Wednesday, January 29–Jim Wyckoff’s Morning Markets Report
Asian and European stock markets were mostly firmer overnight. Mainland China markets remain closed for the Lunar New Year holiday. Hong Kong’s stock market did open today, following the holiday, and closed lower. U.S. stock indexes are pointed toward firmer openings when the New York day session begins, following solid gains Tuesday.
While the coronavirus outbreak is still not at all contained, the marketplace at this point is deeming the event as fully factored into market prices. That perception could change. Traders and investors are turning their attention to other matters.
This week’s meeting of the Federal Reserve’s Open Market Committee (FOMC) that began Tuesday morning and ends Wednesday afternoon with a statement is expected to see no change in U.S. monetary policy. Fed watchers will be interested to see if the FOMC statement or Fed Chairman Powell at his press conference will address very short-term credit funding for banks. That rate in past months became unstable, causing overnight lending rates to briefly spike.
The key outside markets today see crude oil prices higher and trading around $54.00 a barrel. Meantime, the U.S. dollar index is slightly higher and is near this week’s two-month high.
Other U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, advance economic indicators, pending home sales, and the weekly DOE liquid energy stocks report.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are firmer in early U.S. trading as the bulls are right back in business and have avoided serious chart damage. The shorter-term moving averages (4-, 9- and 18-day) are neutral early today. The 4-day moving average is below the 9-day and 18-day. The 9-day is above the 18-day moving average. Short-term oscillators (RSI, slow stochastics) neutral early today. Today, shorter-term technical resistance comes in at 3,300.00 and then at 3,315.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at the overnight low of 3,273.00 and then at 3,250.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 6.0
March Nasdaq index futures: Prices are higher in early U.S. trading. Bulls have the firm overall near-term technical advantage and have stabilized the market. Shorter-term moving averages (4- 9-and 18-day) are neutral early today. The 4-day moving average is below 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 9,200.00 and then at 9,250.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 9,091.75 and then at 9,000.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are higher in early U.S. trading. Bulls have the firm 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 overnight high of 161 30/32 and then at this week’s high of 162 25/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 160 27/32 and then at 160 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 to bullish early today. Shorter-term resistance lies at the overnight high of 130.27.0 and then at 131.00.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 130.13.5 and then at 130.08.0. 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 slightly higher and near Tuesday’s two-month high in early U.S. trading. Bulls have the firm overall near-term technical advantage amid a price uptrend in place on the daily chart. 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 bullish early today. The dollar index finds shorter-term technical resistance at the November high of 98.045 and then at 98.250. Shorter-term support is seen at the overnight low of 97.760 and then at this week’s low of 97.590. Wyckoff’s Intra Day Market Rating: 6.0
NYMEX CRUDE OIL
March Nymex crude oil prices are firmer in early U.S. trading, on a mild bounce from recent strong selling pressure. A steep price downtrend is in place on the daily bar chart. 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 neutral to bullish early today. Look for buy stops to reside just above technical resistance at the overnight high of $54.25 and then at $55.00. Look for sell stops just below technical support at Tuesday’s low of $52.68 and then at this week’s low of $52.13. Wyckoff’s Intra-Day Market Rating: 4.5
GRAINS
US grain futures are mixed to weaker in early US pre-market trading Wednesday. Corn is around 1 cent lower, soybeans around 5 cents higher and wheat is 3 to 5 cents down. While the coronavirus outbreak is still not at all contained, the grain markets at this point are deeming the event as mostly factored into market prices. That perception could change. There is still concern that a major coronavirus outbreak in China that causes harm to the world’s second-largest economy could provide China with an “out clause” regarding the recently signed trade agreement with the US, in which China pledged to buy significantly more US ag products. Grain market bulls are not spooked anymore, but they are also not going to be aggressive buyers—at least not yet. Focus will turn to Thursday’s weekly USDA export sales report for clues on export demand for U.S. grains—which has not been robust of late. There are ideas that China won’t step up its US grain purchases until after the Lunar New Year holiday ends later this week. Also negative for the grain markets is weather in South American growing regions that is presently non-problematic, including reports that a large soybean crop will be harvested in South America this year. Reports are saying that South American soybean prices are at least 15 cents per bushel cheaper on the world market than are US soybeans.
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