Wednesday, July 24–Jim Wyckoff’s Morning Markets Report
Asian and European stocks were mixed overnight. U.S. stock indexes are pointed toward modestly lower openings when the New York day session beings.
European shares were pressured by a weak economic report. The Euro zone purchasing managers index (PMI) composite reading came in at 51.5 in July versus expectations for a figure of 52.1. The manufacturing PMI was worse, coming in at 46.4 in July versus expectations for a number of 47.6. Any reading below 50.0 suggests contraction in the sector.
German government bond yields dropped to a record low following the weak report. The German manufacturing PMI came in at 43.1 in July. Germany’s economy is the workhorse of the Euro zone.
U.S. trader and investor attitudes are still generally upbeat at mid-week on news the U.S. and China have restarted their heretofore stalled trade talks, with U.S. officials traveling to China soon for fresh negotiations.
The European Central Bank holds its regular monetary policy meeting on Thursday. Next week, the U.S. Federal Reserve’s Open Market Committee (FOMC) has its money policy meeting. Both central banks are expected to ease their monetary policies at the meetings.
The mainstream business media is starting to pick up on the recent rallies in gold and silver markets. The Wall Street Journal ran a feature story entitled, “Gold’s Luster is Spreading to Other Precious Metals.” At first blush a metals trader could view this as bullish, as it gives the metals more exposure to potential traders/investors. That may well be true. However, long-time market watchers remember the old trading adage that says when the general public starts to pick up on a market’s significant price move, that move is then probably near an end.
The key “outside markets” today see Nymex crude oil prices firmer and trading around $57.00 a barrel. Meantime, the U.S. dollar index is near steady after hitting a five-week high Tuesday.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the U.S. flash manufacturing PMI, the services PMI, new residential sales and the weekly DOE liquid energy stocks report.
–Jim
U.S. STOCK INDEXES
September S&P 500 e-mini futures: Prices are modestly down in early U.S. trading. Bulls still have the solid overall near-term technical advantage. There are no early chart clues of a market top being close at hand. The 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 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 this week’s high of 3,008.50 and then at the contract high of 3,023.50. Buy stops likely reside just above those levels. Downside support for active traders today is located at Tuesday’s low of 2,987.50 and then at last week’s low of 2,969.50. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.5
September Nasdaq index futures: Prices are weaker in early U.S. trading. Bulls still have the solid 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 early today. Shorter-term technical resistance is seen at 7,980.00 and then at the contract high of 8,001.50. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 7,900.00 and then at last week’s low of 7,815.25. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5.
U.S. TREASURY BONDS AND NOTES FUTURES
September U.S. T-Bonds: Prices are higher in early U.S. trading, on an upside correction from Tuesday’s declines. Bulls have the firm overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is above the 9-day. The 9-day is below 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 155 11/32 and then at 155 20/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 154 20/32 and then at 154 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
September U.S. T-Notes: 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 neutral early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term support lies at the overnight low of 127.08.5 and then at 127.00.0. Sell stops likely reside just below those levels. Shorter-term technical resistance lies at this week’s high of 127.22.0 and then at last week’s high of 127.27.5. Buy stops likely reside just above those levels. Wyckoff’s Intra-Day Market Rating: 6.0
U.S. DOLLAR INDEX
The September U.S. dollar index is weaker on a mild pullback after hitting a five-week high overnight. 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 early today. The dollar index finds shorter-term technical resistance at the overnight high of 97.570 and then at the May high of 97.715. Shorter-term support is seen at Tuesday’s low of 96.985 and then at this week’s low of 96.785. Wyckoff’s Intra Day Market Rating: 5.0
NYMEX CRUDE OIL
September Nymex crude oil prices are slightly up in early U.S. trading. 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 this week’s high of $57.47 and then at $58.00. Look for sell stops just below technical support at this week’s low of $55.74 and then at the July low of $54.85. Wyckoff’s Intra-Day Market Rating: 5.5
GRAINS
U.S. grain futures prices were higher in overnight trading as the bulls work to recover from the recent selling pressure. Corn was up 2 to 2 3/4 cents, soybeans up 7 cents, and wheat around 6 cents higher.
The weather in the U.S. Midwest has been benign recently, with cooler and drier weather that is presently bearish for the grains. However, bullish corn and soybean traders are starting to take note of extended Corn Belt weather forecasts that are dry and with increasing temperatures.
While soybeans are typically the most price-sensitive heading into the month of August, this year’s delayed planting of both corn and soybeans means the month of August will be extra critical for the maturity of both crops.
U.S. grain markets are also getting support at mid-week on news the U.S. and China have restarted their heretofore stalled trade talks, with U.S. officials traveling to China soon for fresh negotiations. Traders will be closely examining Thursday morning’s weekly USDA export sales report for any new China purchases of U.S. grain.
U.S. Secretary of Agriculture Sonny Perdue said Tuesday the government will subsidize U.S. farmers who have suffered from the U.S.-China trade war. He said details will be released later this week.
The Wheat Quality Council spring wheat tour is under way and scouts are sampling fields in North Dakota, Minnesota and South Dakota. They will wrap up the tour Thursday. Reports said scouts are looking at an average spring wheat yield of 43.1 bushels per acre, above last year’s estimate of 38.9 bushels.
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