Daily Morning Report

Wednesday, April 22–Jim Wyckoff’s Morning Markets Report

Global stock markets were mostly up in overnight trading. U.S. stock indexes are pointed toward higher openings when the New York day session begins. The U.S. stock indexes are seeing a corrective bounce at mid-week, following solid losses scored on Monday and Tuesday. The U.S. equity traders are watching corporate earnings reports that have started to come out this week, but have so far been mostly overshadowed by the collapse in the global crude oil market.

This week’s stunning and historic trading action in crude oil futures, in which the just- expired May Nymex contract fell deep into negative price territory but recovered to around $10 a barrel by its expiry, and which has seen Brent crude oil futures fall below $20 a barrel and hit a 21-year low, has possibly caused some oil-based exchange traded funds (ETFs) to be at or near a state of total failure. Speculation in the marketplace at present is that Asian investors have been hit the hardest—so hard that some Asian financial markets could experience a contagion effect and implode, themselves. So far this is just speculation. However, such talk could be partly why safe-haven gold prices are up around $35 an ounce Wednesday. What was so ironic for this veteran reporter on Monday and Tuesday was the eerie calm in the foreign exchange markets, amid the storm of an unprecedented meltdown in the global oil market—arguably the most fungible commodity market in the world. The Russian ruble has been dinged, but the FOREX “majors” appear to have paid little attention to the matter. However, if Asian financial markets become keenly distressed the FOREX majors will wake up in a hurry. Of note, Hong Kong’s de-facto central bank, the Hong Kong Monetary Authority, on Wednesday implemented a temporary U.S. dollar-liquidity facility for the city-state’s banks. The move allows holders of U.S. Treasuries to borrow greenbacks against their Treasury holdings. The action could be tied to crude oil’s severe price declines this week and could be a precursor for some rough waters just ahead in the Asian financial markets.

Oil prices are more stable today, with Nymex West Texas Intermediate (WTI) June futures trading around $11.50 and Brent futures just below $20.00. The other important outside markets today see the U.S. dollar index weaker on a corrective pullback from recent gains. The 10-year U.S. Treasury note yield is trading around 0.58% this morning.

U.S. economic reports due for release Wednesday include the weekly MBA mortgage applications survey, the monthly house price index and the weekly DOE liquid energy stocks report.

–Jim
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The world marketplace is still buzzing and even shaken after Monday’s astonishing and historic trading action in Nymex crude oil futures, in which the expiring May contract fell deep into negative territory by the close—meaning the up-to-then-profitable shorts were forced to take delivery of physical crude oil with no place to store it, and then they had to pay up to get rid of the oil—thus the May futures price trading at -$40 at one point. (More on this important matter in my bi-weekly newsletter that will be out Tuesday.) That price action in crude has buyers in many commodity markets even more leery early this week, which is also spilling over into selling pressure in global stock markets.–Stay tuned! Jim

Tuesday, April 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. The world marketplace is still buzzing and even shaken after Monday’s astonishing and historic trading action in Nymex crude oil futures, in which the expiring May contract fell deep into negative territory by the close—meaning the longs could be forced to take delivery of physical crude oil with no place to store it, and then they had to pay up to get rid of the oil—thus the May futures price trading at -$40 at one point. (More on this important matter in my bi-weekly newsletter that will be out Tuesday.) That price action in crude has buyers in many commodity markets even more leery early this week, which is also spilling over into selling pressure in global stock markets.

This is a busy week for U.S. corporate earnings, which are very likely to remind traders and investors of debilitating effects of the Covid-19 pandemic, even as some parts of the North American economy may be set to reopen soon.

The important outside markets today see June Nymex crude oil futures down around $4.00, or 35%, at $16.40. Brent crude oil futures are trading just above $18.00 and have dropped over 25% this week. The U.S. dollar index higher on safe-haven demand. The 10-year U.S. Treasury note yield is trading around 0.575% this morning—well down from levels seen recently and a sign of “flight to quality” amid higher anxiety in the marketplace at present.

