Daily Morning Report

Thursday, May 14–Jim Wyckoff’s Morning Markets Report

Global stock markets were mixed to lower in overnight trading. U.S. stock indexes are pointed toward narrowly mixed openings when the New York day session begins. Traders and investors continue to assess and reassess the Covid-19 situation as it pertains to global, national and local economies. Human nature appears to be competing more and more with continued warnings from health experts–meaning people that have been cooped up for two months desperately want to get out and resume more normal lives, even though the pandemic is far from being under control and no vaccine is on the horizon.

The U.S. trading session will see the weekly jobless claims released, with the latest reading expected to show new claims of around 2.5 million. If that figure is realized, it would still be markedly down from weekly jobless numbers seen recently.

The marketplace takeaways so far this week include a growing number of economists now projecting longer recovery periods for major world economies, highlighted by Federal Reserve Chairman Jerome Powell Wednesday providing a grim picture of the U.S. economy and its path out of the pandemic. The other takeaway is a strong rebound in stock markets despite many main street businesses remaining shuttered and large segments of populations still in quarantine. How long can this juxtaposition last?

U.S.-China relations remain close to the front burner of the marketplace. The U.S. this week has accused China of hacking U.S. firms working on a Covid-19 vaccine. Given the already strained relations between the world’s two largest economies, it’s hard to imagine they will emerge from the current health crisis without profound and permanent changes in their relationship, including supply chains.

The important outside markets see Nymex crude oil futures higher early today and trading around $26.50 a barrel. The International Energy Agency Thursday said global oil demand in May will drop by 21.5 million barrels—outstripping the recent supply reductions. The U.S. dollar index is firmer today. The yield on the benchmark U.S. Treasury 10-year note is currently around 0.61%.

Other U.S. economic reports out Wednesday include import and export prices. Several Federal Reserve officials are scheduled to give speeches today.

–Jim
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The gold futures market has seen choppy trading recently, but that price action has formed a bullish symmetrical triangle pattern that suggests another leg up in prices is coming soon. Bulls also have the longer-term technical advantage amid a longer-term price uptrend in place. “The trend is your friend” for the gold market bulls.–Stay tuned! Jim

Wednesday, May 13–Jim Wyckoff’s Morning Markets Report

Global stock markets were mixed in overnight trading. U.S. stock indexes are pointed toward firmer openings when the New York day session begins. Traders and investors at mid-week are staying mostly upbeat despite increasing concerns about a second wave of Covid-19 infections hitting the world’s major economies that are starting to open back up. The top U.S. health official on Tuesday warned the U.S. Congress about the dangers of reopening the economy too early. Also, the specter of a renewed U.S.-China trade war, or worse, looms in the background after recent harsh rhetoric coming from both sides and directed at the other.

In overnight news, Eurozone factory output in March dropped 11.3% from February, which was a monthly record. Also, U.K. GDP dropped 2.0% in the latest quarter.

The marketplace will be watching Federal Reserve Chairman Jerome Powell in a morning webcast to an economics group, and especially wanting to hear this thoughts on U.S. interest rates that could fall into negative territory. President Trump tweeted Tuesday he could be in favor of such occurring. This matter is of special interest to precious metals traders, as the knock on investing in gold has been that it offers investors no dividend. Interest rates at or below zero work to eliminate the “opportunity cost” associated with owning precious metals.

The important outside markets see Nymex crude oil futures slightly lower early today and trading around $25.50 a barrel. The U.S. dollar index is slightly up today. The yield on the benchmark U.S. Treasury 10-year note is currently around 0.66%.

U.S. economic reports out Wednesday include the weekly MBA mortgage applications survey, the producer price index and the weekly DOE liquid energy stocks report.

