Wednesday, February 26–Jim Wyckoff’s Morning Markets Report
Global stock markets are lower at mid-week as the coronavirus outbreak and its expected human toll and negative world economic fallout continue to intensify. There is no consensus on how or when this situation will wind up playing out. That suggests turmoil in the markets will continue in varying degrees until some kind of end-game for the matter is expected by the majority of market watchers. U.S. stock indexes are pointed toward firmer openings when the New York day session begins. The DJIA on Monday and Tuesday saw its largest two-day drop in history, points-wise. The S&P 500 futures hit a three-month low overnight.
The U.S. Center for Disease Control officials at a press conference on Tuesday afternoon said of the outbreak: “This might be bad.” The CDC said the Covid-10 illness is going to spread in the U.S. The outbreak continues to spread in Asia and Europe.
In a sign of the keen trader and investor anxiety in the global marketplace at present, the yield on the benchmark U.S. Treasury 10-year note on Tuesday fell to a record low close of 1.328%. On Wednesday the yield traded as low as 1.312%. Gold is near steady Wednesday after falling sharply Tuesday. The big drop in gold prices Tuesday could be tied to notions of less consumer demand for the metal as global economic growth is dinged by the coronavirus outbreak. China, where the illness has hit hardest, is a leading consumer of gold.
The key outside markets today see Nymex crude oil prices lower, at a nearly 14-month low, and trading around $49.50 a barrel. Brent crude is also trading near a 14-month low. Meantime, the U.S. dollar index is higher today.
Financial and currency markets this week are pricing in expected future easing of monetary policies by the major central banks of the world, as traders reckon the coronavirus, or covid-19, illness will prompt the central banks to stimulate their economies to help ward off the negative economic impacts of the outbreak.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, new residential sales and the weekly DOE liquid energy stocks report.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are slightly up in early U.S. trading, after hitting a three-month low overnight. Monday’s big gap-lower trade on the daily bar chart and strong follow-through selling on Tuesday are a solid chart clues that a near-term market top is in place. The shorter-term moving averages (4-, 9- and 18-day) are bearish early today. The 4-day moving average is below the 9-day and 18-day. The 9-day is below 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 overnight high of 3,158.00 and then at 3,180.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at the overnight low of 3,091.00 and then at the January low of 3,071.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.0
March Nasdaq index futures: Prices are up in early U.S. trading after hitting a six-week low overnight. Monday’s big gap-lower trade on the daily bar chart and strong follow-through selling on Tuesday are solid chart clues that a near-term market top is in place. Shorter-term moving averages (4- 9-and 18-day) are neutral early today. The 4-day moving average is below the 9-day and 18-day. The 9-day average is even with the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term technical resistance is seen at the overnight high of 8,948.25 and then at 9,000.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at Tuesday’s low of 8,810.00 and then at the overnight low of 8,709.50. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are lower on profit taking after hitting a contract high Tuesday. Bulls still have the solid 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 neutral to bearish early today. Shorter-term technical resistance is seen at the overnight contract high of 168 5/32 and then at 168 16/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 166 22/32 and then at 166 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5
March U.S. T-Notes: Prices are lower on profit taking after hitting a contract high Tuesday. Bulls still have the solid 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 and 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term resistance lies at the contract high of 133.10.5 and then at 133.16.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 132.23.0 and then at 132.16.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5
U.S. DOLLAR INDEX
The March U.S. dollar index is firmer in early U.S. trading. Bulls still have the solid overall near-term technical advantage. The shorter-term moving averages for the dollar index are neutral early today, as the 4-day is below the 9-day. The 9-day is above the 18-day moving average. Short-term oscillators for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at Tuesday’s high of 99.320 and then at this week’s high of 99.570. Shorter-term support is seen at this week’s low of 98.810 and then at 98.500. Wyckoff’s Intra Day Market Rating: 5.5
NYMEX CRUDE OIL
April Nymex crude oil prices are weaker and hit a nearly 14-month low overnight. The shorter-term moving averages are neutral early today as the 4-day is below the 9-day and 18-day. The 9-day is above the 18-day moving average. Short-term oscillators (RSI and slow stochastics) are bearish early today. Look for buy stops to reside just above technical resistance at the overnight high of $50.42 and then at $51.00. Look for sell stops just below technical support at the overnight low of $48.99 and then at $48.00. Wyckoff’s Intra-Day Market Rating: 4.0
GRAINS
US grain futures are modestly down in early US pre-market trading Wednesday. Corn is down around 3/4 cent, soybeans steady to 2 cents lower, and wheat down around 1 1/2. Global stock markets are lower at mid-week as the coronavirus outbreak and its expected human toll and negative world economic fallout continue to intensify. That’s bearish for grain markets. There is no consensus on how or when this situation will wind up playing out. That suggests turmoil in the markets will continue in varying degrees until some kind of end-game for the matter is expected by the majority of market watchers. The U.S. Center for Disease Control officials at a press conference on Tuesday afternoon said of the outbreak: “This might be bad.” The CDC said the Covid-10 illness is going to spread in the U.S. The outbreak continues to spread in Asia and Europe. In a sign of the keen trader and investor anxiety in the global marketplace at present, the yield on the benchmark U.S. Treasury 10-year note on Tuesday fell to a record low close of 1.328%. On Wednesday the yield traded as low as 1.312%. Gold is near steady Wednesday after falling sharply Tuesday. The big drop in gold prices Tuesday could be tied to notions of less consumer demand for the metal as global economic growth is dinged by the coronavirus outbreak. China, where the illness has hit hardest, is a leading consumer of gold. Nymex crude oil prices are lower Wednesday, at a nearly 14-month low, and trading around $49.50 a barrel. Brent crude is also trading near a 14-month low. Meantime, the U.S. dollar index is higher today. All of the above are also bearish factors for grain markets. Financial and currency markets this week are pricing in expected future easing of monetary policies by the major central banks of the world, as traders reckon the coronavirus, or covid-19, illness will prompt the central banks to stimulate their economies to help ward off the negative economic impacts of the outbreak. Such could prompt better global demand for grain markets in the coming months. Significant near-term technical damage has been inflicted in the grain futures markets just recently, to suggest any sustained rallies or price uptrends are nowhere in sight, and prices are likely to continue to drift sideways to lower in the near term.
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