Thursday, February 20–Jim Wyckoff’s Morning Markets Report
Asian and European shares were mixed overnight. U.S. stock indexes are pointed toward weaker openings when the New York day session begins, on some profit taking after the Nasdaq and S&P 500 indexes hit record highs Wednesday.
The coronavirus outbreak remains on or close to the front burner of the global marketplace, and today the concerns seem a bit greater. China’s central bank cut its one-year loan prime rate to 4.05% from 4.15% and the five-year loan rate to 4.75% from 4.80%. The move was not surprising and is an effort to keep the world’s second-largest economy afloat as the negative impact of the covid-19 outbreak is growing. China’s manufacturers are running out of needed materials and some have shut their doors. This situation is impacting global businesses and underscores the significance of the world supply chain that has many links in China.
There is now talk that with supply shortages of some commodities in China, those commodity prices could actually rise on the world market due to hoarding and China’s manufacturers scrambling to procure those commodities. Such talk is ironic given the coronavirus has worked to crimp global economic growth, including pushing several raw commodity prices lower on expectations for reduced demand for them.
The Federal Reserve said in its FOMC meeting minutes released Wednesday afternoon that it is closely monitoring the economic impact of the coronavirus outbreak.
Spot gold on some world markets hit a seven-year high overnight, on safe-haven demand.
While it’s been reported the rate of spread of the coronavirus (now called covid-19) has slowed significantly recently, other health experts say there is little sign of the virus easing due to its high contagion level. Reports said the Hubei province in China had around 350 new confirmed cases Wednesday, down from nearly 1,700 on Tuesday. Two covid-19 infected passengers of the cruise ship quarantined in Japan have died, with two Japanese government officials reported to have been infected.
The key outside markets today see crude oil prices near steady and trading around $53.25 a barrel. Meantime, the U.S. dollar index is up and hit another multi-month high in early U.S. trading. The greenback bulls have benefited greatly from safe-haven demand amid the heightened global uncertainty.
U.S. economic data due for release Thursday includes the weekly jobless claims report, the Philadelphia Fed business survey, leading economic indicators, and the weekly DOE liquid energy stocks report.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are slightly down in early U.S. trading after hitting a contract high overnight. The bulls have the solid technical advantage. There are no early chart clues to suggest a market top is close at hand. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Today, shorter-term technical resistance comes in at the contract high of 3,397.50 and then at 3,415.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at this week’s low of 3,355.25 and then at 3,325.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.5
March Nasdaq index futures: Prices are slightly lower and hit another contract and record high overnight. Bulls have the solid overall near-term technical advantage. Shorter-term moving averages (4- 9-and 18-day) are bullish early today. The 4-day moving average is above the 9-day. The 9-day average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term technical resistance is seen at the contract high of 9,763.00 and then at 9,800.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 9,600.00 and then at this week’s low of 9,534.25. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are higher in early U.S. trading. Bulls have the overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above the 9-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 this week’s high of 163 16/32 and then at 164 even. Buy stops likely reside just above those levels. Shorter-term support lies at 163 even and then at the overnight low of 162 20/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
March U.S. T-Notes: Prices are higher in early U.S. trading. Bulls have the overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is even with the 18-day moving average. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term resistance lies at this week’s high of 131.12.5 and then at 131.16.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at 131.00.0 and then at this week’s low of 130.26.5. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
U.S. DOLLAR INDEX
The March U.S. dollar index is higher and hit another contract and multi-month high in early U.S. trading. Bulls have the solid overall near-term technical advantage. 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 neutral to bullish today. The dollar index finds shorter-term technical resistance at the contract high of 99.815 and then at 100.000. Shorter-term support is seen at the overnight low of 99.445 and then at 99.275. Wyckoff’s Intra Day Market Rating: 7.0
NYMEX CRUDE OIL
March Nymex crude oil prices are slightly higher and hit another three-week high in early U.S. trading. The shorter-term moving averages are neutral early today as the 4-day is above the 9-day and 18-day. The 9-day is even with the 18-day moving average. Short-term oscillators (RSI and slow stochastics) are bullish early today. Look for buy stops to reside just above technical resistance at the overnight high of $53.90 and then at $54.50. Look for sell stops just below technical support at $53.00 and then at $52.00. Wyckoff’s Intra-Day Market Rating: 5.5
GRAINS
US grain futures are weaker in early US pre-market trading Thursday. Corn is around 1 cent lower, soybeans around 3 cents down and wheat is around 5 cents lower. The coronavirus outbreak remains on or close to the front burner of the global marketplace, and today the concerns seem a bit greater. That’s a daily negative for the grain markets. China’s central bank cut its one-year loan prime rate to 4.05% from 4.15% and the five-year loan rate to 4.75% from 4.80%. The move was not surprising and is an effort to keep the world’s second-largest economy afloat as the negative impact of the covid-19 outbreak is growing. China’s manufacturers are running out of needed materials and some have shut their doors. There is now talk that with supply shortages of some commodities in China, those commodity prices could actually rise on the world market due to hoarding and China’s manufacturers scrambling to procure those commodities. Such talk is ironic given the coronavirus has worked to crimp global economic growth, including pushing several raw commodity prices lower, including grains, on expectations for reduced demand for them. The US Federal Reserve said in its FOMC meeting minutes released Wednesday afternoon that it is closely monitoring the economic impact of the coronavirus outbreak. Trading activity in the grain markets is likely to pick up starting Thursday, as the annual USDA Ag Outlook conference gets under way, including the latest agency forecasts for US and global supply and demand for grains. And on Friday the weekly USDA export sales report will be released—one day later this week because of the US holiday on Monday. Grain market bulls want to see more Chinese activity in the weekly US export sales data.
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