Wednesday, May 16–Jim Wyckoff’s Morning Markets Report
OVERNIGHT DEVELOPMENTS
World stock markets were narrowly mixed overnight. U.S. stock indexes are pointed toward slightly lower openings when the New York day session begins.
In overnight news, the Euro zone consumer price index for April came in at up 0.3% from March and up 1.2%, year-on-year. Those numbers were in line with market expectations.
Japan’s first-quarter GDP showed a growth rate of -0.2%, which was below forecasts for no change in growth.
Features in the marketplace this week are a surging U.S. dollar index that hit a five-month high overnight, which has in turn put some pressure on raw commodity markets that are priced in greenbacks on world markets. Gold prices dropped sharply on Tuesday and hit a five-month low.
U.S. Treasury yields are also on the rise this week, with the key 10-year U.S. T-Note yielding above 3.0%.
It appears the U.S.-North Korea summit in June is unraveling, which is not surprising to many. North Korea has cancelled talks with South Korea and now says it will not completely disarm its nuclear arsenal. The U.S. has not formally responded. This development could flare up into a markets-moving geopolitical event in the near term.
Attention of the marketplace this week is also on U.S. trade meetings with China in Washington, D.C. Also, a possible U.S. decision on the NAFTA trade agreement with Canada and Mexico could be announced late this week, but many are skeptical it will happen so soon.
Something else to keep an eye on: The Turkish currency, the lira, fell to a record low against the U.S. dollar overnight, which prompted the Turkish central bank to issue a warning about “unhealthy” developments in the markets. In years past, unstable secondary currency markets have produced a contagion effect in the major currencies. This is not the case now, but it still warrants monitoring.
The other key “outside market” today finds Nymex crude oil prices higher, above $71.00 a barrel and near last week’s 3.5-year high.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, new residential construction, industrial production and capacity utilization, and the weekly DOE liquid energy stocks report.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are slightly lower on mild profit taking after hitting a seven-week high on Monday. The bulls have the overall near-term technical advantage. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Today, shorter-term technical resistance comes in at Tuesday’s high of 2,731.25 and then at this week’s high of 2,741.25. Buy stops likely reside just above those levels. Downside support for active traders today is located at this week’s low of 2,700.50 and then at 2,680.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.0
June Nasdaq index December futures: Prices are slightly higher in early U.S. trading. Shorter-term moving averages (4- 9-and 18-day) are still bullish early today. The 4-day moving average is above 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 6,950.00 and then at Tuesday’s high of 6,976.75. Buy stops likely reside just above those levels. On the downside, short-term support is seen at this week’s low of 6,854.25 and then at 6,800.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0.
U.S. TREASURY BONDS AND NOTES
June U.S. T-Bonds: Prices are firmer on short covering after hitting a contract low on Tuesday. Bears have the solid overall near-term technical advantage. 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 early today. Shorter-term technical resistance is seen at 142 even and then at 142 16/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 141 5/32 and then at the contract low of 140 26/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5
June U.S. T-Notes: Prices are firmer on short covering after hitting a contract low on Tuesday. 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 early today. Shorter-term resistance lies at 118.28.0 and then at 119.00.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 118.20.5 and then at the contract low of 118.16.5. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5
U.S. DOLLAR INDEX
The June U.S. dollar index is higher and hit a five-month high today. Bulls have the firm 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 93.500 and then at 93.750. Shorter-term support is seen at the overnight low of 93.015 and then at 92.750. Wyckoff’s Intra Day Market Rating: 6.5
NYMEX CRUDE OIL
June Nymex crude oil prices are slightly lower in early U.S. trading, and not far below Tuesday’s 3.5-year high. Bulls are in solid near-term technical control. Look for buy stops to reside just above technical resistance at this week’s high of $71.92 and then at $72.50. Look for sell stops just below technical support at this week’s low of $70.26 and then at $70.00. Wyckoff’s Intra-Day Market Rating: 5.0
GRAINS
Grain futures were mixed overnight. The bulls have faded recently, amid good planting progress in the U.S. Corn Belt. However, weather in the Corn Belt will be a major fundamental factor for the next three months. On Tuesday at least one weather firm forecast a hotter and drier summer in the U.S. Corn Belt. That prompted some speculative buying interest in corn and soybeans.