Friday, January 3–Jim Wyckoff’s Morning Markets Report
An extended period of geopolitical calm was shattered overnight when the U.S. conducted a military air strike in Baghdad, Iraq that killed a top Iranian general along with an Iraqi paramilitary leader. The U.S. said Iran was planning to kill Americans in the Middle East. The strike also comes after the major attack on a Sauid oil installation a few months ago, in which the U.S. blamed Iran. Iran promised harsh retaliation.
Global stock markets plunged on the news and U.S. stocks are set to open the New York day session with strong losses. Gold prices shot higher and hit a four-month high, presently trading around $25 higher, while other key outside markets today see crude oil prices spiking, hitting a 10-month high and presently trading around $2.50 higher at near $63.50 a barrel. The U.S. dollar index continues its rebound from this week’s multi-month low and is trading moderately up on the day.
The keen uncertainty regarding this situation, including how Iran will respond, is likely to keep the global marketplace on edge for some time to come. China has urged both the U.S. and Iran to use restraint, as China and the U.S. are set to sign a partial trade deal on January 15.
The U.S. military action against Iran overshadows a very busy day for U.S. economic data, including the afternoon release of the FOMC minutes from the last meeting. Traders and investors will glean the FOMC minutes for clues on the future direction and timing of U.S. Federal Reserve monetary policy. Other U.S. economic data due for release today includes the ISM New York report on business, the ISM manufacturing report on business, construction spending, the weekly DOE liquid energy stocks report and domestic auto industry sales.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are sharply down in early U.S. trading after hitting a contract and record high in overnight trading. Today’s “key reversal” down on the daily bar chart, if confirmed at the close, would be one technical clue that a market top is in place. The 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 is above the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are bearish early today. Today, shorter-term technical resistance comes in at 3,225.00 and then at 3,245.00. Buy stops likely reside just above those levels. Downside support for active traders today is the overnight low of 3,206.75 and then at 3,200.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 3.5
March Nasdaq index futures: Prices are sharply down in early U.S. trading after hitting a contract and record high in overnight trading. Today’s “key reversal” down on the daily bar chart, if confirmed at the close, would be one technical clue that a market top is in place. Shorter-term moving averages (4- 9-and 18-day) are bullish early today. The 4-day moving average is above the 9-day. The 9-day average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are bearish early today. Shorter-term technical resistance is seen at 8,800.00 and then at 8,850.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 8,735.25 and then at 8,700.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 3.5.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are sharply up in early U.S. trading, on safe-haven demand and short covering, after hitting a six-week low Thursday. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is above the 9-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 158 4/32 and then at 158 16/32. Buy stops likely reside just above those levels. Shorter-term support lies at 157 even and then at the overnight low of 156 21/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.5
March U.S. T-Notes: Prices are sharply up and hit a three-week high in early U.S. trading, on safe-haven demand and short covering. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is above 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 support lies at 129.00.0 and then at the overnight low of 128.20.0. Sell stops likely reside just below those levels. Shorter-term technical resistance lies at the overnight high of 129.10.5 and then at 129.16.0. Buy stops likely reside just above those levels. Wyckoff’s Intra-Day Market Rating: 6.5
U.S. DOLLAR INDEX
The March U.S. dollar index is higher on some safe-haven demand and a corrective bounce after hitting a five-month low on Tuesday. Bears still have the overall near-term technical advantage amid a price downtrend in place on the daily 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 neutral to bullish early today. The dollar index finds shorter-term technical resistance at the overnight high of 96.795 and then at 97.000. Shorter-term support is seen at the overnight low of 96.395 and then at this week’s low of 96.020. Wyckoff’s Intra Day Market Rating: 6.0
NYMEX CRUDE OIL
February Nymex crude oil prices are sharply higher and hit a 10-month high in early U.S. trading. Bulls have the solid near-term technical advantage amid a three-month-old uptrend on the daily bar chart. The shorter-term moving averages 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 (RSI and slow stochastics) are neutral to bullish early today. Look for buy stops to reside just above technical resistance at the overnight high of $64.09 and then at $65.00. Look for sell stops just below technical support at $63.00 and then at $62.50. Wyckoff’s Intra-Day Market Rating: 7.0
GRAINS
US grain futures were lower overnight, amid the keen marketplace uncertainty regarding the U.S. military strike that killed in Iranian general in Baghdad, Iraq. Corn was off around 2 cents, soybeans down around 6 cents and wheat also around 6 cents lower. The overnight geopolitical shock is likely to at least temporarily overshadow the Friday’s weekly USDA export sales report and squelch speculative buying interest that had been evident in recent trading sessions. A partial U.S.-China trade agreement is scheduled to be signed January 15, with most thinking the U.S. military strike won’t change that event. The January 10th monthly USDA supply and demand report will be in focus for the grain markets next week, as estimates of the updated size of the US corn and soybean crops will be issued following a rocky harvest season that was plagued by inclement weather.
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