Monday, February 10–Jim Wyckoff’s Morning Markets Report
Asian and European shares were mostly weaker overnight as traders and investors have put the coronavirus outbreak back to the front burner of the marketplace. There is not a consensus on the ultimate impact of the virus on the global economy, but worries are not receding. U.S. stock indexes are pointed toward steady to weaker openings when the New York day session begins. Trader and investors attitudes are not panicky and wanting to sell their risk assets, but more a case of not wanting to step in to buy them.
The coronavirus outbreak continues to spread, with over 900 reported dead in China, which surpasses the SARS outbreak that occurred over 15 years ago. The World Health Organization said the coronavirus rate of spread could accelerate. Reports also said some manufacturers in China, especially auto makers, have had to stop their assembly lines due to lack of materials for production. Some analysts are saying the coronavirus outbreak in China will have a more negative impact on the domestic economy than the trade war with the U.S.
In other overnight news, China’s consumer price index was reported for January at up 5.4% year-on-year, which was higher than expected and hit an eight-year high. Food price inflation was reported up 20.6%, year-on-year.
The key outside markets today see crude oil prices weaker and trading around $50.00 a barrel. Meantime, the U.S. dollar index is slightly weaker overnight after hitting a four-month high earlier.
U.S. economic data due for release Monday includes the employment trends index. President Trump’s fiscal 2021 budget is also released today.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are near steady in early U.S. trading, on profit taking after hitting a contract and record highs last week. The bulls still have the solid technical advantage. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are neutral early today. Today, shorter-term technical resistance comes in at the overnight high of 3,334.50 and then at the contract high of 3,357.75. Buy stops likely reside just above those levels. Downside support for active traders today is seen at the overnight low of 3,303.50 and then at 3,285.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.0
March Nasdaq index futures: Prices are slightly higher in early U.S. trading. 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 early today. Shorter-term technical resistance is seen at the contract high of 9,471.00 and then at 9,500.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 9,330.75 and then at 9,300.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are steady 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 below the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term technical resistance is seen at the overnight high of 163 6/32 and then at 163 16/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 162 7/32 and then at 162 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0
March U.S. T-Notes: Prices are near steady 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 below the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term resistance lies at the overnight high of 130.11.0 and then at 131.16.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 130.28.5 and then at 130.20.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0
U.S. DOLLAR INDEX
The March U.S. dollar index is slightly lower in early U.S. trading and hit another four-month high overnight. 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 bearish early today. The dollar index finds shorter-term technical resistance at the overnight high of 98.610 and then at the October high of 98.735. Shorter-term support is seen at Friday’s low of 98.300 and then at 98.000. Wyckoff’s Intra Day Market Rating: 4.5
NYMEX CRUDE OIL
March Nymex crude oil prices are slightly lower in early U.S. trading. A price downtrend is in place on the daily bar chart. 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 early today. Look for buy stops to reside just above technical resistance at the overnight high of $50.49 and then at $51.00. Look for sell stops just below technical support at the February low of $49.31 and then at $49.00. Wyckoff’s Intra-Day Market Rating: 4.5
GRAINS
US grain futures are mixed to firmer in early US pre-market trading Monday. Corn is down around 3 cents, soybeans up around 2 cents and wheat around 1 cent higher. The coronavirus outbreak continues to spread, with over 900 reported dead in China, which surpasses the SARS outbreak that occurred over 15 years ago. The World Health Organization said the coronavirus rate of spread could accelerate. Reports also said some manufacturers in China, especially auto makers, have had to stop their assembly lines due to lack of materials for production. Some analysts are saying the coronavirus outbreak in China will have a more negative impact on the domestic economy than the trade war with the U.S. That’s a bearish element for the grain markets to start the week. However, China’s consumer price index on Monday was reported for January, at up 5.4% year-on-year, which was higher than expected and hit an eight-year high. Food price inflation was reported up 20.6%, year-on-year. That’s a potentially bullish element for the grain markets because the Chinese people have to eat and may have to significantly ramp up their food and livestock feed imports. Traders will closely monitor Monday’s weekly USDA export inspections report. Grain traders are also looking ahead to Tuesday’s monthly USDA supply and demand report, which is expected to show 2019/20 marketing year US corn ending stocks at 1.86 billion bushels, US soybean ending stocks at around 0.45 billion bushels, and US wheat stocks around 0.95 billion bushels. USDA said last week this report will not include Phase 1 U.S.-China trade details, regarding China’s purchase commitments to the US, but that the overall deal is being factored into USDA forecasts.
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