Monday, February 3–Jim Wyckoff’s Morning Markets Report
Asian stock markets were lower overnight, led by sharp losses in mainland China stocks as those markets reopened for the first time in over a week, due to the Lunar New Year holiday last week. The Shanghai stock index lost nearly 8% on the day—the biggest drop in 4.5 years. European stock markets were mostly up and U.S. stock indexes are pointed toward higher openings when the New York day session begins.
The coronavirus outbreak in China that has spread to other parts of the world remains in focus early this week. Latest counts show 17,500 Chinese citizens afflicted and over 350 dead, with air travel to China being significantly curtailed and global and domestic business there disrupted. It’s been an up-and-down daily trading affair for markets the past two weeks, regarding the coronavirus outbreak. Judging from the European and U.S. stock markets’ gains Monday, at least on this day the present situation appears to be factored into market prices.
In other Asian news, Hong Kong’s economy contracted by 1.2% in 2019, the first negative growth rate in over 10 years. Civil unrest and a global trade slowdown hurt that city’s economy.
In the Euro zone, the January manufacturing purchasing managers’ index (PMI) came in at 47.9, which was slightly better than expectations, but still a reading below 50.0 that suggests a contraction in the sector.
The U.K. has officially exited from the European Union as of last Friday. The British pound saw some pressure as the U.K. and Euro zone officials begin transition talks.
The key outside markets today see crude oil prices modestly up and trading around $51.80 a barrel. Reports overnight said Saudi Arabia is mulling a “drastic” temporary oil-production cut due to the coronavirus outbreak. OPEC ministerial officials may meet this week to discuss the matter. Meantime, the U.S. dollar index is higher on a corrective bounce from solid losses seen last Friday.
U.S. economic data due for release Monday includes the U.S. manufacturing purchasing managers’ index (PMI), the ISM manufacturing report on business, construction spending, domestic auto industry sales and the global manufacturing PMI.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are higher in early U.S. trading, on a corrective bounce from last Friday’s pressure that did produce a technically bearish monthly low close, which is one clue the market has put in at least a near-term top. 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) neutral early today. Today, shorter-term technical resistance comes in at the overnight high of 3,250.50 and then at 3,275.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at the overnight low of 3,222.00 and then at last week’s low of 3,212.75. 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 still have the overall near-term technical advantage. 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 to bearish early today. Shorter-term technical resistance is seen at the overnight high of 9,092.25 and then at 9,150.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 8,975.00 and then at last week’s low of 8,925.50. 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 weaker in early U.S. trading after hitting 3.5-month high overnight. Bulls still 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 bearish early today. Shorter-term technical resistance is seen at 164 even and then at the overnight high of 164 5/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 163 1/32 and then at 162 16/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5
March U.S. T-Notes: Prices are weaker after hitting a 3.5-month high overnight. 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 bearish early today. Shorter-term resistance lies at the overnight high of 131.29.0 and then at 132.00.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 131.12.5 and then at 131.08.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0
U.S. DOLLAR INDEX
The March U.S. dollar index is solidly higher in early U.S. trading, on a rebound from Friday’s losses. Bulls have the 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 Friday’s high of 97.790 and then at November high of 98.045. Shorter-term support is seen at the overnight low of 97.230 and then at last week’s low of 97.165. Wyckoff’s Intra Day Market Rating: 6.5
NYMEX CRUDE OIL
March Nymex crude oil prices are modestly up in early U.S. trading after hitting a four-month low overnight. A steep price downtrend is still 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 $52.50 and then at $53.00. Look for sell stops just below technical support at the overnight low of $50.42 and then at $50.00. Wyckoff’s Intra-Day Market Rating: 5.5
GRAINS
US grain futures are weaker in early US pre-market trading Monday. Corn is around 1 1/2 cents down, soybeans around 1 cent lower and wheat is 3 to 4 cents down. The coronavirus outbreak in China that has spread to other parts of the world remains in focus early this week. Latest counts show 17,500 Chinese citizens afflicted and over 300 dead, with air travel to China being significantly curtailed and global and domestic business there disrupted. It’s been an up-and-down daily trading affair for most markets the past two weeks, regarding the coronavirus outbreak. However, the grains have taken the situation especially bearish due to the uncertainty regarding China adhering to its recently signed trade deal with the U.S. Grain traders are wondering if China will meet its commitments to buy U.S. ag products at the same time the country is dealing with the coronavirus outbreak that may also crimp global demand for grains. Grain traders are looking at the crude oil market, which hit a four-month low overnight and has dropped over $13.00 a barrel from the January high.
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