Thursday, May 21–Jim Wyckoff’s Morning Markets Report
Global stock markets were mostly lower in overnight trading. U.S. stock indexes are pointed toward lower openings when the New York day session begins, on a corrective pullback from Wednesday’s good gains. Attitudes are more upbeat late this week as governments continue to reopen businesses that had been shuttered for weeks. Some sporting events have been scheduled to resume in the coming weeks and there are rising hopes autumn sports can be played.
Also supporting more positive trader and investor sentiment is the surprising rally in crude oil prices that sees Nymex crude oil trading above $34.00 a barrel Thursday morning. The strong rally in the oil market has caught most oil market watchers by surprise, given significantly reduced demand and still-burdensome global supplies. Just a few weeks ago Nymex May crude oil futures traded as low as -$40 a barrel just before the contract expired.
Global economic data for May is starting to improve from the dire numbers seen in April. The IHS Markit composite purchasing managers index (PMI) for May in the Euro zone rose to 30.5 in May from 13.6 in April. A reading below 50.0 suggests contraction. The U.K.’s PMI for the same period came in at 28.9 from 13.8. Japan’s PMI for the same period was 27.4 versus 25.8. Australia’s composite May PMI was 36.4 versus 21.7 in April.
China has begun its most important political event of the year, the National People’s Congress, after a delay because of the Covid-19 pandemic. The meetings signal what the government is calling its victory over the outbreak that began late last year, and will outline key economic and social goals for the year. U.S.-China relations have soured the past several weeks, amid the pandemic that the U.S. is blaming on China. President Trump tweeted late Wednesday that China’s “disinformation and propaganda attack on the United States and Europe is a disgrace.” The U.S. Senate on Wednesday moved to ban Chinese companies from trading on U.S. stock exchanges.
The other important outside markets see the U.S. dollar index firmer early today. The yield on the benchmark U.S. Treasury 10-year note is currently around 0.67%. Gold prices are lower on a normal downside correction from recent good gains.
U.S. economic data due for release Thursday includes the weekly jobless claims report, expected to show claims of 2.4 million, which is a decline from recent weeks. Also due out is the Philadelphia Fed business survey, PMI indexes, existing home sales, and leading economic indicators.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are lower in early U.S. trading. Bulls still have the overall near-term technical advantage. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are neutral early today. Today, shorter-term technical resistance comes in at this week’s high of 2,976.25 and then at 3,000.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at 2,900.00 and then at this week’s low of 2,850.00. Wyckoff’s Intra-day Market Rating: 4.0
June Nasdaq index futures: Prices are lower in early U.S. trading and did hit a 2.5-month high overnight. A price uptrend is firmly in place on the daily chart. 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 neutral early today. Shorter-term technical resistance is seen at this week’s high of 9,498.00 and then at 9,600.00. On the downside, shorter-term support is seen at 9,300.00 and then at this week’s low of 9,110.25. Wyckoff’s Intra-Day Market Rating: 4.5.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are firmer in early U.S. trading. Bulls have the overall technical advantage. Shorter-term moving averages (4- 9- 18-day) are bearish early today. The 4-day moving average is below the 9-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term technical resistance is seen at this week’s high of 181 4/32 and then at 182 even. Shorter-term support lies at the overnight low of 179 13/32 and then at 179 even. Wyckoff’s Intra-Day Market Rating: 5.5
June U.S. T-Notes: Prices are slightly up in early U.S. trading. Bulls have the solid overall near-term technical advantage. 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 even with the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term resistance lies at the overnight high of 139.07.0 and then at this week’s high of 139.12.5. Shorter-term technical support lies at the overnight low of 138.31.5 and then at 138.24.0. 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 slightly up in early U.S. trading. Bulls have faded this week but still have the slight 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. The 9-day is above 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 Wednesday’s high of 99.570 and then at 99.755. Shorter-term support is seen at this week’s low of 99.005 and then at 98.765. Wyckoff’s Intra Day Market Rating: 5.5
NYMEX CRUDE OIL
July Nymex crude oil prices are higher and hit a six-week high in early U.S. trading. Bulls are enjoying a price uptrend on the daily bar chart. The shorter-term moving averages are bullish early today as the 4-day is above the 9-day and 18-day. The 9-day is above the 18-day moving average. Short-term oscillators (RSI and slow stochastics) are bullish early today. Look for buy stops to reside just above technical resistance at $35.00 and then at the April high of $35.18. Look for sell stops just below technical support at the overnight low of $33.35 and then at $32.00. Wyckoff’s Intra-Day Market Rating: 6.5
GRAINS
US grain futures are mixed in early U.S. pre-market trading. The highlight of the day will be the weekly USDA export sales report. Grain bears remain in overall technical control, even though market bottoms appear to be in place. The grain market bulls need a major Covid-19 vaccine breakthrough or a serious weather market scare somewhere in a major producing region of the world. Otherwise, trading is very likely to remain sideways and choppy in the coming weeks.
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