Daily Morning Report

A potential “green shoot” for the raw commodities markets is a bullish technical signal coming from the Goldman Sachs Commodity Index (GSCI), which is a basket of several major commodity futures markets rolled into one composite price index. The weekly GCSI chart shows prices in April careened to a 17-year low, including producing big gaps down on the bar chart in March. However, in May price action on the weekly chart reversed course, including producing a big gap to the upside. The price action in April and May created a very significantly bullish “island bottom” reversal pattern, to strongly suggest a major low is in place for the GSCI, and that prices are now likely to trend higher in the coming weeks and months, or even longer.–Stay tuned! Jim

Thursday, June 11–Jim Wyckoff’s Morning Markets Report

Global stock markets were mostly lower in overnight trading. U.S. stock indexes are pointed toward solidly lower openings when the New York day session begins. Risk aversion has returned to the marketplace following a wake-up call delivered by the Federal Reserve following its two-day FOMC meeting Wednesday afternoon. The Fed made no changes in U.S. monetary policy but leaned dovish, saying the U.S. economy could take years to fully recover from its recent damage inflicted by the Covid-19 pandemic. The central bank also painted a bleak picture of the present state of the U.S. economy, including forecasting U.S. GDP at minus 6.5% this year and unemployment above 9% by the end of the year. Those numbers were not a shock to the marketplace, but a grim reminder to traders and investors who had just pushed the Nasdaq stock index to a new record high Wednesday morning and the S&P 500 to a three-month high Monday.

Said one market analyst in an email dispatch Thursday morning: “The Fed is now committed to keeping interest rates near zero until at least the end of 2022 and using all its tools to support the economy. This could translate into further speculative bets and push the rally in equities and corporate debt higher. However, without real economic recovery the market will have to deal with a more significant challenge, which is debt insolvency. That’s why the disconnect between asset performance and economic fundamentals cannot run forever and investors will need to become more rational with their investment approach.”

There are also growing worries in the global marketplace about a “second wave” of the Covid-19 pandemic hitting many countries. There is some evidence such may be occurring in some regions of some countries, including the U.S.

The important outside markets see the U.S. dollar index firmer on a bounce after hitting a three-month low Wednesday. The greenback is in a serious swoon. Meantime, Nymex crude oil prices are lower on a corrective pullback after hitting a three-month high above $40.00 Monday, and are trading around $38.50 a barrel. The yield on the benchmark U.S. Treasury 10-year note is currently around the 0.7% level. Gold is solidly up Thursday morning and bulls are having a good week as safe-haven demand has returned to the marketplace.

U.S. economic data due for release Thursday includes the weekly jobless claims report and the producer price index. Jobless claims in the latest reporting week are seen up 1.6 million.

–Jim
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Wednesday, June 10–Jim Wyckoff’s Morning Markets Report

Global stock markets were mostly weaker in overnight trading. U.S. stock indexes are pointed toward narrowly mixed openings when the New York day session begins. The Nasdaq index overnight hit another record high, while the S&P 500 stock index on Monday hit a three-month high. Risk appetite remains generally upbeat at mid-week as businesses in major economies continue to open back up after the Covid-19 lockdown and social distancing guidelines are relaxed.

Today concludes the two-day meeting of the Federal Reserve’s Open Market Committee (FOMC) that will see an afternoon statement, along with a press conference from Fed Chairman Jay Powell. No change in interest rates is expected. However, the Fed’s economic projections and Powell’s remarks will be closely scrutinized and will probably move markets to some degree.

In overnight news, the OECD think tank forecast global economic growth will fall 6% this year, if a second wave of Covid-19 can be avoided. The OECD also said the world economy “is on a tightrope” and a second wave of the pandemic would be a terrible blow to the world economy.

China got some dour economic news at mid-week as it reported its industrial prices in May fell by 3.7%, year-on-year. Consumer inflation fell to a 2.4% growth rate. Both figures undershot market expectations.

The important outside markets see the U.S. dollar index slightly lower and hitting a three-month low overnight. The greenback is in a serious swoon. Meantime, Nymex crude oil prices are lower on a corrective pullback after hitting a three-month high above $40.00 Monday, and is trading around $38.00 a barrel. The yield on the benchmark U.S. Treasury 10-year note is currently around the 0.79% level.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the consumer price index, real earnings and the weekly DOE liquid energy stocks report.

