Daily Morning Report

The gold market shot sharply higher early this week, amid safe-haven demand in an uncertain world at present. Look for new for-the-move highs in the coming weeks, or soon–and importantly amid high volatility. Stay tuned! Jim

Wednesday, March 25–Jim Wyckoff’s Morning Markets Report

Global stock markets were mostly higher in overnight trading. U.S. stock index futures are presently pointed toward mixed openings when the New York electronic day session begins. The equity markets are buoyed by news the U.S. Congress has agreed to a $2 trillion financial aid package for U.S. businesses and citizens so negatively impacted by the Covid-19 outbreak. News reports said the U.K.’s Prince Charles has tested positive for Covid-19.

Given Tuesday’s record gains in the U.S. stock indexes, many traders and investors are now wondering if the bottoms are in place for the U.S. stock indexes, which dropped into bear market territory at the fastest rate ever over the past three weeks. Some of the big shots on the TV business news channels are saying “not yet. It’s too early.” Those big shot TV commentators being in general agreement on that matter makes at least a few long-time market watchers think they might be wrong, because they usually are.

Metals traders are still buzzing about the wild price action in the gold futures and London cash (spot) market Tuesday. April Comex gold futures shot sharply higher Tuesday morning amid keen trader concern that London spot gold price quotes had become unreliable or had been halted. U.K. market-makers had ostensibly shut down as gold mines around the globe have curtailed operations due to the Covid-19 outbreak. With the U.K. government-ordered lock-down, many gold market makers were working from home Tuesday, creating even more confusion. The big gold traders in Europe who normally would base their trading decisions on the London spot gold price got spooked when the London spot price was “way out of whack” to the gold futures price—at as much as a $100.00 discount to Comex gold futures at one point early Tuesday morning. The confusion in the London spot market prompted the big European metals traders to rush to buy Comex gold futures as a hedge, as they felt they could not get what they felt were accurate or fair London spot gold prices. Also, there have been many reports the supply of physical gold bullion worldwide is hard to come by. That led to ideas Comex futures traders long (buyers) the gold market in the nearby contracts could hold their positions into expiration of those contracts and thereby take delivery of physical gold, per futures contract specifications. The credibility of this notion was bolstered late Tuesday evening when the London Bullion Market Association (LBMA) and major banks asked CME Group (parent company for Comex) to change physical delivery specifications for gold futures contracts to allow 400-ounce bars of gold, which is the standard for London traders. Currently, CME only allows 100-ounce bars to be delivered. Then later Tuesday evening the CME Group came out and announced a whole new gold futures contract was created, which would allow both 400-ounce and 100-ounce bars acceptable for delivery. The new gold futures contract, if approved by regulators, would start to trade in a few weeks. The upshot of this matter for all traders of all markets is that the London spot gold market had operated efficiently for over 150 years—until Tuesday. Such are the times we are experiencing at present.

The important markets today see Nymex crude oil prices slightly down and trading around $23.65 a barrel. The U.S. dollar index is sharply lower again after hitting a 17-year high on Monday. The 10-year U.S. Treasury note yield is trading around 0.85% Wednesday.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, durable goods orders, the weekly DOE liquid energy stocks report and the monthly house price index.

–Jim
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Tuesday, March 24–Jim Wyckoff’s Morning Markets Report

Global stock markets were higher in overnight trading. U.S. stock index futures are presently pointed toward sharply higher to limit-up openings when the New York electronic day session begins. It appears the world stock markets took a more bullish stance toward the Federal Reserve’s “atomic bomb” monetary stimulus moves Monday morning than did the U.S. markets. However, the U.S. stock index futures played catch-up overnight with the big to limit-up gains.

In overnight news, the U.K. is now locked down to control the Covid-19 outbreak. U.S. airlines are now considering halting all flights, but many believe that won’t occur. The buzz in Washington, D.C. and around the U.S. on Tuesday is on when the U.S. will reopen for business and if “the cure is worse than the sickness” regarding coronavirus and the U.S. economy grinding to a halt. President Trump appears to be getting very uneasy the longer the economy is shut down—especially in this presidential election year.

