Wednesday, March 24–Jim Wyckoff’s Morning Markets Report
Global stock markets were mixed to lower overnight. U.S. stock indexes are pointed toward firmer openings when the New York day session begins. Rising Covid-19 infections in Europe and the resulting business lockdowns, and some worries about a third wave hitting the U.S., have prompted a bit keener risk aversion in the markets this week.
A marketplace feature at mid-week is that one of the world’s largest container ships got turned sideways in high winds Tuesday and became grounded in Egypt’s Suez Canal, blocking global shipping, possibly for days. Reports said about 10% of global trade runs through the Suez Canal, including crude oil. Crude oil’s rebound today after strong losses that pushed prices to a six-week low on Tuesday is likely due in part to the blockage of the canal. Still, serious near-term technical damage was inflicted in crude oil Tuesday, to strongly suggest that market has topped out and that crude prices will now trade sideways at best for an extended period. More importantly, the breakdown in crude oil futures sends a strong message to the big, speculative “fund” futures traders that the bull moves in other commodities have also run their course for now, and it may now be time for those funds to initiate bigger short positions in commodity futures markets. Crude oil is arguably the leader of the raw commodity sector and when that market suffers, traders tend to at least shy away from other commodity futures markets, if not outright sell them.
In other overnight news, the Euro zone March composite purchasing managers index (PMI) came in at 52.5 and beat forecasts for a reading of 49.1. The Euro zone manufacturing PMI in March was 62.4 versus the forecast for 57.6. A number above 50.0 suggests growth.
U.S. Treasury Secretary Janet Yellen and Federal Reserve Chair Jerome Powell today speak to a U.S. Senate panel regarding President Biden’s $1.9 trillion stimulus package and his planned $3 trillion infrastructure program. Both spoke to a House committee Tuesday and laid out their cases for more government spending and continued monetary policy accommodation. Their comments did not have a significant impact on the markets.
The other key “outside market” today sees the U.S. dollar index higher and hitting a four-month high overnight as the greenback bulls have restarted a price uptrend on the daily bar chart. The stronger dollar is also a negative for many commodity markets because many of them are priced in U.S. dollars on the world market. So when the dollar appreciates it makes those commodities more expensive to purchase in non-U.S. currency. Meantime, the U.S. Treasury 10-year note yield is fetching 1.623% Wednesday morning.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, durable goods orders the U.S. flash and services purchasing managers indexes, and the weekly DOE liquid energy stocks report.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are firmer in early U.S. trading. Bulls have the solid overall near-term technical advantage. 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 neutral early today. Today, shorter-term technical resistance comes in at this week’s high of 3,944.50 and then at the contract high of 3,978.50. Buy stops likely reside just above those levels. Downside support for active traders is seen at last week’s low of 3,875.00 and then at 3,850.00. Wyckoff’s Intra-day Market Rating: 5.5
June Nasdaq index futures: Prices are firmer in early U.S. trading. Shorter-term moving averages (4- 9-and 18-day) are neutral early today. The 4-day moving average is even with the 9-day. The 9-day average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term technical resistance is seen at this week’s high of 13,172.00 and then at last week’s high of 13,287.25. On the downside, shorter-term support is seen at 13,000.00 and then at 12,900.00. Wyckoff’s Intra-Day Market Rating: 5.5.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are firmer on more short covering after hitting a contract low last week. Bears still have the solid overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is even with the 9-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term technical resistance is seen at the overnight high of 157 4/32 and then at 157 16/32. Shorter-term support lies at 156 even and then at 155 even. Wyckoff’s Intra-Day Market Rating: 5.5
June U.S. T-Notes: Prices are slightly higher in early U.S. trading on more short covering after hitting a contract low last week. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term resistance lies at the overnight high of 132.09.0 and then at 132.16.0. Shorter-term technical support lies at 131.24.0 and then at 131.20.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5
EURO CURRENCY
The June Euro currency futures are lower and hit a 4.5-month low in early U.S. trading. Bears have the overall near-term technical advantage and have momentum. The shorter-term moving averages for the Euro are bearish early today, as the 4-day is below the 9-day. The 9-day is below the 18-day moving average. Short-term oscillators for the Euro are bearish early today. The Euro currency finds shorter-term technical resistance at the overnight high of 1.1873 and then at 1.1900. Shorter-term support is seen at the overnight low of 1.1833 and then at 1.1800. Wyckoff’s Intra Day Market Rating: 4.0
NYMEX CRUDE OIL
May Nymex crude oil prices are solidly higher in early U.S. trading on a bounce after dropping sharply Tuesday and hitting a six-week low. Bulls have the overall near-term technical advantage but a price uptrend on the daily chart has been negated, to suggest a near-term market top is in place. 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 $60.00 and then at $61.00. Look for sell stops just below technical support at $58.00 and then at this week’s low of $57.25. Wyckoff’s Intra-Day Market Rating: 6.0
GRAINS
U.S. grain futures are mixed but mostly weaker in early U.S. pre-market trading. The higher U.S. dollar index is keeping grain market bulls tentative at mid-week. Grain traders await the very important March 31 USDA planting intentions and quarterly grains stocks reports on week from today. Trading is likely to remain quieter ahead of that data. Grain market bulls do still have the overall near-term technical advantage. Grain traders also need to keep an eye on crude oil prices. Wednesday crude futures took out on the downside the previous March low to set a six-week low, which is a clue that many of the raw commodity sector markets that had been in rally modes, may have topped out, at least for the near term, including 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