Tuesday, February 25–Jim Wyckoff’s Morning Markets Report
Global stock markets have stabilized and are trading mixed Tuesday, following Monday’s strong selling pressure that wiped out all of the U.S. stock market’s gains for 2020, including seeing the Dow Jones Industrial Average lose over 1,000 points. U.S. stock indexes are pointed toward slightly higher openings when the New York day session begins. The key questions on traders’ and investors’ minds are: Have the markets now fully factored in the coronavirus impact on the global economy? Or, “will the next shoe drop” soon?
Here is the latest on the coronavirus outbreak (covid-19). China has over 80,000 confirmed cases, with 508 new cases Tuesday and 71 new deaths to push the total above 2,700. Reports say China may postpone its annual National People’s Congress in March. More than 1,200 cases have been confirmed in 30 countries outside of China. South Kore has 84 new cases and nine deaths. A crew member of Korean Air has tested positive for coronavirus. Northern Italy sees 12 towns quarantined amid 229 cases confirmed and seven deaths. Japan has 160 coronavirus cases. Still, the World Health Organization says it is too early to call the outbreak a pandemic, although other health experts are calling it such. United Airlines says U.S. citizens traveling to China are now near zero.
Financial and currency markets are starting to price in expected future easing of monetary policies by the major central banks of the world, due to the covid-19 outbreak. Fed funds futures markets show an 86% chance the Federal Reserve will lower U.S. interest rates by July. The 10-year U.S. Treasury Note yield is nearing a historic low and is currently fetching around 1.35%.
The key outside markets today see crude oil prices lower and trading around $51.00 a barrel. Meantime, the U.S. dollar index is slightly lower but not too far below last week’s nearly three-year high.
U.S. economic data due for release Tuesday includes the weekly Johnson Redbook and Goldman Sachs retail sales reports, the monthly house price index, the S&P-Case-Shiller home price index, the Richmond Fed business survey, and the consumer confidence index.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are slightly up in early U.S. trading. Monday’s big gap-lower trade on the daily bar chart is a solid chart clue that a near-term market top is in place. 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) are neutral to bearish early today. Today, shorter-term technical resistance comes in at the overnight high of 3,259.50 and then at 3,275.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at Monday’s low of 3,213.75 and then at 3,200.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.0
March Nasdaq index futures: Prices are slightly up in early U.S. trading. Monday’s big gap-lower trade on the daily bar chart is a solid chart clue that a near-term market top is in place. 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 average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is seen at the overnight high of 9,224.25 and then at 9,300.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at Monday’s low of 9,041.25 and then at 9,000.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are higher and hit another contract high in early U.S. trading, on safe-haven demand. 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 bullish early today. Shorter-term technical resistance is seen at the overnight contract high of 167 13/32 and then at 168 even. Buy stops likely reside just above those levels. Shorter-term support lies at 166 even and then at the overnight low of 165 31/32 and then at Monday’s low of 165 15/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 7.0
March U.S. T-Notes: Prices are higher and hit another 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 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 overnight contract high of 132.30.0 and then at 133.00.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 132.11.0 and then at Monday’s low of 132.03.0. 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 near steady in early U.S. trading. Prices last week hit a contract and three-year high. Bulls still have the solid 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. The 9-day is above the 18-day moving average. Short-term oscillators for the dollar index are neutral to bearish today. The dollar index finds shorter-term technical resistance at the Monday’s high of 99.570 and then at the contract high of 99.815. Shorter-term support is seen at Monday’s low of 99.030 and then at 98.750. Wyckoff’s Intra Day Market Rating: 5.0
NYMEX CRUDE OIL
April Nymex crude oil prices are near steady in early U.S. trading. The shorter-term moving averages are neutral early today as the 4-day is even with the 9-day. The 9-day is above the 18-day moving average. Short-term oscillators (RSI and slow stochastics) are neutral to bearish early today. Look for buy stops to reside just above technical resistance at $52.00 and then at Monday’s high of $52.64. Look for sell stops just below technical support at $51.00 and then at $50.00. Wyckoff’s Intra-Day Market Rating: 5.0
GRAINS
US grain futures are mixed in early US pre-market trading Tuesday. Corn is up around 1/2 cent, soybeans about 1 1/2 cents higher, and wheat down 1 to 3 cents. Global stock markets have stabilized and are trading mixed Tuesday, following Monday’s strong selling pressure that wiped out all of the U.S. stock market’s gains for 2020, including seeing the Dow Jones Industrial Average lose over 1,000 points. The key questions on grain traders’ and investors’ minds are: Have the grain markets now fully factored in the coronavirus impact on global demand? Or, “will the next shoe drop” soon? Here is the latest on the coronavirus outbreak (covid-19). China has over 80,000 confirmed cases, with 508 new cases Tuesday and 71 new deaths to push the total above 2,700. Reports say China may postpone its annual National People’s Congress in March. More than 1,200 cases have been confirmed in 30 countries outside of China. South Kore has 84 new cases and nine deaths. A crew member of Korean Air has tested positive for coronavirus. Northern Italy sees 12 towns quarantined amid 229 cases confirmed and seven deaths. Japan has 160 coronavirus cases. Still, the World Health Organization says it is too early to call the outbreak a pandemic, although other health experts are calling it such. United Airlines says U.S. citizens traveling to China are now near zero. Financial and currency markets are starting to price in expected future easing of monetary policies by the major central banks of the world, due to the covid-19 outbreak. Fed funds futures markets show an 86% chance the Federal Reserve will lower U.S. interest rates by July. The 10-year U.S. Treasury Note yield is nearing a historic low and is currently fetching around 1.35%. The grain market bulls should get some comfort knowing that easing monetary policies of the major central banks would grease the skids for likely better global demand for grains. Still, technical damage has been inflicted in the grain futures markets just recently, to suggest any sustained rallies or price uptrends are nowhere in sight.
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