Daily Morning Report

Friday, December 21–Jim Wyckoff’s Morning Markets Report

OVERNIGHT DEVELOPMENTS

European and Asian stock markets were mostly lower overnight, following the solid losses in the U.S. stock market Thursday that drove the indexes to new lows for the year. U.S. stock indexes are pointed toward mixed openings when the New York day session begins. Recently, on big sell off days in the U.S. stock market, trading starts out calmer and then gets more volatile and skittish as the sessions progress. Today could offer the same.

It’s still a very keen risk-off mentality in the world marketplace heading into the weekend and into the Christmas holiday next week. Worries about slowing world economies, slumping crude oil prices, a potential U.S. government shutdown later today, and a U.S. Federal Reserve that many say is out of touch with the markets are all combining to make traders and investors very squeamish. “When in doubt, get out,” is the mantra of many stock market traders at present. On the other hand, U.S. Treasury and gold market bulls are licking their chops amid the stock market meltdown.

Gold and U.S. Treasury prices today have pulled back a bit from their highs this week, on normal downside corrections in price uptrends.

In focus today is the U.S. Congress and President Trump in a stare-down on the federal budget. Trump wants funding for a border wall with Mexico, while the Democrat-controlled U.S. House does not. The U.S. government will see a partial shutdown at midnight tonight if there is no budget agreement reached by that time. This is not the major issue for the markets, but it is “piling on” in an already-shaky situation.

The key outside markets today see the U.S. dollar index higher on a corrective bounce from solid losses Thursday that pushed prices to a four-week low. The greenback has been hit by the more dovish Federal Reserve and easing tensions in the European Union regarding Italy’s finances, which have supported the Euro currency.

Meantime, Nymex crude oil prices are modestly lower and hit a 17-month low of $45.32 a barrel overnight. There are still no early chart clues the crude oil market is near a bottom, but there is some strong longer-term chart support at the $42 area that may halt the slide.

Traders are awaiting Friday morning’s third estimate of U.S. GDP report for the third quarter, which is expected to show a rise of 3.5%, year-on-year, which is the same as the second estimate.

Other U.S. economic data due for release Friday includes the durable goods report, the University of Michigan consumer sentiment survey, personal income and outlays and the Kansas City Fed manufacturing survey.

–Jim

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Thursday, December 20–Jim Wyckoff’s Morning Markets Report

OVERNIGHT DEVELOPMENTS

European stock markets were mostly lower overnight, following the solid losses in the U.S. stock market Wednesday that drove the indexes to new lows for the year. U.S. stock indexes are pointed toward slightly higher openings when the New York day session begins. However, the U.S. stock market is very wobbly and traders are leery of another big drop.

The world marketplace is still digesting the U.S. FOMC interest rate cut on Wednesday afternoon and the comments from Fed Chairman Jerome Powell. Traders and investors deemed the Fed’s new stance as more dovish than previously, but not dovish enough to stave off what many believe is an impending global economic slowdown.

Chinese economic and political officials are holding key meetings late this week, at which major economic initiatives are being discussed and could be announced. China’s economy has been pinched this year by tariffs imposed by the U.S. on China’s imports.

It now appears less likely, but still not out of the question, the U.S. government will shut down Friday, as reports say the Trump administration is likely to come to an agreement with Congress on a budget.

The key outside markets today see the U.S. dollar index solidly lower and hitting a four-week low overnight. The greenback is being hit by the more dovish Federal Reserve and easing tensions in the European Union regarding Italy’s finances, which have supported the Euro currency.

Meantime, Nymex crude oil prices are lower and hit another 15-month low of $45.82 a barrel overnight. There are still no early chart clues the crude oil market is near a bottom, but there is some strong longer-term chart support at the $42 area that may halt the slide.

Traders are awaiting Friday morning’s U.S. GDP report for the third quarter, which is expected to show a rise of 3.5%, year-on-year.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the Philadelphia Fed business survey, and leading economic indicators.