U.S. economic reports due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, and existing home sales.

–Jim
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Monday, April 20–Jim Wyckoff’s Morning Markets Report

Global stock markets were mixed to lower in overnight trading. U.S. stock indexes are pointed toward lower openings when the New York day session begins. The feature in overnight trading was a very sharp drop of over 25% in crude oil prices. Nymex crude oil hit a 21-year low of $13.31 a barrel. Just two months ago Nymex crude prices were above $60.00. North American storage facilities are full and there is no place to put new production, amid the huge drop in gasoline demand that has resulted in prices at the pump going for less than $1.00 a gallon at some locations. The overnight plunge in crude oil has added further tension to an already-anxious marketplace. This is a busy week for U.S. corporate earnings, which are very likely to remind traders and investors of debilitating effects of the Covid-19 pandemic.

In the U.S., more and more citizens, many of whom are out of work and running out of money, are demanding that governments reopen businesses.

China’s central bank on Monday again cut its key lending rate by 20 basis points, to 3.85%, in a further effort to resuscitate its crippled economy.

In other overnight news, the German Bundesbank said Germany, the strongest economy in the European Union, is facing a severe economic recession from which it is not likely to recover any time soon. The German central bank said the reason for the slow recovery is that that German government is likely to keep social distancing restrictions on its citizens until a vaccine is found for Covid-19. More economists are saying the expected economic recovery in North America will also be slower than the optimistic forecasts that were initially reckoned by many.

The other important outside markets today see the U.S. dollar index slightly higher. The 10-year U.S. Treasury note yield is trading around 0.632% this morning—down from levels seen late last week and a sign of higher anxiety in the marketplace at present.

U.S. economic reports due for release Monday include the Chicago Fed national activity index.

–Jim
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The Nymex crude oil futures market Friday hit a fresh 18.5-year low just above $18.00 a barrel. In early January prices traded above $64.00. Prices are in a steep downtrend and there are no solid, early chart clues that prices are close to bottoming out. Importantly, raw commodity sector leader crude oil’s price plunge is also a heavy, bearish anchor on most of the commodity futures markets.–Stay tuned! Jim

Friday, April 17–Jim Wyckoff’s Morning Markets Report

Global stock markets were mixed to mostly firmer in overnight trading. U.S. stock indexes are pointed toward sharply higher openings and five-week highs when the New York day session begins. Traders and investors are more upbeat to end the trading week. President Trump Thursday afternoon laid out plans to reopen the U.S. economy in stages that could begin as early as today, as there are early signs the Covid-19 pandemic in North America and Europe has hit a peak for new infections. Also, there is new hope that a drug being tested by Gilead can greatly reduce the severity of the respiratory illness, based on early clinical trials. As one market analyst put it, the marketplace is presently viewing the Covid-19 situation as “the glass being half-full.”

In overnight news, there was more dour economic data coming out of China Friday, as the world’s second-largest economy in March saw its industrial production down 8.4% versus down 13.5% in February, year-on-year. Retail Sales in the same period were off 19.0% compared to down 20.5% in February. Gross domestic product growth in the first quarter was minus 6.8% versus a year ago. The GDP figure was China’s first negative number ever recorded.

In a sign of the still-very-turbulent economic times, luxury retailer Neiman Marcus could not make a bond payment this week as the pandemic keeps its stores shuttered. The company is now in default, suggesting bankruptcy is next.

The important outside markets today see crude oil prices solidly lower and trading around $18.50 a barrel–an 18.5-year low. The U.S. dollar index is higher again this morning as the greenback bulls are having a good week. The 10-year U.S. Treasury note yield is trading around 0.65% this morning. Safe-haven gold prices are solidly lower amid the better risk appetite in the marketplace late this week.

U.S. economic reports due for release Friday are light and include the leading economic indicators report.

–Jim
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