The U.S. Congress has yet to agree on a bailout package for U.S. businesses and citizens. Home Depot founder Ken Langone had a simple message for Congress Monday: “Get off your ass” and get something done for the American people. Most Americans agree with him.

In overnight news, manufacturing surveys in Europe and Japan contracted substantially. The Euro zone Markit purchasing managers index (PMI) was 31.4 in March versus 51.6 in February. A reading below 50.0 suggests contraction in the sector.

The important outside markets today see Nymex crude oil prices solidly up and trading around $25.00 a barrel. The U.S. dollar index is sharply lower after hitting a 17-year high on Monday. The 10-year U.S. Treasury note yield is trading around 0.82% Tuesday. Gold prices are sharply up and pushed well above $1,600.00 overnight, and have gained around $150.00 so far this week.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the U.S. flash manufacturing PMI, the services PMI, new residential sales and the Richmond Fed business survey. The Group of Seven financial ministers also meet today via a video teleconference.

–Jim

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The U.S. Treasury market has made a dramatic rebound in prices (lower yield) after strong selling pressure recently amid a rush for cash that put pressure on most markets–even safe-haven assets like Treasuries and gold. As the panic in the global marketplace as at least stabilized if not receded, buyers are stepping back into safe-haven assets like gold and Treasuries. Don’t be surprised to see U.S. Treasury bond and note futures hit new for-the-move highs in the near term. Stay tuned! Jim

Monday, March 23–Jim Wyckoff’s Morning Markets Report

Global stock markets were lower in overnight trading. U.S. stock index futures are presently pointed toward solidly lower openings when the New York electronic day session begins. The New York Stock Exchange, itself, is now closed. When the markets opened electronically Sunday, U.S. stock indexes were locked limit down. The U.S. Congress over the weekend failed to agree on a financial aid package for U.S. businesses and citizens, which is being blamed for the even more dour marketplace mood to start the trading week.

The Covid-19 outbreak continues to spread worldwide, with the U.S. economy shutting down even further as many states, including New York and California, have been locked down by their governors. Focus in the U.S. is on a shortage of medical supplies. Local health officials are now asking for the public to donate any supplies such as masks and gloves that they have at home. U.S. Senator Rand Paul has been diagnosed with Covid-19. Over the weekend much of the American public came to the stark realization the U.S. is not going to remain on lockdown for just a couple weeks, but instead for a period likely at least twice that long and probably even longer. China-U.S. relations are becoming more strained as President Trump now refers to Covid-19 as the “China virus,” which has angered the Chinese people.

Following is an edited email dispatch from a market analyst Monday morning: “U.S. economic growth estimates from the biggest investment banks are becoming increasingly dire. Last week, J.P. Morgan expected GDP to shrink 14% in the second quarter of this year, Goldman Sachs sees a 24% fall, while the latest forecast by Morgan Stanley is even gloomier, anticipating a 30% drop. However, the worst projections are coming from a well-respected Fed official, James Bullard, who said unemployment may hit 30% and GDP decline 50% in the second quarter. Within the next couple of weeks, we will get to know how severe the upcoming economic crisis will be. The scariest scenario is that it turns into a credit crisis which will break the financial system.”

The important outside markets today see Nymex crude oil prices weaker and trading around $22.25 a barrel. The U.S. dollar index is near steady after hitting a three-year high last week. Gold prices are higher and trading just below $1,500.00 an ounce. The 10-year U.S. Treasury note yield has dropped to 0.813% Monday after trading above 1.0% last week.

U.S. economic data due for release Monday is light and includes the Chicago Fed national activity index.

–Jim

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The Nymex crude oil futures market’s dramatic rebound late this week, after hitting an 18-year low of $20.06 a barrel on Wednesday, suggests this very important market has put in a price bottom. That’s very good news for the beleaguered raw commodity market bulls.