Daily Morning Report

The monthly continuation chart for nearby Comex gold futures shows prices trending solidly up, on a longer-term basis, to suggest still more upside in the coming months. The trend-line price projection from the monthly chart, at present, suggest prices will hit a new all-time record high in September of 2022.–Stay tuned! Jim

Thursday, May 21–Jim Wyckoff’s Morning Markets Report

Global stock markets were mostly lower in overnight trading. U.S. stock indexes are pointed toward lower openings when the New York day session begins, on a corrective pullback from Wednesday’s good gains. Attitudes are more upbeat late this week as governments continue to reopen businesses that had been shuttered for weeks. Some sporting events have been scheduled to resume in the coming weeks and there are rising hopes autumn sports can be played.

Also supporting more positive trader and investor sentiment is the surprising rally in crude oil prices that sees Nymex crude oil trading above $34.00 a barrel Thursday morning. The strong rally in the oil market has caught most oil market watchers by surprise, given significantly reduced demand and still-burdensome global supplies. Just a few weeks ago Nymex May crude oil futures traded as low as -$40 a barrel just before the contract expired.

Global economic data for May is starting to improve from the dire numbers seen in April. The IHS Markit composite purchasing managers index (PMI) for May in the Euro zone rose to 30.5 in May from 13.6 in April. A reading below 50.0 suggests contraction. The U.K.’s PMI for the same period came in at 28.9 from 13.8. Japan’s PMI for the same period was 27.4 versus 25.8. Australia’s composite May PMI was 36.4 versus 21.7 in April.

China has begun its most important political event of the year, the National People’s Congress, after a delay because of the Covid-19 pandemic. The meetings signal what the government is calling its victory over the outbreak that began late last year, and will outline key economic and social goals for the year. U.S.-China relations have soured the past several weeks, amid the pandemic that the U.S. is blaming on China. President Trump tweeted late Wednesday that China’s “disinformation and propaganda attack on the United States and Europe is a disgrace.” The U.S. Senate on Wednesday moved to ban Chinese companies from trading on U.S. stock exchanges.

The other important outside markets see the U.S. dollar index firmer early today. The yield on the benchmark U.S. Treasury 10-year note is currently around 0.67%. Gold prices are lower on a normal downside correction from recent good gains.

U.S. economic data due for release Thursday includes the weekly jobless claims report, expected to show claims of 2.4 million, which is a decline from recent weeks. Also due out is the Philadelphia Fed business survey, PMI indexes, existing home sales, and leading economic indicators.

–Jim
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Wednesday, May 20–Jim Wyckoff’s Morning Markets Report

Global stock markets were mixed in overnight trading. U.S. stock indexes are pointed toward solidly higher openings when the New York day session begins. Trader and investor enthusiasm is just a bit muted at mid-week after the initial optimism regarding a successful phase-one Covid-19 vaccine test performed very well. The majority of medical experts still believe any proven vaccine is at least one-year away.

Despite continued dour economic data being released from the major world economies, and reports that the pandemic in Brazil is careening out of control, world stock markets are performing well. It’s likely a case of traders/investors having “pandemic-fatigue” and are in denial of what is occurring and will continue to occur in the coming months, or they were hit with the Covid-19 shock so hard that within a period of just a few weeks they factored into market prices a worst-case scenario, and now the markets are recovering because such a scenario is not playing out—at least not yet. Maybe some of both.

The German government on Wednesday auctioned its 10-year bond (bund) and it fetched an average yield of -0.47%. So, for the next 10 years investors that bought the bunds were willing to accept negative returns. Their logic must be that economic times will get even worse in the coming years and that price deflation will become problematic. The bund investors’ logic comes at a time when the world’s central banks have flooded their financial systems with record amounts of liquidity in an attempt to rescue their floundering economies. Veteran market participants have heard the saying that bond traders are the smartest traders in the world. However, this veteran market watcher will take the other side of the deflation trade that bund buyers are presently making. Economics 101 has historically taught that increased money supply and velocity create price inflation, not deflation.

The important outside markets see Nymex crude oil futures higher early today and trading around $32.15 a barrel. The U.S. dollar index is weaker again early today. The yield on the benchmark U.S. Treasury 10-year note is currently around 0.69%.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the weekly DOE liquid energy stocks report and the FOMC minutes from the last meeting.

–Jim
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The Goldman Sachs Commodity Index (GSCI) is a basket of major commodity futures markets rolled into a composite index. It’s a good gauge of the overall health of the raw commodity sector. See on the weekly GSCI chart that prices have moved well off the multi-year low scored in April. In fact, a bullish “island bottom” reversal pattern has formed on the weekly chart to suggest the GSCI has put in a major bottom. The strong recovery in the oil market has helped the GSCI and is also a good sign for the raw commodity sector that has been so hard-hit by the Covid-19 pandemic. Better times lie ahead for commodity markets.–Stay tuned! Jim

Tuesday, May 19–Jim Wyckoff’s Morning Markets Report

Global stock markets were mostly firmer in overnight trading. U.S. stock indexes are pointed toward weaker openings when the New York day session begins. The U.S. stock indexes rallied sharply Monday on positive early results for a Covid-19 vaccine. Many in the marketplace are speculating it’s going to take a proven vaccine to bring the global economy completely back to life and get humans back to mostly normal day-to-day matters. Still, early this week finds trader and investor risk appetite more robust, also due in part to a sharp rally in crude oil prices recently.

Federal Reserve Chairman Jerome Powell and U.S. Treasury Secretary Steven Mnuchin will appear via videoconference before the Senate Banking Committee today, discussing the U.S. emergency lending programs Congress is implementing amid the U.S. economic crisis.

The important outside markets see Nymex crude oil futures higher early today and hitting a two-month high overnight, trading around $32.25 a barrel in the June contract, which expires today. Many were predicting the June futures contract would expire the way the May contract did—in negative territory. The U.S. dollar index is lower again early today. The yield on the benchmark U.S. Treasury 10-year note is currently around 0.7%.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, and new residential construction.

–Jim
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Monday, May 18–Jim Wyckoff’s Morning Markets Report

Global stock markets were mostly firmer in overnight trading. U.S. stock indexes are pointed toward higher openings when the New York day session begins. As the world’s major economies have started to reopen, there is some encouraging news on the Covid-19 pandemic front. Reports say the rate of increase of new infections is at the slowest pace in months. Federal Reserve Chairman Jerome Powell said over the weekend the U.S. economy could recover steadily through the second half of the year, under the condition that there is no second wave of Covid-19. Powell said the Fed still has more ammunition to stimulate the U.S. economy, if it’s needed, adding there needs to be a vaccine for the economy to fully recover and that may be more than a year away.

In overnight news, Japan, the world’s third-largest economy, sank into recession in the first quarter, as its gross domestic product contracted by 3.4% in the period.

The important outside markets see Nymex crude oil futures sharply higher early today, at a five-week high, and trading around $31.50 a barrel in the June contract, which expires late this week. Many were predicting the June contract would expire the way the May contract did—in negative territory. The U.S. dollar index is near steady early today. The yield on the benchmark U.S. Treasury 10-year note is currently around 0.64%. Spot (cash) gold hit a seven-year high overnight, with Comex futures getting close to April’s multi-year high.

U.S. economic data due for release Monday is light and includes the NAHB housing market index.

–Jim
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