Daily Morning Report

Monday, December 3–Jim Wyckoff’s Morning Markets Report

OVERNIGHT DEVELOPMENTS

Risk appetite is back in full force to start the trading week, following the weekend news out of the G20 meeting in Argentina that the U.S. and China have agreed on a cease-fire in their trade war. Asian and European stock markets rallied sharply, while crude oil and gold prices were also posting good gains on hopes for better world economic growth if the two largest economies stop their trade hostilities. U.S. stock indexes are pointed toward sharply higher openings when the New York day session begins.

The U.S. dollar index is weaker as secondary world currencies were boosted Monday, including the Chinese yuan, on the U.S.-China truce.

The positive outcome of the weekend U.S.-China trade meeting was not completely unexpected by the marketplace, as expectations on the results had varied widely. Still, the outcome was at the least better than many expected. The U.S. and China gave each other 90 days to make further progress on their trade tiff.

The U.S.-China trade cease-fire gave traders and investors a double-barrel shot of upbeat news, following last week’s surprisingly dovish comments coming from Federal Reserve Chairman Jay Powell.

In other news, the OPEC oil cartel meeting is getting under way in Vienna, Austria. Reports said Qatar plans to pull out of the cartel in January. Oil prices were also lifted in part on comments from Russian and Saudi Arabian officials that they want to extend production cuts.

The death of former U.S. President George H.W. Bush over the weekend gives the U.S. financial markets an unexpected mid-week closure on Wednesday, for a national day of mourning.

U.S. economic data due for release Monday includes the U.S. manufacturing purchasing managers index (PMI), construction spending, the ISM manufacturing report on business, the global manufacturing PMI and domestic auto industry sales.

–Jim

Continue Reading

Friday, November 30–Jim Wyckoff’s Morning Markets Report

OVERNIGHT DEVELOPMENTS

European stock markets were mostly lower overnight. Asian stock indexes were mixed. U.S. stock indexes are pointed toward lower openings when the New York day session begins. While the U.S. stock index bulls have had a good week, the bears still possess the overall near-term technical advantage.

All marketplace eyes are now on the Group of 20 meetings that begin Friday in Buenos Aires, Argentina and will feature a face-to-face meeting between U.S. President Trump and Chinese President Xi Jinping on Saturday. The world’s two largest economies are locked in a heated trade war. Come Monday morning, many markets could be very active at their openings, given the keen uncertainty on the outcome of the U.S.-China meeting on trade.

In overnight news, the Euro zone jobless rate was unchanged in October, at 8.1%. Meantime, consumer prices in the bloc rose 2.0% in November, on an annual basis, versus up 2.2% in October. It appears that just recently inflation worries worldwide have ebbed a bit, what with the big drop in crude oil prices.

The key outside markets today find Nymex crude oil futures prices lower and trading just below $51.00 a barrel. 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 and near the recent highs.

U.S. economic data due for release Friday is light and includes the ISM Chicago business survey.

–Jim

Continue Reading

The Nymex crude oil futures market dropped to a 13-month low below $50.00 a barrel late this week. Prices are in a steep downtrend and there are no early clues that a market bottom is close at hand. The next strong support levels in crude lie below the $45.00 level, which suggests that’s where prices are headed. Importantly, the large speculative “fund” traders are going to be reluctant to get bullish on any raw commodity futures market as long as the sector leader, crude oil, remains in a tailspin. Stay tuned!

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

Continue Reading

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

Continue Reading

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!