Wednesday, February 19–Jim Wyckoff’s Morning Markets Report
Asian and European shares were mixed but mostly firmer overnight. U.S. stock indexes are pointed toward higher openings when the New York day session begins. Risk aversion has receded a bit Wednesday. It appears the spread of the coronavirus illness (now officially called covid 19) to humans has slowed and that’s somewhat encouraging to the marketplace. However, the economic consequences of the outbreak are still playing out. What traders, investors, analysts and other market watchers are discovering is that the global supply chain sees many of its links in China, and with much of China still in quarantine, many global businesses—especially manufacturers–are suffering and may continue to do so for a while. The uncertainty regarding when the global supply chain will return to normal is likely to continue to squelch trader and investor risk appetite for at least the near term.
Gold prices have added to Tuesday’s solid gains and are at a six-week high. U.S. Treasuries are also in rally mode this week, on safe-haven demand.
The key outside markets today see crude oil prices higher and trading around $52.75 a barrel. Meantime, the U.S. dollar index is slightly up and hit another multi-month high in early U.S. trading. The greenback bulls have flexed their muscles lately, partly on safe-haven demand amid the heightened global uncertainty.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the Goldman Sachs and Johnson Redbook weekly retail sales reports, the consumer price index, the producer price index, new residential construction, and FOMC minutes. Several Federal Reserve officials also are slated to give speeches today.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are firmer in early U.S. trading and not far below this week’s record and contract high. The bulls have the solid technical advantage. There are no early chart clues 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 and 18-day. The 9-day is above the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are neutral early today. Today, shorter-term technical resistance comes in at the contract high of 3,392.50 and then at 3,400.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at Tuesday’s low of 3,355.25 and then at 3,325.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 6.0
March Nasdaq index futures: Prices are higher and not far below this week’s contract and record high in early U.S. trading. Bulls have the solid overall near-term technical advantage. 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 early today. Shorter-term technical resistance is seen at the contract high of 9,687.50 and then at 9,700.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 9,600.00 and then at Tuesday’s low of 9,534.25. 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 firmer in early U.S. trading. Bulls have the 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 this week’s high of 163 16/32 and then at 164 even. Buy stops likely reside just above those levels. Shorter-term support lies at 163 even and then at the overnight low of 162 26/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
March U.S. T-Notes: Prices are slightly higher in early U.S. trading. Bulls have the 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 resistance lies at Tuesday’s high of 131.12.5 and then at 131.16.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at 131.00.0 and then at Tuesday’s low of 130.26.5. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5
U.S. DOLLAR INDEX
The March U.S. dollar index is higher and hit another contract high in early U.S. trading. Bulls 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 bullish today. The dollar index finds shorter-term technical resistance at the contract high of 99.435 and then at 99.500. Shorter-term support is seen at the overnight low of 99.275 and then at 99.000. Wyckoff’s Intra Day Market Rating: 6.5
NYMEX CRUDE OIL
March Nymex crude oil prices are higher and hit a three-week high in early U.S. trading. The shorter-term moving averages are neutral early today as the 4-day is above the 9-day and 18-day. The 9-day is below the 18-day moving average. Short-term oscillators (RSI and slow stochastics) are bullish early today. Look for buy stops to reside just above technical resistance at the overnight high of $52.81 and then at $53.00. Look for sell stops just below technical support at $52.00 and then at $51.00. Wyckoff’s Intra-Day Market Rating: 6.0
GRAINS
US grain futures are lower in early US pre-market trading Wednesday. Corn is 1 1/2 cents lower, soybeans around 1 cent down and wheat is around 5 cents lower. The markets are seeing corrective pullbacks Wednesday, from Tuesday’s gains, especially in wheat, which saw solid gains on reports of a smaller Australian crop and some weather worries in other global wheat regions. Global risk aversion has receded just a bit Wednesday. It appears the spread of the coronavirus illness (now officially called covid 19) to humans has slowed and that’s somewhat encouraging to the marketplace. However, the economic consequences, including grain shipments in Asia, of the outbreak are still playing out. What grain traders and other market watchers are discovering is that the global supply chain sees many of its links in China, and with much of China still in quarantine, many global businesses—especially manufacturers–are suffering and may continue to do so for a while. The uncertainty regarding when the global supply chain will return to normal is likely to continue to limit buying interest in the grain markets. Trading activity in the grain markets is likely to pick up starting Thursday, as the annual USDA Ag Outlook conference gets under way, including the latest agency forecasts for US and global supply and demand for grains. And on Friday the weekly USDA export sales report will be released—one day later this week because of the US holiday on Monday. Grain market bulls want to see more Chinese activity in the weekly US export sales data.
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