After Fed Rate Hike, Focus Back to U.S.-China Eroding Relations

Thursday, September 27–Jim Wyckoff’s Morning Markets Report

OVERNIGHT DEVELOPMENTS

World stock markets were mostly lower overnight. U.S. stock indexes are pointed toward firmer openings when the New York day session begins.

Traders are still digesting this week’s Federal Open Market Committee (FOMC) meeting that saw the Fed on Wednesday afternoon slightly raise U.S. interest rates, by 0.25%, to a range of 2.0% to 2.25%. The move was expected and marks the third rate rise this year. The FOMC removed the word “accommodative” from its statement, which suggested to some the U.S. central bank is moving closer to the end of the current rate-hike cycle. The Fed is now on pace to raise rates another quarter-point this year and then three times in 2019. The Federal Reserve officials said long-term U.S. inflation prospects remain unchanged and non-problematic despite the recent strong U.S. economic growth. Fed Chairman Jerome Powell held a press conference after the FOMC statement. He said the U.S. economy is in a good place right now, but added the Fed’s monetary policy is still leaning to the accommodative side.

Veteran market watchers reckon the Fed cannot keep tightening U.S. monetary policy by raising interest rates while at the same time see the U.S. economy growing so strongly–and without igniting inflation fears. President Trump has already weighed in on the matter and has admonished the Fed for raising interest rates.

Meantime, China-U.S. relations continue to sour, as Trump on Wednesday accused China of meddling in the upcoming U.S. elections.

Focus in Europe is now on the new Italian government’s economic plans to address its fiscal and financial problems, which are required by European Union law. Many believe Italian lawmakers won’t comply with EU rules on the matter. The Euro currency is pressured today on reports Italy will delay its fiscal and economic projections.

The key outside markets today find the U.S. dollar index higher on an upside correction from recent selling pressure. Meantime, November Nymex crude oil prices are higher and trading around $72.50 a barrel.

U.S. economic data due for release Thursday includes the weekly jobless claims report, durable goods orders, pending home sales, the Kansas City Fed manufacturing survey, and the third estimate of second-quarter gross domestic product.

–Jim

U.S. STOCK INDEXES

December S&P 500 e-mini futures: Prices are slightly higher in early U.S. trading. The bulls have the firm overall near-term technical advantage. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Today, shorter-term technical resistance comes in at this week’s high of 2,936.00 and then at the contract high of 2,947.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at this week’s low of 2,907.50 and then at 2,900.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.5

December Nasdaq index December futures: Prices are up in early U.S. trading. Bulls have the firm 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 and 18-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 this week’s high of 7,668.00 and then at 7,700.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 7,586.00 and then at 7,550.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0.

U.S. TREASURY BONDS AND NOTES

December U.S. T-Bonds: Prices are firmer on more short covering after hitting a four-month low on Tuesday. Bears still have the overall near-term technical advantage as a four-week-old downtrend is in place on the daily chart. Shorter-term moving averages (4- 9- 18-day) are bearish early today. The 4-day moving average is below the 9-day and 18-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term technical resistance is seen at the overnight high of 141 3/32 and then at 141 16/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 140 17/32 and then at 140 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5

December U.S. T-Notes: Prices are slightly higher on more short covering after hitting a four-month low on Tuesday. Bears still have the overall near-term technical advantage. Prices are in a four-week-old downtrend on the daily bar chart. Shorter-term moving averages (4- 9- 18-day) are bearish early today. The 4-day moving average is below the 9-day and 18-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 118.31.5 and then at 119.08.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at 118.20.0 and then at 118.16.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5

U.S. DOLLAR INDEX

The December U.S. dollar index is higher in early U.S. trading. A five-week-old downtrend is still in place on the daily bar chart. The shorter-term moving averages for the dollar index 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 for the dollar index are bullish early today. The dollar index finds shorter-term technical resistance at the overnight high of 94.260 and then at 94.500. Shorter-term support is seen at the overnight low of 93.810 and then at last week’s low of 93.395. Wyckoff’s Intra Day Market Rating: 6.0

NYMEX CRUDE OIL

November Nymex crude oil prices are higher and not far below Tuesday’s contract high in early U.S. trading. The bulls have the solid overall near-term technical advantage. The shorter-term moving averages 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 (RSI and slow stochastics) are bullish early today. Look for buy stops to reside just above technical resistance at the contract high of $72.78 and then at $73.00. Look for sell stops just below technical support at the overnight low of $71.97 and then at this week’s low of $71.14. Wyckoff’s Intra-Day Market Rating: 6.0

GRAINS

Grain futures prices were lower overnight. Grain market bears still have the overall near-term technical advantage, but corn and soybean prices look like they have bottomed out. U.S. corn and soybean harvest pressure is under way at full speed, so look for farmer selling pressure to limit the upside. Traders are awaiting Friday’s USDA quarterly grain stocks projections.

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