Monday, February 24–Jim Wyckoff’s Morning Markets Report
Markets worldwide are getting rocked by a marked increase over the weekend in trader and investor fears amid the still-growing coronavirus outbreak. Gold is up around $40 an ounce and at a seven-year high, U.S. Treasuries are rallying sharply, the U.S. dollar index is up, crude oil prices are sharply down and much of the rest of the raw commodity sector is feeling selling pressure. Asian and European shares were down overnight. U.S. stock indexes are pointed sharply lower openings when the New York day session begins, with the DJIA down over 700 points.
While the human toll from the coronavirus (covid-19) is growing, the likely economic toll also is expanding. What is gripping markets is the keen uncertainty of how this situation will eventually play out. There is no consensus at all regarding the outcome.
China recorded the total number of afflicted at over 77,000 and over 2,350 dead. The illness is also spreading in South Korea. Northern Italy has some towns quarantined after the covid-19 illness was discovered spreading in that region, including three deaths.
Manufacturing indexes from the major world economies are showing the negative effects of the covid-19 outbreak. U.S. companies are also mentioning the illness as impacting their bottom lines when earnings reports are released. The global marketplace has quickly realized early this year the keen importance of China’s economy in the world supply chain, which has been significantly disrupted.
The key outside markets today see crude oil prices sharply lower and trading around $51.40 a barrel. Meantime, the U.S. dollar index is higher and not far below last week’s nearly three-year high.
U.S. economic data due for release Monday includes the Chicago Fed national activity index and the Texas manufacturing outlook survey.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are sharply down and hit a three-week low in early U.S. trading. Today’s big gap-lower trade on the daily bar chart is a solid chart clue that a near-term market top is in place. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are bearish early today. Today, shorter-term technical resistance comes in at 3,275.00 and then at 3,300.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at the overnight low of 3,241.75 and then at 3,212.75. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 3.0
March Nasdaq index futures: Prices are sharply lower in early U.S. trading on profit taking after hitting another contract and record high last Thursday. Today’s big gap-lower trade on the daily bar chart is a solid chart clue 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. The 9-day average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are bearish early today. Shorter-term technical resistance is seen at 9,250.00 and then at 9,300.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 9,125.00 and then at 9,100.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 3.0.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are sharply higher and hit a contract high in early U.S. trading, on safe-haven demand. Bulls 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 bullish early today. Shorter-term technical resistance is seen at the overnight contract high of 166 27/32 and then at 167 even. Buy stops likely reside just above those levels. Shorter-term support lies at 166 even and then at the overnight low of 165 15/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 8.0
March U.S. T-Notes: Prices are solidly higher and hit a contract high in early U.S. trading. Bulls 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 bullish early today. Shorter-term resistance lies at the overnight contract high of 132.20.5 and then at 133.00.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 132.03.0 and then at 132.00.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 8.0
U.S. DOLLAR INDEX
The March U.S. dollar index is higher in early U.S. trading. Prices last week hit a contract and three-year high. 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 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 99.305 and then at 99.140. Wyckoff’s Intra Day Market Rating: 6.0
NYMEX CRUDE OIL
April Nymex crude oil prices are sharply lower in early U.S. trading. The shorter-term moving averages are still bullish early today as the 4-day is above 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 $52.00 and then at the overnight high of $52.64. Look for sell stops just below technical support at $51.00 and then at $50.00. Wyckoff’s Intra-Day Market Rating: 3.0
GRAINS
US grain futures are solidly lower in early US pre-market trading Monday. Corn is down around 4 cents, soybeans 9 to 10 cents lower, and wheat down around 8 cents. Risk appetite has been rocked worldwide a marked increase over the weekend in trader and investor fears amid the still-growing coronavirus outbreak. Asian and European shares were solidly down overnight. U.S. stock indexes are pointed sharply lower openings when the New York day session begins, with the DJIA down over 700 points. While the human toll from the coronavirus (covid-19) is growing, the likely economic toll also is expanding. What is gripping the grain markets is the keen uncertainty of how this situation will eventually play out, with demand for grains worldwide possibly being crimped in the coming months. There is no consensus at all regarding the outcome. China recorded the total number of afflicted at over 77,000 and over 2,350 dead. The illness is also spreading in South Korea. Northern Italy has some towns quarantined after the covid-19 illness was discovered spreading in that region, including three deaths. Manufacturing indexes from the major world economies are showing the negative effects of the covid-19 outbreak. U.S. companies are also mentioning the illness as impacting their bottom lines when earnings reports are released. The global marketplace has quickly realized early this year the keen importance of China’s economy in the world supply chain, which has been significantly disrupted. All of the above is bearish for the grain markets and is superseding other supply and demand fundamentals in the grain markets—at least for now.
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