–Jim
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Tuesday, May 12–Jim Wyckoff’s Morning Markets Report

Global stock markets were narrowly mixed in overnight trading. U.S. stock indexes are pointed toward slightly lower openings when the New York day session begins. Traders and investors are assessing the markets ramifications of a very possible “second wave” of the Covid-19 pandemic as major global economies start to reopen their businesses and transportation infrastructure. There is growing sentiment that economic recoveries will be slower than initially expected and which had been factored into current market prices, including the solid rallies in many global stock indexes. If marketplace notions continue to shift to slower economic recoveries it’s likely that many markets (especially the stock markets) will have to do some serious re-pricing—to the downside.

The Trump administration’s chief pandemic health official, Dr. Anthony Fauci, will testify before the U.S. Senate today and will warn of the high potential for infections to rise if the U.S. economy begins to reopen too early. Many states are starting to reopen more of their businesses. Government leaders have to walk a tightrope of balancing a likely increase of infections upon reopening businesses versus continued economic damage if they don’t, and that itself will take a significant human health toll. There is no single, correct solution to the matter. It’s a no-win situation for government leaders making those decisions.

The U.S. Federal Reserve late Monday announced it will begin buying corporate bond exchange traded funds (ETFs) for the first time ever, in a further effort to grease the skids of the U.S. financial system. It’s quite extraordinary to see the range of expectations of economists regarding the Covid-19-induced monetary policy stimuli from the major central banks and the future economic impact of such. Some economists forecast price inflation, some call for price deflation and others call for price “stagflation,” or higher inflation with little to no economic growth. Two markets to watch closely that will very likely provide a clue on which scenario will play out are crude oil and gold. If those markets push solidly higher on a sustained basis then inflation would be most likely. If they grind sideways or lower, deflation would most likely to be the case for an extended period of time. One should hope that inflation is the outcome, not because it is such a good thing, but because extended price deflation is a very bad thing for most markets. What do you think? Drop me an email at jim@jimwyckoff.com. I always enjoy hearing from my valued readers.

Speaking of inflation levels, or lack thereof, today’s U.S. consumer price index for April is due out and is expected to come in down 0.8% from March.

The important outside markets today see Nymex futures higher early today and trading around $25.00 a barrel. The U.S. dollar index is weaker today. The yield on the benchmark U.S. Treasury 10-year note is currently around 0.7%.

U.S. economic reports out Tuesday include the weekly Goldman Sachs and Johnson-Redbook retail sales reports, the NFIB small business index, the consumer price index, the monthly Treasury budget statement and real earnings.

–Jim
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The Nymex crude oil futures market has seen a strong rebound from the historic lows seen last month. The recent price gains do suggest a market bottom is in place and that crude oil futures prices can trend at least sideways, if not sideways to higher in the near term. Remember that futures markets tend to factor into their prices known fundamental events before they ever fully play out.–Stay tuned! Jim

Monday, May 9–Jim Wyckoff’s Morning Markets Report

Global stock markets were mixed in overnight trading, with Asian stock indexes mostly higher and European stocks mostly down. U.S. stock indexes are pointed toward weaker openings when the New York day session begins. There are some new concerns about a second wave of Covid-19 sweeping countries already hit hard by the pandemic. South Korea and Singapore are seeing a resurgence in cases. This development comes as many major global economies are starting to reopen as their citizens become less patient regarding being quarantined.

There is still some unease in the marketplace regarding still-tense U.S.-China relations. The world’s two largest economies have been exchanging barbs over the origins of Covid-19, with President Trump suggesting China may have manufactured the virus in a laboratory. While U.S. and China trade officials have communicated in recent days and reaffirmed China’s commitment to purchase U.S. agricultural products, President Trump implied Friday he still may sanction China over its handling of the pandemic in its early stages. “I’m having a very hard time with China,” Trump said Friday.

China over the weekend said it would continue to stimulate its economy to support its recovery from the pandemic.

Bitcoin prices are getting hammered Monday after hitting an 11-week high last Friday.

The important outside markets today see Nymex futures lower early today and trading around $24.25 a barrel. The U.S. dollar index is higher today. The yield on the benchmark U.S. Treasury 10-year note is currently around 0.68%.

U.S. economic reports out Monday are light and include the employment trends index.

–Jim
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