-term moving averages are neutral early today as the 4-day is below 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 the overnight high of $63.96 and then at $65.00. Look for sell stops just below technical support at this week’s low of $61.95 and then at $61.00. Wyckoff’s Intra-Day Market Rating: 4.0
GRAINS
U.S. grain futures are mostly firmer in early U.S. pre-market trading. The “risk-off” trading attitudes this week are bearish for the grains. Significant chart damage has been inflicted in the grain futures this week, to suggest that near-term market tops are in place. It’s going to very likely take a serious weather market scare in the Corn Belt this summer to revive the grain market bulls. On tap today is the weekly USDA export sales report.
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