–Jim

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The U.S. stock indexes this week have hit new lows for the year as serious near-term technical damage has been inflicted, to suggest still more selling pressure to come. There are no early technical clues to suggest the U.S. stock indexes are close to bottoming out. So much for the seasonal “Santa Claus” rally in equities! Keep reading my daily reports. It was in those reports that you were warned in October that the U.S. stock indexes had put in major market tops and the more selling pressure was likely. Stay tuned!

Wednesday, December 19–Jim Wyckoff’s Morning Markets Report

OVERNIGHT DEVELOPMENTS

European stock markets were mostly firmer overnight, while Asian shares were mostly weaker. U.S. stock indexes are pointed toward higher openings when the New York day session begins, on a rebound after the indexes fell to new low closes for the year on Tuesday. Gold, the U.S. dollar and U.S. Treasuries have been supported recently by the wobbly and volatile U.S. stock market.

Focus today is squarely on the U.S. Federal Reserve’s Open Market Committee (FOMC) meeting that began Tuesday morning and ends Wednesday afternoon with a statement. Many still expect the FOMC to raise interest rates by 0.25% this afternoon. However, the likelihood for a rate hike today has come into question after proclamations from President Trump, his closes economic advisors and noted market analysts and traders that the Fed should leave interest rates alone. Fed Chairman Jerome Powell holds a press conference after the FOMC statement. Look for active markets this afternoon, after the FOMC announcement.

Chinese economic and political officials are holding key meetings this week, at which major economic initiatives are being discussed and could be announced. China’s economy has been pinched this year by tariffs imposed by the U.S. on China’s imports.

It now appears less likely the U.S. government will shut down Friday, as reports say the Trump administration is likely to come to an agreement with Congress on a budget.

The key outside markets today see the U.S. dollar index lower on a further corrective pullback after hitting a nearly two-year high last week. Meantime, raw commodity sector leader Nymex crude oil prices are firmer on tepid short covering after careening to a 15-month low of $45.79 a barrel on Tuesday. There are still no early chart clues the crude oil market is near a bottom.

A heavy slate of U.S. economic data is also due out later this week, including the first estimate of third-quarter gross domestic product on Friday morning.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, international transactions and the current account, existing home sales, and the weekly DOE liquid energy stocks report.

–Jim

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Tuesday, December 18–Jim Wyckoff’s Morning Markets Report

OVERNIGHT DEVELOPMENTS

European and Asian stock markets were mostly weaker overnight. U.S. stock indexes are pointed toward firmer openings when the New York day session begins, on a tepid rebound after the indexes fell to new lows for the year on Monday. The small-cap Russell 2000 index is now in bear market territory—down 20% from its high.

In overnight news, China’s President Xi Jinping gave a hawkish speech on national television Tuesday, suggesting to some that China could take a harder line with the U.S. on trade and intellectual property issues that have the world’s two largest economies at loggerheads. Others think the Xi speech as just rhetoric aimed at shoring up his own reputation among the Chinese people.

The U.S. Federal Reserve’s Open Market Committee (FOMC) meets Tuesday and Wednesday to discuss monetary policy, while the U.S. government could be shut down at the end of the week if Congress and President Trump cannot agree on a budget plan. Most expect the FOMC to raise interest rates by 0.25% on Wednesday afternoon, at the conclusion of their meeting. The expectations for a rate hike are despite proclamations from President Trump, his closes economic advisors and noted market analysts and traders that the Fed should leave interest rates alone.

A heavy slate of U.S. economic data is also due out later this week, including the first estimate of third-quarter gross domestic product.

The key outside markets today see the U.S. dollar index weaker on a further corrective pullback after hitting a nearly two-year high last Friday. Meantime, Nymex crude oil prices are lower and hit a 15-month low of $47.84 a barrel overnight. There are still no early chart clues the crude oil market is near a bottom.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, new residential construction, and the FOMC meeting begins.

–Jim

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The U.S. dollar index is a basket of six major world currencies stacked up against the U.S. dollar. See on the daily bar chart that the USDX last week hit a two-year high amid a solid price uptrend. The greenback bulls are in solid technical control and there are no early technical clues the dollar index is about to top out. Thus, the path of least resistance heading into the new year is sideways to higher. Stay tuned!