Daily Morning Report

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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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. The general public (not the investing public) is starting to pick up on the solid rebound in the U.S. stock market despite the gloom and doom that continues to envelope the American and global economies. The vast majority of regular traders and investors knows the rallying stock market means the marketplace strongly expects the North American and European economies will be roaring back to life in the coming months. However, for the general public, most of which does not have a portfolio of stocks, the rallying stock markets could give Wall Street another black eye amid the perceptions of the rich getting richer during these extremely troublesome times that have so many out of work. Don’t be surprised if the U.S. presidential election this fall has at least some attention paid to this matter.

Speaking of troubled times, that point will be driven home hard Friday morning with the release of the April U.S. employment situation report from the Labor Department. The non-farm jobs figure is expected to show a loss of 21 million American workers and an unemployment rate north of 15%. These numbers will be the worst ever, since these figures started being recorded in the 1940s. Some economists are calling for U.S. economic data in the coming weeks to reach the Great Depression era figures of the 1930s.

On the positive side of the ledger on this last trading day of the week, U.S. and Chinese trade officials had a conference call overnight, reports said. The call was apparently prompted by President Trump threatening to call off the Phase 1 trade deal reached in January. The reports said the call went well. China has been purchasing more American agricultural products, as reported by USDA this week.

Traders and investors are also more upbeat this week amid a strong recovery in Nymex crude oil futures prices as U.S. and European economies begin to reopen. Nymex futures are higher early today and trading around $24.00 a barrel. Less than two weeks ago June crude futures traded well below $10.00 a barrel. Many raw commodity futures markets have taken note that their sector leader, crude, has made such a strong recovery recently—because it implies other commodity markets may also have hit their lows, or are close to bottoming out.

Other U.S. economic reports out Friday include monthly wholesale trade.

–Jim
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The U.S. stock indexes are in near-term price uptrends at present, to suggest more sideways-to-higher price action in the coming days or longer. There are no early technical clues to suggest prices are near a top. If any significant bearish chart clue arises, you’ll hear it first from me, in my daily markets report.–Stay tuned! Jim

Thursday, May 7–Jim Wyckoff’s Morning Markets Report

Global stock markets were mixed to firmer in overnight trading. U.S. stock indexes are pointed toward higher openings when the New York day session begins. Traders and investors are more upbeat this week amid a strong recovery in Nymex crude oil futures prices and as U.S. and European economies begin to reopen. Still, the Covid-19 cases and deaths in the U.S. continue to rise outside of the earlier hotspots like New York City.

Focus today is on the weekly U.S. jobless claims report, which is expected to show less claims filed than the enormous figures seen in recent weeks, but still very large at over 3 million in new claims expected. Thursday’s weekly jobless report comes just ahead of Friday morning’s monthly employment situation report from the U.S. Labor Department, which is expected to show a loss of over 20 million jobs in April and an unemployment rate north of 15%, after a jobless rate of just 4.4% reported in March.

Another positive for traders and investors today is reports that U.S. and China trade officials will meet next week. The meeting comes after the recent rise in tensions between the world’s two largest economies, as the U.S. has accused China of hiding the Covid-19 outbreak, and even creating it in a laboratory.

China also got some upbeat economic data Thursday, as its exports unexpectedly rose in April by 3.5%, year-on-year, after declining 6.6% in March. Exports in April were forecast at down over 18%. Meantime, China’s imports fell 14.2% in April after declining only 0.9% in March.

The Bank of England today left its monetary policy unchanged, as most had expected. However, the BOE said U.K. economic growth for much of 2020 could be down 30%.

At least one market advisory firm is now calling for a “commodity super-cycle” to begin to occur in the coming months. The firm believes the combination of major global economies coming back to life in rapid fashion, after the Covid-19-induced demand shock, and the recent huge monetary stimulus measures from the big central banks of the world will produce huge demand for raw commodities that will drive their prices sharply higher. The naysayers to this postulation say the 2008 financial crisis that saw similar—although not nearly as extreme—conditions did not produce problematic price inflation at all, and in fact the world’s major economies struggled with inflation that was too low for many years. This longtime market watcher’s perspective on the matter: I lean on the side of problematic price inflation, thinking of the old saying, “no good deed (central bank stimulus) goes unpunished.”

The important outside markets Thursday see Nymex crude oil prices higher and trading around $26.00 a barrel in June futures. Prices have more than tripled from the recent low. The U.S. dollar index is slightly higher today as the greenback bulls are having a very good week.

Other U.S. economic reports out Thursday include the Challenger job-cuts report, preliminary productivity and costs, consumer credit and monthly chain store sales.

–Jim
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