Daily Morning Report

Tuesday, January 28–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were mixed to weaker overnight. U.S. stock indexes are pointed toward firmer openings when the New York day session begins, following solid losses Monday. There is still some risk aversion in the global marketplace as the coronavirus outbreak continues to spread in China, with over 100 dead and over 4,500 infected in that country, according to the latest reports. Other countries are also seeing its citizens contract the virus.

Veteran traders know that shock market events like the coronavirus outbreak tend to see the markets factor in worst-case scenarios in the early stages of the affair. Price action in several markets the past few days suggests this event will be factored into most market prices sooner rather than later—and may be already factored in altogether. Reason: Most shock events to markets do not have the worst-case scenario play out. Once traders realize the shock event is not as bad (for markets) as they first thought, the markets’ prices begin to move back toward where they were before the shock occurred. Of course, right now it’s still too early to tell if the markets have fully factored in the coronavirus and its impact on the global economy. By the end of this week, traders and investors should have a better idea whether the outbreak has mostly run its course, from a markets-impact perspective.

The coronavirus outbreak has overshadowed the meeting of the Federal Reserve’s Open Market Committee (FOMC) that begins Tuesday morning and ends Wednesday afternoon with a statement. No change in U.S. monetary policy is expected at this week’s meeting.

The key outside markets today see crude oil prices lower and trading around $52.75 a barrel. Meantime, the U.S. dollar index is slightly higher and hit a two-month high overnight.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, durable goods orders, the S&P/Core-Logic home price indexes, the Richmond Fed business survey, and the consumer confidence index.

–Jim

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Monday, January 27–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were solidly down overnight. U.S. stock indexes are pointed toward sharply lower openings when the New York day session begins. Over the weekend the coronavirus illness that apparently originated in China has rapidly spread, killing at least 80 of its citizens, with nearly 8,500 cases now reported in China. Several Chinese cities are under quarantine. Several cases are now reported in the U.S. as doctors are now saying the illness is more easily contractable. There are increasing worries the outbreak could hurt world economic growth. Raw commodity prices, including crude oil, are slumping. Safe-haven gold prices are higher Monday. This week is the Chinese Lunar New Year holiday—the most important holiday in China. Chinese authorities have extended the week-long holiday by two days due to the coronavirus outbreak.

Reports of a Boeing jetliner crashing in Afghanistan are further unsettling the marketplace. Details on the purported crash are sketchy with Boeing officials currently denying one of their planes has crashed.

The key outside markets today see crude oil prices sharply lower, at a 3.5-month low, and trading around $52.35 a barrel. Meantime, the U.S. dollar index is slightly higher and hit a seven-week high overnight, as the USDX is trending up.

U.S. economic data due for release Monday include new residential sales and the Texas manufacturing outlook survey.

–Jim

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The Nymex crude oil futures market has seen prices careen lower the past couple weeks, losing around $10 a barrel from the January spike high. Do not be surprised if the early-January high of $65.40 is the high for the year in crude oil. And don’t be surprised to see crude oil trade the rest of the year in a choppy range between $50.00 and $60.00. Stay tuned!–Jim

Friday, January 24–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were mostly up overnight. U.S. stock indexes are pointed higher openings when the New York day session begins. European markets were boosted from some upbeat economic data Friday, as the composite purchasing managers index (PMI) came in at 50.9 in January, unchanged from December. The German manufacturing PMI for January came in at 45.2 and beat market expectations. The German manufacturing PMI was reported at 43.7 in December. A reading above 50.0 suggests expansion. European traders were encouraged that economic workhorse Germany is seeing its manufacturing sector improve.

The marketplace this week has waffled on the coronavirus illness that is impacting China and has now killed at least 26 of its citizens, with nearly 1,000 contracting the illness and several cities in China on lockdown. One day the markets are spooked by the matter and then next day they seem to ignore it. Reports Friday said the breakout of coronavirus could lop off over 1% of China’s annual GDP, especially as the main holiday in China, the Lunar New Year, starts this weekend. At least one case of the virus has been found in the U.S. and one has been reported in Singapore. The U.S. State Department on Thursday advised U.S. citizens to reconsider traveling to the impacted regions of China. It’s likely this situation will get worse before it gets better.

The key outside markets today see crude oil prices weaker and trading around $55.35 a barrel. Prices Thursday hit a two-month low as prices are in a steep near-term downtrend.
Meantime, the U.S. dollar index is higher and hit a seven-week high overnight, as the USDX is trending up.

U.S. economic data due for release Friday includes the U.S. flash services PMI and the manufacturing PMI.

–Jim

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Thursday, January 23–Jim Wyckoff’s Morning Markets Report

Asian and European stock markets were mostly down overnight. U.S. stock indexes are pointed toward weaker openings when the New York day session begins. There is some risk aversion creeping back into the world marketplace late this week. The coronavirus impacting China has now killed 17 citizens there as China has locked down the city of 10 million people, Wuhan, reports said. At least one case of the virus is in the U.S. President Trump’s trade threats against the European Union in an interview in Davos on Wednesday are also unsettling European traders.

The key European event today will be the regular monetary policy meeting of the European Central Bank, the results of which should be out soon, as of this writing. No change in ECB policy is expected but the press conference from ECB President Lagarde will be closely monitored.

The key outside markets today see crude oil prices down and trading around $56.00 a barrel. The U.S. dollar index is near steady early today.

U.S. economic data due for release Thursday includes the weekly jobless claims report, leading economic indicators, the weekly DOE liquid energy stocks report, and the Kansas City Fed manufacturing survey.

–Jim

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The corn and soybean bulls have faded recently but the wheat market bulls are strong, pushing futures prices to multi-month highs recently. The big question on wheat traders’ minds: Can wheat futures prices continue to rally at the same time corn and soybean prices trend sideways to lower? Veteran grain traders think this scenario cannot last long. However, at present, the price trend in wheat futures is up, and “the trend is your friend” in trading markets. Stay tuned!–Jim