Friday, May 24–Jim Wyckoff’s Morning Markets Report
World stock markets were mostly higher overnight. U.S. stock indexes are also pointed toward firmer openings when the New York day session begins. Markets were rattled Tuesday as the U.S.-China trade war was ratcheted up yet another notch, as both governments stepped up their rhetoric against each other. The U.S. is also now targeting China’s communications giant, Huawei, for sanctions. A New York Federal Reserve report said the trade war with China will cost Americans an average of $813 a year.
In overnight news, U.K. Prime Minister Theresa May said she will resign within two weeks, in order to allow another leader to try to clear up the Brexit mess. Meantime, India’s Prime Minister Modi was a solid victor in his country’s elections.
Parliamentary elections in the U.K. and The Netherlands got under way Thursday, with the populist parties (euroskeptics) possibly doing well. Other European countries’ election results will be announced Sunday.
A feature in the marketplace late this week is the dramatic sell off in crude oil prices. Nymex crude oil on Thursday dropped to a low of $57.33 Prices on Tuesday closed at $63.13. Prices have recovered a bit Friday and are trading around $58.50. Plentiful U.S. supplies and worries about slowing world economic growth are mostly to blame for the downdraft in crude prices.
Meantime, the U.S. dollar index has backed off after scoring a contract and two-year high on Thursday. Technical price action shows a bearish “key reversal” down has occurred in the USDX, which is a chart clue the index has put in a near-term top.
And, world government bond yields are falling this week, on some flight-to-safety buying in U.S. and German bonds, while other countries’ bond prices gained on worries about slowing economic growth keeping interest rates very low.
U.S. economic data due for release Friday includes the advance report on durable goods.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are higher in early U.S. trading. The shorter-term moving averages (4-, 9- and 18-day) are bearish early today. The 4-day moving average is below the 9-day. The 9-day is below the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are neutral to bullish early today. Today, shorter-term technical resistance comes in at Thursday’s high of 2,858.50 and then at this week’s high of 2,876.50. Buy stops likely reside just above those levels. Downside support for active traders today is located at the May low of 2,799.75 and then at 2,780.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 6.0
June Nasdaq index futures: Prices are higher in early U.S. trading. Shorter-term moving averages (4- 9-and 18-day) are bearish early today. The 4-day moving average is below the 9-day. The 9-day average is below the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is seen at 7,400.00 and then at Thursday’s high of 7,434.75. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 7,308.00 and then at this week’s low of 7,268.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are lower on some normal profit taking after hitting a contract high on Thursday. Bulls have the solid overall near-term technical advantage, to suggest more upside. 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 high of 151 4/32 and then at the contract high of 151 15/32. Buy stops likely reside just above those levels. Shorter-term support lies at 150 16/32 and then at 150 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0
June U.S. T-Notes: Prices are lower on profit taking after hitting a contract high on Thursday. 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 neutral to bearish early today. Shorter-term support lies at 124.24.0 and then at 124.20.0. Sell stops likely reside just below those levels. Shorter-term technical resistance lies at the overnight high of 125.00.5 and then at the contract high of 125.07.0. Buy stops likely reside just above those levels. Wyckoff’s Intra-Day Market Rating: 4.0
U.S. DOLLAR INDEX
The June U.S. dollar index is weaker on some profit taking after hitting a two-year high on Thursday. Bulls still 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 and 18-day. The 9-day is above the 18-day moving average. Short-term oscillators for the dollar index are bearish early today. The dollar index finds shorter-term technical resistance at the overnight high of 97.775 and then at 98.000. Shorter-term support is seen at the overnight low of 97.555 and then at 97.250. Wyckoff’s Intra Day Market Rating: 4.5
NYMEX CRUDE OIL
July Nymex crude oil prices are higher in early U.S. trading on a corrective bounce from sharp losses suffered Wednesday and Thursday. Bears have restarted a price downtrend on the daily 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 $59.00 and then at $60.00. Look for sell stops just below technical support at the overnight low of $50.01 and then at Thursday’s low of $57.33. Wyckoff’s Intra-Day Market Rating: 5.5
GRAINS
U.S. grain futures prices were higher in overnight trading as the bulls made a quick recovery from Thursday’s price pressure. The U.S. government unveiled its subsidy plan for farmers hurt by the U.S.-China trade war, and it was not as price-sensitive to soybeans as traders had initially feared. Thus, focus is back on very soggy weather in the U.S. midsection, which remains bullish for the grains due to record slow planting progress for this time of year. As each wet day passes in the Midwest, lower production levels for corn and soybeans are more likely. Wheat futures will continue in a follower’s role. If soybeans and corn continue to rally, wheat will, too. There are two elements now working against the U.S. grain market bulls: A stronger U.S. dollar that makes U.S. agricultural exports more expensive on world markets, and the big drop in crude oil prices this week. The drop in oil is likely to not only spook the commodity market bulls, but also embolden the large speculative “fund” futures traders to re-enter short trades in the grains.
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