–Jim
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“The trend is your friend” is the tried and true market adage that so many professional traders espouse. The U.S. stock indexes are trending solidly up and there are no early clues to suggest that market tops are in place. Any early, bearish chart clues that do arise you will hear from me first, via my daily markets update report.–Stay tuned! Jim

Tuesday, June 9–Jim Wyckoff’s Morning Markets Report

Global stock markets were mixed but mostly weaker in overnight trading. U.S. stock indexes are pointed toward lower openings when the New York day session begins, on normal corrective pullbacks from recent strong gains. The Nasdaq index overnight hit a record high, while the S&P 500 stock index hit a three-month high Monday. Trader and investor risk sentiment remains upbeat. The just-released NFIB small business optimism index rose to 94.4 in May from 90.9 in April. The U.S. government reported the American economy officially entered recession in February, while also on Monday the Federal Reserve expanded its lending program to U.S. businesses.

In overnight news, the Euro zone economy in the first quarter contracted by 3.6% from the fourth quarter of last year. Forecasters expect the second-quarter GDP reading to be worse.

The World Bank has forecast global GDP to see a 5.2% contraction this year. Advanced economies will contract 7%, led by a 9.1% decline in the Euro zone. Other GDP projections see the U.S. at -6.1%, China at up 1.0% and India -3.2%. “This is the first recession since 1870 triggered solely by a pandemic, and it continues to manifest itself… Given this uncertainty, further downgrades to the outlook are very likely,” the World Bank said. Global economic growth is due for a rebound in 2021, growing 4.2%, said the World Bank.

Today begins the two-day meeting of the Federal Reserve’s Open Market Committee (FOMC) that ends Wednesday afternoon with a statement and press conference from Fed Chairman Jay Powell.

The important outside markets see the U.S. dollar index slightly higher early today on a corrective bounce from its recent 11-week low. Meantime, Nymex crude oil prices are lower on a corrective pullback after hitting a three-month high Monday, and trading around $37.25 a barrel. The yield on the benchmark U.S. Treasury 10-year note is currently around the 0.82% level.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the NFIB small business index, the IBD/TIPP economic optimism index, and monthly wholesale trade.

–Jim
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Monday, June 8–Jim Wyckoff’s Morning Markets Report

Global stock markets were mixed in overnight trading. U.S. stock indexes are pointed toward modestly higher openings when the New York day session begins. The Nasdaq hit a record high overnight, while the S&P 500 stock index hit a three-month high. Businesses in major global economies continue to reopen and that’s lifting trader and investor spirits. However, the more social interaction the past couple weeks has caused an increase in Covid-19 infections in some U.S. states. Still, that could be just because more testing for infections is being done than in weeks past. Also, the civil unrest in the U.S. has turned much less violent and by far mostly peaceful.

The marketplace is mostly shrugging off some stated reporting errors in Friday’s shockingly upbeat U.S. employment report from the Labor Department. Those reporting errors made the report look more rosy than it would have been otherwise, but the errors were not major. Friday’s report suggested the U.S. economy will see a “V-shaped” recovery from the Covid-19 damage. “We are likely to see the shortest (U.S.) recession on record,” said one market analyst. Friday’s huge miss by analysts/economists on the jobs data in May raises questions on the accuracy of assumptions made by central banks, including the Federal Reserve, the past few months. Important questions include: What if the central banks greatly misjudged the overall damage to their economies and their recovery rates? Did the central banks severely over-react on monetary stimulus packages, which could create bigger problems (inflation) down the road?

In overnight news, economic data out of China was downbeat. China’s imports in May were down 16.7%, year-on-year. Exports were down 3.3% in the same period.

The important outside markets see the U.S. dollar index slightly lower early today and not far above last Friday’s 11-week low. Meantime, Nymex crude oil prices are higher and trading around $39.75 a barrel. The yield on the benchmark U.S. Treasury 10-year note is currently around the 0.91% level. Bond yields have risen significantly the past few sessions.

U.S. economic data due for release Monday is light and includes the employment trends index.

–Jim
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