Thursday, February 27–Jim Wyckoff’s Morning Markets Report
Global stock markets were lower overnight as the coronavirus outbreak continues to spread and trader and investor fears continue to rise. The outbreak will significantly impact global growth for at least the first quarter of 2020, and maybe beyond. Prognosticators are trying to gauge the ultimate impact of the illness on the world economy but nobody really has a clue on the matter. That uncertainty is what is roiling the markets at present, and will likely continue to do so for the near term. U.S. stock indexes are pointed toward sharply lower openings when the New York day session begins.
President Trump held a news conference Wednesday evening and named Vice President Pence as heading up the U.S. effort to combat the illness and its spread. Trump also said he thinks U.S. equities are selling off because of the socialist-leaning Democratic presidential candidates.
The yield on the benchmark U.S. Treasury 10-year note on Thursday fell to a record low of
1.29%. There’s an old market adage that “the bond market knows and stock traders are schmoes.” U.S. Treasury yields started falling last week, before the big sell off in the global stock markets. What the U.S. Treasury market is telling traders and investors now is that serious economic damage will be inflicted by the coronavirus—both at home and abroad, including the possibility of a U.S. recession on the horizon.
Most market watchers now expect future easing of monetary policies by the major central banks of the world, to stimulate their economies and help ward off the negative economic impacts of the coronavirus outbreak.
Nymex crude oil prices lower, at a 14-month low, and trading around $47.60 a barrel in early trading Thursday. The U.S. dollar index is trading down today.
U.S. economic data due for release Thursday includes the weekly jobless claims report, the second estimate of fourth-quarter gross domestic product, pending homes sales, the Kansas City Fed manufacturing survey, and durable goods orders.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are solidly down and hit a 3.5-month low in early U.S. trading. This week’s downdraft is a solid chart clue that at least a near-term market top is in place. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are bearish early today. Today, shorter-term technical resistance comes in at 3,100.00 and then at the overnight high of 3,117.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at the overnight low of 3,059.50 and then at 3,050.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 3.5
March Nasdaq index futures: Prices are down in early U.S. trading and hit a six-week low overnight. This week’s price action is a solid chart clue that a near-term market top is in place. Shorter-term moving averages (4- 9-and 18-day) are bearish early today. The 4-day moving average is below the 9-day and 18-day. The 9-day average is even with the 18-day. Short-term oscillators (RSI, slow stochastics) are bearish early today. Shorter-term technical resistance is seen at the overnight high of 8,878.50 and then at 8,900.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 8,697.25 and then at the January low of 8,678.00. 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 higher and hit a contract high overnight. Bulls have the strong 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 bullish early today. Shorter-term technical resistance is seen at the overnight contract high of 168 19/32 and then at 169 even. Buy stops likely reside just above those levels. Shorter-term support lies at 168 even and then at the overnight low of 167 13/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 7.5
March U.S. T-Notes: Prices are higher and hit a contract high overnight. Bulls have the strong 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 and 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term resistance lies at the contract high of 133.19.0 and then at 133.24.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at 133.10.0 and then at the overnight low of 133.00.5. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 7.0
U.S. DOLLAR INDEX
The March U.S. dollar index is lower and hit a two-week low in early U.S. trading. Bulls still have the firm 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 bearish early today. The dollar index finds shorter-term technical resistance at the overnight high of 98.995 and then at 99.200. Shorter-term support is seen at the overnight low of 98.605 and then at 98.500. Wyckoff’s Intra Day Market Rating: 4.0
NYMEX CRUDE OIL
April Nymex crude oil prices are lower and hit a nearly 14-month low overnight. The shorter-term moving averages 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 (RSI and slow stochastics) are bearish early today. Look for buy stops to reside just above technical resistance at the overnight high of $48.78 and then at $49.00. Look for sell stops just below technical support at the overnight low of $47.55 and then at $47.00. Wyckoff’s Intra-Day Market Rating: 3.0
GRAINS
US grain futures are down in early US pre-market trading Thursday. Corn is down around 2 cents, soybeans around 3 cents lower, and wheat down 2 to 3 cents. Fear in the global marketplace continues to squelch the grain market bulls. Global stock markets were lower overnight as the coronavirus outbreak continues to spread and trader and investor anxiety continues to rise. The outbreak will significantly impact global growth for at least the first quarter of 2020, and maybe beyond. Prognosticators are trying to gauge the ultimate impact of the illness on the world economy but nobody really has a clue on the matter. That uncertainty is what is roiling the markets at present, including the grains, and will likely continue to do so for the near term. The yield on the benchmark U.S. Treasury 10-year note on Thursday fell to a record low of
1.29%. There’s an old market adage that “the bond market knows and stock traders are schmoes.” U.S. Treasury yields started falling last week, before the big sell off in the global stock markets. What the U.S. Treasury market is telling grain traders now is that serious economic damage will be inflicted by the coronavirus—both at home and abroad, including the possibility of a U.S. recession on the horizon. That’s bearish for grains. Most market watchers now expect future easing of monetary policies by the major central banks of the world, to stimulate their economies and help ward off the negative economic impacts of the coronavirus outbreak. Significant near-term technical damage has been inflicted in the grain futures markets recently, to suggest any sustained rallies or price uptrends are nowhere in sight, and prices are likely to continue to drift sideways to lower in the near term.
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