Tuesday, January 21–Jim Wyckoff’s Morning Markets Report
Asian and European stock markets were weaker overnight. U.S. stock indexes are pointed toward modestly lower openings when the New York day session begins.
There is keener risk aversion in the marketplace to start the U.S. trading week Tuesday, following the Martin Luther King holiday Monday. China is now battling a coronavirus that has killed at least four with hundreds more afflicted, and is rapidly spreading. The illness, which is apparently easily contracted, is being compared with the SARS virus killed hundreds 17 years ago. Would-be travelers in China and Asia are now likely to at least curtail their activities.
There is also focus on the World Economic Forum annual meeting in Davos, Switzerland. President Trump delivered an address to the group Tuesday, mostly touting U.S. economic growth during his administration’s tenure.
At the Davos confab, the International Monetary Fund released a report that forecast global economic growth at 3.3% in 2020 and 3.4% in 2021. Those figures compare with world economic growth of 2.9% in 2019.
In other news, the closely watched German ZEW economic expectations index came in at 26.7 in January versus 10.7 in December, and better than forecasts. The reading in January was the highest in 4.5 years.
The markets are so far paying very little attention to the impeachment process of President Trump. The U.S. Senate this week will debate Trump’s trial parameters, with the trial itself likely starting afterward.
The key outside markets today see crude oil prices down and trading around $58.00 a barrel. The U.S. dollar index is slightly down early today.
There is no major U.S. economic data due for release Tuesday.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are weaker in early U.S. trading, on mild profit taking after hitting a contract and record high last week. Bulls still have the solid near-term technical advantage and there are no early close to suggest a market top is close at hand. The 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 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 the contract high of 3,330.25 and then at 3,350.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at 3,294.00 and then at last week’s low of 3,265.50. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.5
March Nasdaq index futures: Prices are modestly down in early U.S. trading, on profit taking after hitting a contract and record high last week. Bulls still have the solid near-term technical advantage to suggest more upside. 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 to bearish early today. Shorter-term technical resistance is seen at the contract high of 9,189.25 and then at 9,200.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 9,100.00 and then at 9,050.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are higher in early U.S. trading. 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 early today. Shorter-term technical resistance is seen at today’s high of 158 12/32 and then at last week’s high of 158 25/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 157 28/32 and then at 157 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
March U.S. T-Notes: Prices are higher in early U.S. trading. 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 early today. Shorter-term resistance lies at the overnight high of 129.15.5 and then at 129.20.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 129.03.5 and then at 129.00.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
U.S. DOLLAR INDEX
The March U.S. dollar index is weaker in early U.S. trading and is seeing a corrective pullback after hitting a five-week high last Friday. Bulls have the slight 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 and 18-day. The 9-day is above the 18-day moving average. Short-term oscillators for the dollar index are neutral to bearish early today. The dollar index finds shorter-term technical resistance at last week’s high of 97.485 and then at 97.750. Shorter-term support is seen at the overnight low of 97.225 and then at 97.000. Wyckoff’s Intra Day Market Rating: 4.0
NYMEX CRUDE OIL
March Nymex crude oil prices are lower in early U.S. trading. Recent price action suggests a near-term market top is in place. 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 $58.00 and then at $59.00. Look for sell stops just below technical support at last week’s low of $57.42 and then at $57.00. Wyckoff’s Intra-Day Market Rating: 4.0
GRAINS
US grain futures are mixed but mostly weaker in early US pre-market trading Tuesday. Corn is down around 2 cents, while soybeans are off 3 cents lower and wheat is 1/2 to 1 cent lower. The keener risk aversion in the marketplace to start the U.S. trading week is bearish for the grains markets, too. China is battling a coronavirus that has killed at least four with hundreds more afflicted, and is rapidly spreading. The illness, which is apparently easily contracted, is being compared with the SARS virus killed hundreds 17 years ago. Would-be travelers in China and Asia are now likely to at least curtail their activities. The latest CFTC Commitments of Traders report showed the big speculative funds are now net short 78,442 corn futures contracts, long 6,290 soybean contracts, and long 29,787 wheat contracts. The big spec long position in corn can be read as bullish, as those longs are now squeamish after last Friday’s big up day in US corn futures. US grain futures traders will continue to monitory daily and weekly USDA export sales figures, mainly looking for more purchases coming from China. There were rumors last Friday that China was booking a large quantity of U.S. corn for nearby shipment.
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