Monday, March 16–Jim Wyckoff’s Morning Markets Report
Global stock markets were solidly lower in overnight trading. U.S. stock markets are pointed to sharply lower to limit-down trade ahead of the New York day session opening. Trader and investor confidence appears to be going from bad do worse to start the trading week, as over the weekend U.S. non-essential commerce began to shut down amid the coronavirus pandemic. Major stores are closing, public schools are closing, Colorado shut down all of its ski slopes and some states have ordered the closing of bars and restaurants. U.S. airlines are in financial peril as passenger traffic plummets. This follows the moves last week to effectively shut down most major sporting events in the U.S. The U.S. Center for Disease control has warned most Americans to stay home and recommended gatherings of 50 or more people be cancelled for at least the next two months.
The U.S. Federal Reserve on Sunday afternoon again cut its key interest rate, by 1.0% this time, to a range of zero to 0.25%. The Fed also will pump an additional $700 billion into the U.S. financial system (quantitative easing) and has opened up swap lines with other major central banks, in an effort to keep liquidity in the financial markets. President Trump and Congress over the weekend agreed on an aid bill for businesses and consumers negatively impacted by the virus outbreak. Speculation is that it will take at least two months for this situation to get under control from a U.S. public health perspective.
Other world central banks over the weekend announced further actions to thwart the negative economic impact of the virus outbreak that has created a demand shock worldwide.
Following is an edited portion of one email dispatch from a market analyst Monday morning: “It’s becoming evident that the major central banks across the globe are using all their available tools to prevent a crisis, but it seems the fear of the pandemic is taking control of investors. Markets will continue going through this phase of extreme volatility until they are able to assess the scale of damage caused by the virus outbreak. The longer the outbreak persists and countries stay in emergency status, the harder the global economy will be hit. A recession seems almost impossible to prevent at this stage, but the question remains, how bad is it going to be? Equity strategists will not be able to provide meaningful targets for stock prices. That’s because even companies themselves cannot project revenue targets in such situations.”
Economic data released by China Monday showed industrial production in the world’s second-largest economy plunged 13.5% in the first two months of 2020. Retail sales dropped 20.5% in the period as consumers were locked at home. Traders are wondering if the same dour economic numbers will start to come out of Europe and the U.S.
The benchmark 10-year U.S. Treasury note sees its yield around 0.8% Monday. The U.S. dollar index is solidly lower in early U.S. trading. Nymex crude oil prices are solidly down and trading around $30.00 a barrel.
U.S. economic data due for release Monday includes the Empire State manufacturing survey.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are limit down in early U.S. trading. Bears have the solid overall near-term technical advantage amid a price downtrend in place on the daily bar chart. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Today, shorter-term technical resistance comes in at 2,600.000 and then at the overnight high of 2,650.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at 2,500.00 and then at 2,450.00. Wyckoff’s Intra-day Market Rating: 1.0
June Nasdaq index futures: Prices are limit down in early U.S. trading. Bears have the solid overall near-term technical advantage. 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 to bearish early today. Shorter-term technical resistance is seen at 7,500.00 and then at 7,600.00. On the downside, short-term support is seen at 7,500.00 and then at 7,400.00. Wyckoff’s Intra-Day Market Rating: 1.0.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are sharply higher in early U.S. trading. Bulls have the firm overall near-term technical advantage amid extremely volatile trading. Shorter-term moving averages (4- 9- 18-day) are still 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 bullish early today. Shorter-term technical resistance is seen at the overnight high of 182 21/32 and then at 183 even. Shorter-term support lies at the overnight low of 178 16/32 and then at 178 even. Wyckoff’s Intra-Day Market Rating: 8.0
June U.S. T-Notes: Prices are sharply up in early U.S. trading. Bulls have the firm overall near-term technical advantage amid a price uptrend on the daily bar chart. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term resistance lies at 138.00.0 and then at 138.16.0. Shorter-term technical support lies at 137.00.0 and then at the overnight low of 136.20.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 8.0
U.S. DOLLAR INDEX
The June U.S. dollar index is sharply lower in early U.S. trading. Bulls still have the overall near-term technical advantage. The shorter-term moving averages for the dollar index are neutral early today, as the 4-day is above the 9-day and 18-day. The 9-day is below the 18-day moving average. Short-term oscillators for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at 98.250 and then at the overnight high of 98.685. Shorter-term support is seen at the overnight low of 97.580 and then at 97.000. Wyckoff’s Intra Day Market Rating: 3.5
NYMEX CRUDE OIL
April Nymex crude oil prices are sharply lower in early U.S. trading. Bears are in solid overall near-term technical control. 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 bearish early today. Look for buy stops to reside just above technical resistance at $31.00 and then at $32.00. Look for sell stops just below technical support at $29.00 and then at $28.00. Wyckoff’s Intra-Day Market Rating: 4.0
GRAINS
US grain futures are down in early US pre-market trading and are a contract or near their for-the-move lows scored last week. Corn is around 4 cents lower, soybeans around 7 cents down, and wheat around 5 cents lower. Grain traders continue to focus on the coronavirus situation and right now the keen panic and uncertainty of the matter will keep buyers on the sideline. Grain market bears have the solid technical advantage at present, suggesting the path of least resistance for prices will remain sideways at best and most likely sideways to lower for the short term.
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