Thursday, February 6–Jim Wyckoff’s Morning Markets Report
Asian and European shares were higher overnight as traders and investors at least for now have pushed aside the coronavirus outbreak in China. U.S. stock indexes are pointed toward higher openings when the New York day session begins and are at or near their record highs.
History proves traders and markets are fickle. The coronavirus outbreak continues to spread, with over 500 reported dead in China and around 30,000 afflicted in the country. China’s domestic commerce is being impacted, as is global commerce. The big drop in Tesla’s stock price Wednesday is blamed at least in part on the coronavirus outbreak impacting Tesla’s business in China. Many global companies doing business with China (Remember that China is the world’s second-largest economy.) have been negatively impacted. It will not be surprising to this longtime market watcher to see the coronavirus outbreak back on the front burner of the marketplace next week, or sooner. Such a scenario would be bullish for gold, U.S. Treasuries and the U.S. dollar, and bearish for global equities.
Reports overnight said China has moved to lower tariffs on $75 billion in U.S. imports, as part of its recent partial trade agreement with the U.S. Chinese officials also said the plan to cut domestic value-added taxes. The Chinese Finance Ministry said it hopes to eventually eliminate all of the increased trade tariffs on U.S. goods that were implemented during the trade war of the past two years.
The global marketplace showed little reaction to the acquittal of President Trump in his impeachment trial in the Senate. The outcome was not surprising at all.
The key outside markets today see crude oil prices higher and trading around $51.00 a barrel. Meantime, the U.S. dollar index is near steady after hitting a nearly four-month high overnight.
Traders are also awaiting the U.S. employment situation report from the Labor Department that is out Friday morning. The key non-farm payrolls figure is forecast to come in at up around 160,000. However, a strong ADP national employment report reading on Wednesday has some thinking Friday’s jobs report will be stronger than forecast.
U.S. economic data due for release Thursday includes the weekly jobless claims report, the Challenger job-cuts report, preliminary productivity and costs, and the monthly chain store sales index.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are higher in early U.S. trading and hit a new contract and record high. The bulls have the strong technical advantage and a fresh leg up in prices is likely in the near term. 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 below the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are bullish early today. Today, shorter-term technical resistance comes in at the overnight contract high of 3,357.75 and then at 3,375.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at the overnight low of 3,332.50 and then at 3,315.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 7.0
March Nasdaq index futures: Prices are higher and near Wednesday’s contract and record high 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 bullish early today. Shorter-term technical resistance is seen at the contract high of 9,462.75 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 9,375.00 and then at Wednesday’s low of 9,317.75. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 7.0.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are firmer in early U.S. trading. Bulls have the overall near-term technical advantage but need to show more power to keep the near-term price uptrend alive. 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 early today. Shorter-term technical resistance is seen at 162 even and then at Wednesday’s high of 162 20/32. Buy stops likely reside just above those levels. Shorter-term support lies at 161 even and then at the overnight low of 160 15/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
March U.S. T-Notes: Prices are slightly up in early U.S. trading. Bulls need to show fresh power soon to keep the near-term price uptrend alive. 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 130.24.0 and then at 131.00.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 130.07.0 and then at 130.00.0. 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 modestly slightly higher in early U.S. trading and hit a nearly four-month high. Bulls have the firm 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 early today. The dollar index finds shorter-term technical resistance at the overnight high of 98.210 and then at 98.500. Shorter-term support is seen at 98.000 and then at Wednesday’s low of 97.760. Wyckoff’s Intra Day Market Rating: 6.0
NYMEX CRUDE OIL
March Nymex crude oil prices are higher in early U.S. trading, on short covering after hitting a 13-month low Tuesday. A steep price downtrend is still 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 bullish early today. Look for buy stops to reside just above technical resistance at the overnight high of $52.20 and then at $53.00. Look for sell stops just below technical support at $50.00 and then at this week’s low of $49.31. Wyckoff’s Intra-Day Market Rating: 5.5
GRAINS
US grain futures are mixed to lower in early US pre-market trading Thursday. Corn is down around 1 cent, soybeans around 3 1/2 cents higher and wheat is around 3 cents down. Global stock markets were higher Thursday as traders and investors at least for now have pushed aside the coronavirus outbreak in China. Grain traders have become less anxious about the matter. However, history proves traders and markets are fickle. The coronavirus outbreak continues to spread, with over 500 reported dead in China and around 30,000 afflicted in the country. China’s domestic commerce is being impacted, as is global commerce. The big drop in Tesla’s stock price Wednesday is blamed at least in part on the coronavirus outbreak impacting Tesla’s business in China. Many global companies doing business with China (Remember that China is the world’s second-largest economy.) have been negatively impacted. It will not be surprising to this longtime market watcher to see the coronavirus outbreak back on the front burner of the marketplace next week, or sooner, including the grain markets. Such a scenario would be bearish for grains. Reports overnight said China has moved to lower tariffs on $75 billion in U.S. imports, as part of its recent partial trade agreement with the U.S. Chinese officials also said the plan to cut domestic value-added taxes. The Chinese Finance Ministry said it hopes to eventually eliminate all of the increased trade tariffs on U.S. goods that were implemented during the trade war of the past two years. That’s a positive for the grain markets. US grain traders are awaiting the weekly USDA export sales report Thursday morning. US grain exports remain tepid, with soybean prices still fetching more on the world market than South American soybeans. Also, weather conditions in South American growing regions remain mostly favorable, suggesting big corn and soybean crops will be harvested there.
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