Daily Morning Report

Monday, December 16–Jim Wyckoff’s Morning Markets Report

Asian and European stock indexes were higher overnight. The U.S. stock indexes are pointed toward higher openings and at or very near record highs when the New York day session begins. Risk appetite is keener to start the trading week as events last week cleared up a lot of uncertainty in the world marketplace. The U.S. and China have reached a partial trade deal, U.K. Prime Minister Boris Johnson won an election mandate on Brexit, and the U.S. reached a trading deal with its neighbors, Canada and Mexico.

China also got some upbeat economic data Monday, as its industrial output in November was up 6.2%, year-on-year, beating market expectations for a rise of 5.0%.

In other overnight news, the Euro zone composite purchasing managers index (PMI) came in at 50.6 in December, which was in line with market expectations. However, the manufacturing PMI was 45.9 versus expectations for a reading of 47.3 in the period. A reading below 50.0 suggests contraction in the sector. Germany’s manufacturing PMI came in at 44.1, also a miss to the downside.

The key “outside markets” today see the U.S. dollar lower. Meantime, Nymex crude oil prices are near steady and trading around $60.00 a barrel.

U.S. economic data due for release Monday includes the Chicago Fed national activity index and new residential sales.

–Jim

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Friday, December 13–Jim Wyckoff’s Morning Markets Report

Asian and European stock indexes were higher overnight. The U.S. stock indexes are pointed toward higher openings and new record highs when the New York day session begins. Risk is back on the table for traders and investors following reports the U.S. and China are very close to a partial trade deal, as was reported at midday Thursday, including a tweet from President Trump that implied a deal was imminent. However, the marketplace is now wondering why there is “radio silence” coming from Chinese officials Friday. Some media outlets in China were saying any deal that is agreed upon must be fair. Reports said the apparent partial trade deal involves China purchasing $50 billion of U.S. goods—mostly agricultural products—in 2020, in exchange for the U.S. not imposing new tariffs on Chinese imports into the U.S., and cutting in half the current tariffs in place.

The general election in the U.K. Thursday saw Prime Minister Boris Johnson and conservative policies score a solid victory. Johnson then proclaimed the U.K. will exit the European Union (Brexit) by the end of January. This has taken the Brexit uncertainty off the table, after such had been lingering for quite some time. U.K. stocks surged on the news, as did the British pound.

One feature in the markets late this week is rising global bond yields, as assets have moved from the safer-haven fixed income sector into stock markets.

The key “outside markets” today see the U.S. dollar solidly lower and hitting a nearly five-month low. Meantime, Nymex crude oil prices are higher and trading around $60.00 a barrel.

U.S. economic data due for release Friday includes retail sales, import and export prices, and manufacturing and trade inventories.

–Jim

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The U.S. dollar index is a basket of six major world currencies weighted against the greenback. Just this week, for the first time in months, the USDX bears have seized the overall near-term technical advantage. This has significant implications for other markets, including raw commodities (bullish), most of which are priced in U.S. dollars on the world market. Stay tuned!–Jim

Thursday, December 12–Jim Wyckoff’s Morning Markets Report

Asian and European stock indexes were mixed mostly firmer overnight. The U.S. stock indexes are pointed toward modestly higher openings when the New York day session begins. The marketplace is still digesting Wednesday’s conclusion of the FOMC meeting of the Federal Reserve, which saw no change in U.S. interest rates and a mostly upbeat assessment of the U.S. economy. The FOMC did tip its hand and say there were no rate-cut plans on the table for 2020 and implied that interest rates could remain stable for a prolonged period of time. The FOMC statement and comments from Fed Chairman Powell were deemed mostly neutral, but the gold and U.S. Treasury markets rallied, while the U.S. dollar index sold off in the aftermath of the FOMC statement Wednesday afternoon.

The European Central Bank is meeting today, headed up by new ECB President Christine Lagarde. No changes in ECB monetary policy are expected.

A general election in the U.K. today will help determine the course of Brexit and Prime Minister Boris Johnson’s conservative policies.

In other overnight news, China’s official Xinhua news agency said China will lower “funding costs” for the overall economy.

Euro zone industrial production in October was reported down 0.5% from September and down 2.2%, year-on-year. Those figures were a bit worse than expected.

The Sunday, Dec. 15 U.S. trade tariffs deadline on China’s imports is looming over the marketplace. While recent rhetoric from both sides has been mostly upbeat recently, traders know that the situation is still very fluid. Many markets are likely to be more tentative the rest of this week, knowing that a surprise could come this weekend.

The key “outside markets” today see the U.S. dollar index firmer. Meantime, Nymex crude oil prices are higher and trading around $59.00 a barrel.

U.S. economic data due for release Thursday includes the weekly jobless claims report and the producer price index.

–Jim

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Wednesday, December 11–Jim Wyckoff’s Morning Markets Report

Asian and European stock indexes were mixed weaker overnight. The U.S. stock indexes are pointed toward narrowly mixed openings when the New York day session begins. This Sunday (Dec. 15) is the deadline for new U.S. trade tariffs going into effect against Chinese goods imported into the U.S. While the rhetoric this week has been mostly upbeat on the matter, the history of the U.S.-China trade war is one of distinct highs and lows regarding progress toward a deal. And the marketplace knows President Trump’s mercurial personality. Thus, markets and traders are likely to remain tentative the rest of this week, and slightly leaning toward risk aversion.

Traders and investors are also awaiting the U.S. economic highlight of the week: the Federal Reserve’s Open Market Committee meeting (FOMC) that began Tuesday morning and ends Wednesday afternoon with a statement. The Fed is expected to make no changes in its monetary policy. However, the FOMC statement and Fed Chairman Powell’s press conference will be closely scrutinized for clue on futures monetary policy moves. The European Central Bank also meets on monetary policy Thursday.

The key “outside markets” today see the U.S. dollar index firmer. Meantime, Nymex crude oil prices are weaker and trading around $59.00 a barrel.

Other U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the consumer price index, real earnings, the monthly Treasury budget statement and the weekly DOE liquid energy stocks report.

–Jim

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The March e-mini S&P stock index futures bulls powered prices higher late last week to negate a potentially bearish “key reversal” down that had occurred earlier. However, now a bearish diamond pattern has formed on the daily bar chart, which is another technical clue of a topping process in the market. But if history repeats itself, the bulls will again dodge this bullet–or maybe not. Price action this week will determine. Stay tuned!–Jim