Friday, October 26–Jim Wyckoff’s Morning Markets Report
OVERNIGHT DEVELOPMENTS
Global stock markets were mostly lower overnight. U.S. stock indexes are pointed toward sharply lower openings and at five-month lows when the New York day session begins. It’s likely going to be another volatile day during the U.S. trading session today. Disappointing earnings reports from Amazon and Alphabet stocks are helping to press the U.S. equities lower.
There are near-term technical clues the U.S. stock indexes have put in near-term market tops, if not major tops. If that’s indeed the case, it’s a bullish element for hard assets like the precious metals and other raw commodities. Today will be an extra important trading day for U.S. stock indexes. Solid losses to end the week will further exacerbate trader and investor anxiety heading into an uncertain weekend. A big rally in U.S. stocks today would assuage the marketplace anxiety to some degree.
Traders and investor can point to no single factor that is spooking the world marketplace in late October. There are ongoing geopolitical concerns that include the U.S.-China trade war, U.S.-Saudi Arabia tensions over the murdered Saudi journalist, and Italy’s defiance over forming its budget to meet European Union rules. It’s not going to be surprising to see some fresh news on one of these fronts in the next few days.
The Chinese yuan fell to a multi-year low versus the U.S. dollar overnight. The U.S. is worried China is devaluing its currency to gain trade advantages.
In other overnight news, the European Union got more dour economic news today when the European Central Bank’s survey of professional forecasters reported weaker economic projections for the Euro zone in the coming years. The survey projected a 2.0% GDP gain this year and 1.8% growth in 2019.
The U.S. economic highlight this week will be the first estimate of third-quarter GDP due out Friday morning. GDP is seen up 3.4% in the third quarter, on an annual basis. The marketplace could react to the GDP data if it’s a miss from forecasts. But it appears the cards are stacked against the stock market bulls because a GDP miss to the downside would mean slowing business activity, while a miss to the upside would mean the Federal Reserve likely continuing to tighten monetary policy.
The key outside markets today find the U.S. dollar index near steady and hovering near this week’s nine-week high. Look for the greenback to remain supported on safe-haven demand amid wobbly world stock markets. Meantime, November Nymex crude oil prices are lower and trading around $66.50 a barrel. Oil prices fell to a two-month low earlier this week, on worries about slowing world economic growth, due in part to the U.S.-China trade war.
Other U.S. economic data due for release Friday includes the University of Michigan consumer sentiment survey.
–Jim
U.S. STOCK INDEXES
December S&P 500 e-mini futures: Prices are solidly lower and hit a five-month low in early U.S. trading. Recent price action suggests that at least a near-term market top is in place, if not a major top. The shorter-term moving averages (4-, 9- and 18-day) are bearish early today. The 4-day moving average is below the 9-day. The 9-day is below the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are bearish early today. Today, shorter-term technical resistance comes in at the overnight high of 2,680.75 and then at 2,700.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 2,646.00 and then at 2,625.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 3.5
December Nasdaq index December futures: Prices are solidly lower and hit a five-month low in early U.S. trading. Recent price action suggests a near-term market top is in place, if not a major market top. Shorter-term moving averages (4- 9-and 18-day) are bearish early today. The 4-day moving average is below the 9-day. The 9-day average is below the 18-day. Short-term oscillators (RSI, slow stochastics) are bearish early today. Shorter-term technical resistance is seen at the overnight high of 6,900.00 and then at 7,000.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 6,734.25 and then at 6,700.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 3.5.
U.S. TREASURY BONDS AND NOTES
December U.S. T-Bonds: Prices are higher and hit a three-week high on safe-haven demand and short covering. A fledgling price uptrend is in place on the daily bar chart. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term technical resistance is seen at 139 24/32 and then at 140 even. Buy stops likely reside just above those levels. Shorter-term support lies at 139 even and then at the overnight low of 138 28/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
December U.S. T-Notes: Prices are higher and hit a six-week high in early U.S. trading. Safe-haven demand and short covering are featured. A fledgling uptrend is in place on the daily bar chart. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term resistance lies at the overnight high of 119.01.0 and then at 119.08.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 118.21.5 and then at 118.16.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.5
U.S. DOLLAR INDEX
The December U.S. dollar index is firmer and hit a contract high in early U.S. trading. Bulls have the solid overall near-term technical advantage amid safe-haven demand for the greenback. The shorter-term moving averages for the dollar index are bullish early today, as the 4-day is above the 9-day. The 9-day is above the 18-day moving average. Short-term oscillators for the dollar index are bullish early today. The dollar index finds shorter-term technical resistance at 96.750 and then at 97.000. Shorter-term support is seen at the overnight low of 96.325 and then at 96.000. Wyckoff’s Intra Day Market Rating: 7.0
NYMEX CRUDE OIL
December Nymex crude oil prices are lower in early U.S. trading and near this week’s two-month low. Recent strong selling pressure suggests this market has topped out. The shorter-term moving averages are bearish early today as the 4-day is below the 9-day and 18-day. The 9-day is below the 18-day moving average. Short-term oscillators (RSI and slow stochastics) are neutral to bearish early today. Look for buy stops to reside just above technical resistance at the overnight high of $67.04 and then at $67.50. Look for sell stops just below technical support at this week’s low of $65.74 and then at $65.00. Wyckoff’s Intra-Day Market Rating: 4.0
GRAINS
Grain futures prices were higher overnight. The grain market bears still have the overall near-term technical advantage, even though it appears harvest lows are in place. The upside will continue to be limited by big U.S. corn and soybean crops being harvested, and tepid world demand for U.S. wheat.
IMPORTANT NOTE: I am not a futures broker and do not manage any trading accounts other than my own personal account. It is my goal to point out to you potential trading opportunities. However, it is up to you to: (1) decide when and if you want to initiate any traders and (2) determine the size of any trades you may initiate. Any trades I discuss are hypothetical in nature.
Here is what the Commodity Futures Trading Commission
(CFTC) has said about futures trading (and I agree 100%):
1. Trading commodity futures and options is not for everyone. IT IS A VOLATILE, COMPLEX AND RISKY BUSINESS.
Before you invest any money in futures or options contracts, you should consider your financial experience, goals and financial resources, and know how much you can afford to lose above and beyond your initial payment to a broker. You should understand commodity futures and options contracts and your obligations in entering into those contracts. You should understand your exposure to risk and other aspects of trading by thoroughly reviewing the risk disclosure documents your broker is required to give you.
Jim Wyckoff