Daily Morning Report

Thursday, June 18–Jim Wyckoff’s Morning Markets Report

Global stock markets were mixed in overnight trading. U.S. stock indexes are pointed toward slightly lower openings when the New York day session begins. Risk appetite may be receding a bit late this week as Covid-19 cases in many U.S. states are on the rise, prompting concerns those states may have to once again impose restrictions on their businesses and the public. Reports said the second wave of the pandemic outbreak in Beijing, China has been quickly contained but other countries are seeing the virus spread.

Said one market analyst in a morning email dispatch, some of which has been edited for clarity: “Covid-19 and the Fed’s (and other central banks’) actions are influencing a herd mentality to financial markets where rational risk and reward calculations are no longer in place. The first sign of trouble sees investors flee to safe havens, and when the Fed plays the put (put option, meaning adding more stimulus), traders take the opposite side of the trade. This kind of environment will keep volatility heightened in the near term. In my opinion, the problem that the Fed and other central banks have caused over the past couple of months is that retail investors are bidding up some of the worst-performing companies just because they believe the current policies will keep them afloat…. This is leading to the creation of a big bubble in asset prices and the further it grows, the more damage it will make when it bursts.”

The important outside markets early today see the U.S. dollar index near steady. Meantime, Nymex crude oil prices are slightly up and trading around $38.00 a barrel. The yield on the benchmark U.S. Treasury 10-year note is currently around the 0.71% level.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the Philadelphia Fed business survey and leading economic indicators.

–Jim
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See on the daily bar chart for the September Euro currency futures that a price uptrend has at least temporarily stalled out. This could be a normal pause before the uptrend resumes, but the bulls need to step up and show some good power soon to suggest the recent price action is just a pause in the uptrend. More significant downside price action in the near term would kill the uptrend.–Stay tuned! Jim

Wednesday, June 17–Jim Wyckoff’s Morning Markets Report

Global stock markets were mostly up a bit in overnight trading. U.S. stock indexes are pointed toward firmer openings when the New York day session begins. Traders and investors are weighing the bullish aspects of generally faster rebounds in world economies than many had expected versus the bearish element of a resurgence in Covid-19 reported cases in some regions of the globe, including some U.S. states. At present, it appears the global economic growth factor is winning out. Skeptics can argue the rally in world stock markets is mainly due to the floods of central-bank infused cash that have hit the global financial system.

In overnight news, the Euro zone May consumer price index came out at -0.1% from April and up 0.1%, year-on-year. Deflationary concerns are still at the forefront for central bankers. However, a Wall Street Journal article at mid-week is headlined “Few Are Prepared for the Risk of Inflation Era After Recession.” The story says the 2008 financial crisis and the big influx of central bank liquidity into the financial systems then produced no problematic inflation. However, the article says things are different now and at present “the markets may have it completely wrong” on the inflation matter.

There are a couple of geopolitical developments that bear watching. North Korea has ramped up its provocation of South Korea in recent days. Also, a clash between Indian and Chinese soldiers in their border region is the first military conflict between the two nations in decades.

Fed Chairman Jerome Powell on Wednesday offers up his second and final day of testimony to the U.S. Congress on the health of the U.S. economy and its recovery prospects—today to a House of Representatives panel. His comments to a Senate committee on Tuesday produced no significant surprises.

The important outside markets early today see the U.S. dollar index firmer. Meantime, Nymex crude oil prices are lower and trading around $38.00 a barrel. The yield on the benchmark U.S. Treasury 10-year note is currently around the 0.75% level.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, new residential construction and the weekly DOE liquid energy stocks report.

–Jim
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Tuesday, June 16–Jim Wyckoff’s Morning Markets Report

Global stock markets were mostly up in overnight trading. U.S. stock indexes are pointed toward solidly higher openings when the New York day session begins. The U.S. stock indexes on Monday made a strong recovery from sharp early-day losses, due in part to the Federal Reserve announcing it has started buying corporate bonds, in an extension of an existing program that had only purchased corporate bond exchange traded funds. Reports also said the Trump administration is planning to spend $1 trillion on U.S. infrastructure improvements.

There is growing agreement the Federal Reserve will continue to deploy more firepower to support the U.S. economy. Such is ultimately bearish for the U.S. dollar as the U.S. government’s debt obligations continue to bulge. The U.S. dollar index is presently in a steep downtrend on the daily bar chart.

The U.S. economic highlight of the week will be Fed Chairman Jerome Powell’s two days of congressional testimony on Tuesday and Wednesday for his semi-annual economic report to Congress. He may provide more clarity and perspective on the Fed’s bond buying and other monetary policy moves. Traders will monitor to see if his comments expand on his sober assessment of the U.S. economy last week.

In other news, North Korea is ramping up its bellicose activities, as it blew up a meeting facility with South Korea that was just inside the North Korean border. Many look for North Korea to become more provocative with the U.S. as the U.S. presidential election approaches in November.

The important outside markets early today see the U.S. dollar index a bit weaker. Meantime, Nymex crude oil prices are higher and trading around $37.75 a barrel. The International Energy Agency said Tuesday global oil demand in 2020 will decline by 8.1 million barrels per day. The yield on the benchmark U.S. Treasury 10-year note is currently around the 0.75% level.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, retail sales, industrial production and capacity utilization, the NAHB housing market index, and manufacturing and trade inventories.

–Jim
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See on the daily bar chart for the September e-mini S&P futures that a price uptrend line has been negated with recent strong selling pressure. The bulls need to step up early this week and show power, to restart the price uptrend. More price pressure this week would strongly suggest a market top is in place.–Stay tuned! Jim

Monday, June 15–Jim Wyckoff’s Morning Markets Report

Global stock markets were mostly down in overnight trading. U.S. stock indexes are pointed toward solidly lower openings when the New York day session begins. Traders and investors are risk averse to start the work week, as there are growing signs that the Covid-19 pandemic is making a resurgence. Reports said parts of Beijing are on lockdown again, with cases in some U.S. states also on the rise as businesses reopen and American citizens become more lax on social distancing. Reported cases in the U.S. have now risen above 2 million.

There are also growing notions that the global stock market rebounds have come too far, too fast, given the actual economic conditions in the major industrialized countries at present. The general and even many in the investing public are asking, “How could the Nasdaq stock index hit a record high last week when U.S. unemployment has surged to around 15% and much of the economy remains crippled?”

The U.S. economic highlight of the week will be Fed Chairman Jerome Powell’s two days of congressional testimony on Tuesday and Wednesday for his semi-annual economic report to Congress. He may provide more clarity on the Fed’s bond buying and other monetary policy moves. Traders will monitor to see if his comments expand on his sober assessment of the U.S. economy last week.

In other overnight news, Euro zone April exports were reported down 24.5% and imports were down 13%.

The important outside markets early today see the U.S. dollar index weaker. The greenback remains in a steep downtrend. Meantime, Nymex crude oil prices are lower and trading around $35.75 a barrel. The yield on the benchmark U.S. Treasury 10-year note is currently around the 0.68% level.

U.S. economic data due for release Monday includes the Empire State manufacturing survey and Treasury international capital data.

–Jim
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