Thursday, August 1–Jim Wyckoff’s Morning Markets Report
Asian and European stocks were mixed to weaker overnight. U.S. stock indexes are pointed toward firmer openings when the New York day session begins.
Traders and investors are still digesting Wednesday afternoon’s Federal Open Market Committee (FOMC) statement and Fed Chairman Powell press conference. The FOMC cut its main interest rate, the “fed funds rate” by 0.25%, to a range of 2% to 2.25%, as expected. A few did look for a bigger 0.5% rate cut. This was the first rate decrease by the Federal Reserve in 11 years. The FOMC statement said the rate cut was enacted due to very low inflation pressures and concerns about global economic growth. While the FOMC statement suggested the door is opened to more interest rate reductions in the months ahead, Powell took the marketplace aback when he said the Fed is not planning a long series of U.S. interest rate reductions. He added that this week’s interest rate cut was a “mid-cycle” adjustment. That spooked the stock and financial markets and U.S. stock indexes sold off. The U.S. dollar index rallied solidly to a new high for the year and is seeing follow-through upside today.
Gold prices are sharply lower and U.S. Treasuries are also weaker Thursday on the apparent less-easy lean on monetary policy from the Federal Reserve.
Traders are now awaiting Friday’s U.S. employment situation report for July, arguably the most important monthly report for the U.S. economy. The key non-farm payrolls number is expected to be up around 165,000. In June, non-farm payrolls were up 224,000.
The other key “outside market” today sees Nymex crude oil prices lower and trading just below $58.00 a barrel.
U.S. economic data due for release Thursday includes the weekly jobless claims report, the Challenger job-cuts report, the U.S. manufacturing PMI, the ISM manufacturing report on business, the global manufacturing PMI, domestic auto sales, and construction spending.
–Jim
U.S. STOCK INDEXES
September S&P 500 e-mini futures: Prices are slightly up in early U.S. trading, following Wednesday’s sell off. Bulls still have the firm 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 3,000.00 and then at 3,015.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 2,966.25 and then at this week’s low of 2,958.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.5
September Nasdaq index futures: Prices are higher in early U.S. trading, on a corrective bounce from Wednesday’s solid losses. Bulls have the firm overall near-term technical advantage. 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 neutral early today. Shorter-term technical resistance is seen at 7,950.00 and then at 8,000.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 7,819.50 and then at this week’s low of 7,782.25. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5.
U.S. TREASURY BONDS AND NOTES FUTURES
September U.S. T-Bonds: Prices are weaker in early U.S. trading. Bulls have the firm 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 early today. Shorter-term technical resistance is seen at this week’s high of 155 29/32 and then at 156 even. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 154 31/32 and then at this week’s low of 154 14/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0
September U.S. T-Notes: Prices are lower in early U.S. trading. Bulls still have the firm 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 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are bearish early today. Shorter-term support lies at the overnight low of 127.04.5 and then at this week’s low of 127.00.5. Sell stops likely reside just below those levels. Shorter-term technical resistance lies at the overnight high of 127.18.0 and then at 127.22.0. Buy stops likely reside just above those levels. Wyckoff’s Intra-Day Market Rating: 4.0
U.S. DOLLAR INDEX
The September U.S. dollar index is higher and hit a contract high in early U.S. trading. Bulls have the strong 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 contract high of 98.700 and then at 99.000. Shorter-term support is seen at the overnight low of 98.365 and then at 98.000. Wyckoff’s Intra Day Market Rating: 6.5
NYMEX CRUDE OIL
September Nymex crude oil prices are lower in early U.S. trading. Bulls still have the slight overall near-term technical advantage. The shorter-term moving averages are neutral early today as the 4-day is above the 9-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 $58.00 and then at this week’s high of $58.82. Look for sell stops just below technical support at the overnight low of $57.43 and then at $57.00. Wyckoff’s Intra-Day Market Rating: 4.0
GRAINS
US grain futures prices were mixed to firmer in overnight trading. Corn was up around 2 cents, soybeans near steady and wheat was 1 to 2 cents higher.
Despite the record late plantings this year, the US corn and soybean crops are looking surprisingly well as the critical growing month of August begins. Also bearish for the grains, Corn Belt weather forecasts for the next 10 days are not threatening to the corn or soybean crops.
The US-China high-level trade talks in Shanghai this week produced no breakthroughs, and President Trump said China cannot be trusted. Chinese and US trade negotiators will reportedly meet again in the US in September, but the sense of grain traders is no agreement is at all close to occurring. That’s also a bearish underlying element for the US grain markets.
Technically, key near-term technical price levels were breached on the downside in corn, soybeans and wheat this week, including technically bearish monthly low closes on Wednesday. This has emboldened the technical-based bears and the big speculative “fund” traders to take out fresh short positions in the grain futures markets.
Traders will closely examine Thursday morning’s weekly USDA export sales report. US export sales of grains have heretofore been tepid. This week’s big rise in the US dollar index is further dampening hopes US grains can become more competitive on the world export market.
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