Daily Morning Report

Thursday, November 29–Jim Wyckoff’s Morning Markets Report

OVERNIGHT DEVELOPMENTS

European stock markets were also mostly higher overnight. Asian stock indexes were also mostly firmer. U.S. stock indexes are pointed toward weaker openings when the New York day session begins, following strong gains Wednesday. The U.S. stock index bulls are having a very good week, so far.

The marketplace is still buzzing about Fed Chairman Jerome Powell’s dovish remarks on U.S. monetary policy in a speech to the Economic Club of New York Wednesday. Powell said at present, U.S. interest rates are just below “neutral” levels and that the Fed will remain data dependent, with no set path on adjusting interest rates. Traders and investors interpreted Powell’s comments as meaning the Fed will likely raise interest rates slightly at its December meeting, but after that all bets are off. Prior to Powell’s speech, the sense of the marketplace was that the Federal Reserve would continue on a gradual rate-hike course in 2019. Powell also intimated that U.S. inflation is not at all problematic at present. The U.S. stock market rallied strongly on the news, while the U.S. dollar index sold off moderately. Gold prices also rallied on the news. Traders will get an update on Federal Reserve policy discussion when the FOMC minutes are released this afternoon.

Focus this week is also on the upcoming Group of 20 meetings that begin Friday in Argentina and will feature a face-to-face meeting between the U.S. and Chinese presidents on Saturday. The world’s two largest economies are locked in a heated trade war.

In overnight news, the European Central Bank issued a warning regarding the growing risks to the Euro zone financial sector. Trade disputes, Brexit and high debt levels of member countries were cited by the ECB as worrisome elements.

The key outside markets today find Nymex crude oil futures prices lower and hitting a 13-month low of $49.41 a barrel. Rising U.S. oil inventories are prompting the fresh selling pressure. Crude prices are down around 30% following the recent sharp declines. A key OPEC oil cartel meeting is scheduled for next week in Vienna, Austria.

The other key outside market today finds the U.S. dollar index trading firmer.

U.S. economic data due for release Thursday includes the weekly jobless claims report, personal income and outlays, pending home sales and the FOMC minutes.

–Jim

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Wednesday, November 28–Jim Wyckoff’s Morning Markets Report

OVERNIGHT DEVELOPMENTS

European stock markets were also mostly higher overnight. Asian stock indexes were also mostly firmer. U.S. stock indexes are pointed toward slightly higher openings when the New York day session begins. The U.S. stock index bulls are having a good week, so far, but the losses the past several weeks still suggest major market tops are in place.

Focus this week is on the upcoming Group of 20 meetings that begin Friday in Argentina and will feature a face-to-face meeting between the U.S. and Chinese presidents on Saturday. The world’s two largest economies are locked in a heated trade war. President Trump made hardline comments on the matter Monday, but his chief economic advisor on Tuesday sent mixed signals on any hopes for an agreement this weekend. There is general agreement that the trade war is hurting China’s economy much more than the U.S. economy.

On tap today is a speech by Federal Reserve Board governor Jerome Powell to the Economic Club of New York. Traders will be watching to see if Powell gives any clues on the timing and direction of the Fed’s monetary policy moves.

The key outside markets today find Nymex crude oil futures prices slightly lower. Prices Monday hit a 13-month low of $50.10. Crude prices are down around 30% following the recent sharp declines. A key OPEC oil cartel meeting is scheduled for next week.

The other key outside market today finds the U.S. dollar index trading near steady but not far below this month’s 1.5-year high.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the advance economic indicators report, the second estimate of third-quarter GDP, new residential sales, the Richmond Fed business survey, and the weekly DOE liquid energy stocks report.

–Jim

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The Nymex natural gas futures market has recently experienced extreme daily price volatility as prices touched a multi-year high earlier this month. That extreme volatility wiped out a hedge fund manager that I had known for many years. His main trading tool was selling well-out-of-the-money options on futures. Selling options can appear an easier way to make money in the futures markets because one’s winning percentage will be higher. However, as the hedge fund manager so brutally found out this month, all it takes is one episode of extreme volatility to blow up an entire hedge fund business, including customers losing all their investments–plus even owing money to the futures clearing firm! One of my long-time market analyst/trader friends once told me that he tried selling options on futures for one year, and he had 97% winners–but still just broke even on profits. Selling options has its place in the markets, but selling “naked” options is akin to “picking up pennies in front of a steamroller.” Stay tuned!

Tuesday, November 27–Jim Wyckoff’s Morning Markets Report

OVERNIGHT DEVELOPMENTS

European stock markets were mostly lower overnight. Asian stock indexes were mostly firmer. U.S. stock indexes are pointed toward weaker openings when the New York day session begins.

Focus this week is on the upcoming Group of 20 meetings that begin late this week in Argentina and will feature a face-to-face meeting between the U.S. and Chinese presidents on Saturday. The world’s two largest economies are locked in a heated trade war that appears to show no signs of de-escalating. President Trump made more hardline comments on the matter Monday. There is general agreement that the trade war is hurting China’s economy much more than the U.S. economy.

There is talk in the marketplace recently that the U.S. Federal Reserve may take a more dovish tone on its monetary policy due to notions the recent strong U.S. economic growth may be quickly decelerating. The Federal Open Market Committee meets to discuss monetary policy in late December. It’s widely expected the Fed will slightly raise its key Fed funds target range in December. However, a commentary in the Wall Street Journal today said Fed monetary policy will be “wide open” for 2019, which could lead to more uncertainty in the marketplace.

Nymex crude oil futures prices are slightly firmer today on mild short covering and a corrective rebound after hitting a 13-month low of $50.10 on Monday. Crude prices are down around 20% following the recent sharp declines. A key OPEC oil cartel meeting is scheduled for next week.

The other key outside market today finds the U.S. dollar index trading slightly higher but not far below this month’s 1.5-year high.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the S&P/Case-Shiller home price index, the quarterly house price index, and the consumer confidence index.

–Jim

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Monday, November 26–Jim Wyckoff’s Morning Markets Report

OVERNIGHT DEVELOPMENTS

European stock markets were mostly firmer overnight, as trader and investor appetites are more upbeat following a Brexit deal between the U.K. and the EU that appears a bit closer to being agreed upon, but still needs U.K. Parliament approval. U.S. stock indexes are pointed solidly higher at the New York openings.

Focus this week will be on the upcoming Group of 20 meeting later this week in Argentina that will feature a face-to-face meeting between the U.S. and Chinese presidents. The world’s two largest economies are locked in a heated trade war that appears to show no signs of de-escalating.

There is also talk in the marketplace just recently that the U.S. Federal Reserve may take a more dovish tone on its monetary policy due to notions the recent strong U.S. economic growth may be backing off. The Federal Open Market Committee meets to discuss monetary policy in December.

Nymex crude oil futures prices are firmer today on short covering and a corrective rebound after hitting a 13-month low of $50.10 overnight. Crude prices are down around 20% following the recent sharp declines.

The other key outside market today finds the U.S. dollar index trading lower but not far below this month’s 1.5-year high.

U.S. economic data due for release Monday includes the Chicago Fed national activity index and the Texas manufacturing outlook survey.

–Jim

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The Nymex crude oil futures market on Friday dropped to a 13-month low below $52.00 a barrel as the sharp drop in the market continues. In early October crude hit a multi-month high above $76.00 a barrel and traders were talking “an 80 handle” soon. Since, then prices have sold off sharply amid rising U.S. crude production and worries about slowing world economies. It’s likely than in the near term oil prices will drop below $50.00 a barrel–and don’t rule out a challenge of $40.00 in the coming weeks. Stay tuned!