Friday, February 7–Jim Wyckoff’s Morning Markets Report
Asian and European shares were weaker overnight as traders and investors have pushed the coronavirus outbreak in China back to near the front burner of the marketplace. U.S. stock indexes are pointed toward lower openings when the New York day session begins. Traders can correctly argue many of the rallying stock indexes are on Friday just seeing some normal profit-taking pressure from recent gains that put some stock indexes at record highs earlier this week, including those in the U.S.
Still, the coronavirus outbreak continues to spread, with over 625 reported dead in China and over 31,000 afflicted in that country. President Trump and Chinese Premiere Xi Jing Ping discussed the matter in a telephone call late Thursday. China’s domestic economy is being impacted, as is the global economy, to a degree. There are also reports coming from China that the nation may invoke a disaster clause in its trade agreement with the U.S. that would allow China to purchase less than their January trade agreement stated. Look for safe-haven assets like gold, U.S. Treasuries, the Japanese yen and the U.S. dollar to perform better on Friday, heading into an uncertain weekend regarding the coronavirus situation.
Traders are awaiting the U.S. employment situation report from the Labor Department that is out Friday morning—arguably the most important U.S. economic report of the month. The key non-farm payrolls figure is forecast to come in at up around 160,000. However, a very strong ADP national employment report reading on Wednesday has some reckoning Friday’s jobs report will be stronger than forecast.
The key outside markets today see crude oil prices weaker and trading around $50.50 a barrel. Meantime, the U.S. dollar index is firmer and hit a four-month high overnight.
Other U.S. economic data due for release Friday includes the monthly wholesale trade report, and consumer credit.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are weaker in early U.S. trading, on profit taking after hitting a contract and record high Thursday. The bulls still have the strong 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 below 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 3,350.00 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 3,315.00 and then at 3,300.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.5
March Nasdaq index futures: Prices are weaker on profit taking after hitting a contract and record high overnight. Bulls still 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 9,362.50 and then at 9,317.75. 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 solidly up in early U.S. trading. Bulls have the overall near-term technical advantage and needed to show 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 Wednesday’s high of 162 20/32 and then at 163 even. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 161 10/32 and then at 161 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.5
March U.S. T-Notes: Prices are up in early U.S. trading. Bulls needed to show 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 resistance lies at the overnight high of 130.31.0 and then at 131.04.5. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 130.16.5 and then at this week’s low of 130.07.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.5
U.S. DOLLAR INDEX
The March U.S. dollar index is modestly slightly higher in early U.S. trading and hit another four-month 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 bullish early today. The dollar index finds shorter-term technical resistance at the overnight high of 98.515 and then at the October high of 98.735. Shorter-term support is seen at the overnight low of 98.300 and then at 98.000. Wyckoff’s Intra Day Market Rating: 6.0
NYMEX CRUDE OIL
March Nymex crude oil prices are slightly lower in early U.S. trading. A 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 neutral early today. Look for buy stops to reside just above technical resistance at the overnight high of $51.48 and then at $52.00. 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: 4.5
GRAINS
US grain futures are mixed to firmer in early US pre-market trading Thursday. Corn is up around 1 1/2 cents, soybeans near steady and wheat is around 1/2 cent higher. Global stock markets are uneasy Friday as traders and investors have pushed the coronavirus outbreak in China back to near the front burner of the marketplace. Stock market traders can correctly argue many of the recently rallying stock indexes are on Friday just seeing some normal profit-taking pressure from recent gains. Still, the coronavirus outbreak continues to spread, with over 625 reported dead in China and over 31,000 afflicted in that country. President Trump and Chinese Premiere Xi Jing Ping discussed the matter in a telephone call late Thursday. China’s domestic economy is being impacted, as is the global economy, to a degree. There are also reports coming from China that the nation may invoke a disaster clause in its trade agreement with the U.S. that would allow China to purchase less U.S. products than their January trade agreement stated. This has cast a slightly bearish pall over the grain markets Friday, especially heading into an uncertain weekend regarding the coronavirus situation. Grain traders are looking ahead to next Tuesday’s 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 Thursday the 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