Tuesday, August 13–Jim Wyckoff’s Morning Markets Report
Asian and European stock markets were mostly lower overnight. U.S. stock indexes are also pointed toward modestly lower openings when the New York day session begins. There is more protesting by the citizens of Hong Kong, which has again shut down the city’s main airport. This situation is escalating and the world marketplace is now sensing some real trouble brewing in the Asian region. Pressure is building on mainland China to quell the civil unrest. The U.S.-China trade war is also escalating, with some Wall Street firms now advising their clients the U.S.-China trade conflict could deteriorate into a “cold war” similar to what the U.S. and Russia had for three decades. Throw in North Korea test-firing missiles, the U.S.-Iran stand-off and political unrest in Argentina and traders/investors have a whole bunch of worry simmering and maybe coming to a boil on the front burners of the world marketplace.
Gold prices shot to a six-year high overnight, while U.S. Treasuries and world government bond yields are dropping again. The German bund hit a new record-low yield of minus 0.617%.
The U.S. dollar index and crude oil prices are fairly stable today, however.
Worries about slowing global economic growth were further stoked Tuesday when the closely watched German ZEW economic current conditions index in August had a reading of -13.5 versus -1.1 in July. The economic expectations component had a reading of -44.1 in August versus -34.5 in July. Germany is the economic workhorse of the European Union.
On tap in the U.S. today is the July consumer price index, expected to be up 0.3% from June and up 1.7%, year-on-year.
Other U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the NFIB small business index, and real earnings.
U.S. STOCK INDEXES
September S&P 500 e-mini futures: Prices are slightly lower in early U.S. trading. Bulls and bears are on a level overall near-term technical playing field amid choppy trading. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are neutral early today. Today, shorter-term technical resistance comes in at 2,900.00 and then at Monday’s high of 2,931.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 2,866.75 and then at 2,850.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.5
September Nasdaq index futures: Prices are lower in early U.S. trading. Shorter-term moving averages (4- 9-and 18-day) are neutral 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 early today. Shorter-term technical resistance is seen at 7,600.00 and then at 7,650.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 7,514.00 and then at 7,500.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5.
U.S. TREASURY BONDS AND NOTES FUTURES
September U.S. T-Bonds: Prices are higher and near the recent contract high in early U.S. trading. Bulls have the solid 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 to bullish early today. Shorter-term technical resistance is seen at the contract high of 163 31/32 and then at 164 16/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 163 2/32 and then at 162 16/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.5
September U.S. T-Notes: Prices are weaker in early U.S. trading, on mild profit taking. Bulls still have the solid overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above with the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term support lies at 130.00.0 and then at 129.25.0. Sell stops likely reside just below those levels. Shorter-term technical resistance lies at the overnight high of 130.17.0 and then at the contract high of 130.27.5. Buy stops likely reside just above those levels. Wyckoff’s Intra-Day Market Rating: 5.0
U.S. DOLLAR INDEX
The September U.S. dollar index is near steady in early U.S. trading. Bulls 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 below the 9-day and 18-day. The 9-day is above the 18-day moving average. Short-term oscillators for the dollar index are bearish early today. The dollar index finds shorter-term technical resistance at Monday’s high of 97.550 and then at last week’s high of 97.930. Shorter-term support is seen at last week’s low of 96.980 and then at 96.750. Wyckoff’s Intra Day Market Rating: 5.0
NYMEX CRUDE OIL
September Nymex crude oil prices are near steady in early U.S. trading. Bears have the overall near-term technical advantage amid a price downtrend in place on the daily bar chart. 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 to bullish early today. Look for buy stops to reside just above technical resistance at the overnight high of $55.30 and then at $56.00. Look for sell stops just below technical support at $54.00 and then at Monday’s low of $53.54. Wyckoff’s Intra-Day Market Rating: 5.0
US grain futures prices were mixed in overnight trading, following Monday’s highly anticipated USDA monthly supply and demand report, which was deemed very bearish for corn and wheat and friendly for soybeans. Corn was down 10 to 12 cents in the nearby contracts, soybeans up around 7 cents and wheat off 1 to 2 cents.
US corn futures settled down the 25-cent daily trading limit Monday. Daily trading limits expand to 40 cents for Tuesday. Corn traders reacted negatively to USDA’s forecasting the US corn crop size around 700 million bushels larger than traders expected. The new-crop marketing year ending stocks were around 550 million bushels more than anticipated. The surprising corn data from the government puts into more focus the Pro Farmer Midwest Crop Tour next week, as scouts will gather samples from seven Corn Belt states.
Soybean traders did not get a dose of bearish news in Monday’s USDA data. However, the pounding seen in corn and wheat futures spilled over into selling pressure in soybeans. USDA’s first soybean crop estimate came in 120 million bu. below what traders anticipated and 165 million bu. below the July projection. USDA estimated U.S. planted soybean acreage at 76.700 million, down 3.34 million acres from June. USDA estimated the national average soybean yield at 48.5 bu. per acre, unchanged from the July projection.
Wheat futures tumbled after the USDA reports, with most HRW and spring wheat futures setting new contract lows. USDA’s increase in the US average wheat yield boosted total supplies by 59 million bushels from the July report. USDA cut estimated food use 5 million bushels, to 960 million and increased estimated feed and residual use 20 million bushels, to 170 million. Estimated 2019-20 US wheat exports were also increased 25 million bushels to 975 million. The USDA world wheat production forecast was reduced from a month ago but still left global output up 37.5 million metric tons from a year ago.
Corn Belt weather this week sees temperatures rising a bit, but with scattered rainfall expected in the region. It’s nearing mid-August now, and the window is closing on any heat/dry stress developing for the soybean crops. The next major weather threat would be an early frost in the Corn Belt.
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.