Wednesday, May 20–Jim Wyckoff’s Morning Markets Report
Global stock markets were mixed in overnight trading. U.S. stock indexes are pointed toward solidly higher openings when the New York day session begins. Trader and investor enthusiasm is just a bit muted at mid-week after the initial optimism regarding a successful phase-one Covid-19 vaccine test performed very well. The majority of medical experts still believe any proven vaccine is at least one-year away.
Despite continued dour economic data being released from the major world economies, and reports that the pandemic in Brazil is careening out of control, world stock markets are performing well. It’s likely a case of traders/investors having “pandemic-fatigue” and are in denial of what is occurring and will continue to occur in the coming months, or they were hit with the Covid-19 shock so hard that within a period of just a few weeks they factored into market prices a worst-case scenario, and now the markets are recovering because such a scenario is not playing out—at least not yet. Maybe some of both.
The German government on Wednesday auctioned its 10-year bond (bund) and it fetched an average yield of -0.47%. So, for the next 10 years investors that bought the bunds were willing to accept negative returns. Their logic must be that economic times will get even worse in the coming years and that price deflation will become problematic. The bund investors’ logic comes at a time when the world’s central banks have flooded their financial systems with record amounts of liquidity in an attempt to rescue their floundering economies. Veteran market participants have heard the saying that bond traders are the smartest traders in the world. However, this veteran market watcher will take the other side of the deflation trade that bund buyers are presently making. Economics 101 has historically taught that increased money supply and velocity create price inflation, not deflation.
The important outside markets see Nymex crude oil futures higher early today and trading around $32.15 a barrel. The U.S. dollar index is weaker again early today. The yield on the benchmark U.S. Treasury 10-year note is currently around 0.69%.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the weekly DOE liquid energy stocks report and the FOMC minutes from the last meeting.
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are higher in early U.S. trading. Bulls have the overall near-term technical advantage. 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 bullish early today. Today, shorter-term technical resistance comes in at this week’s high of 2,976.25 and then at 3,000.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at 2,900.00 and then at this week’s low of 2,850.00. Wyckoff’s Intra-day Market Rating: 6.5
June Nasdaq index futures: Prices are higher in early U.S. trading and near this week’s 2.5-month high. A price uptrend is firmly in place on the daily chart. 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 bullish early today. Shorter-term technical resistance is seen at this week’s high of 9,417.25 and then at 9,500.00. On the downside, shorter-term support is seen at the overnight low of 9,273.00 and then at this week’s low of 9,110.25. Wyckoff’s Intra-Day Market Rating: 6.5.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are near steady in early U.S. trading. Bulls still have the overall technical advantage but have faded a bit this week. Shorter-term moving averages (4- 9- 18-day) are bearish early today. The 4-day moving average is below the 9-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term technical resistance is seen at 180 even and then at this week’s high of 181 4/32. Shorter-term support lies at this week’s low of 177 26/32 and then at 177 even. Wyckoff’s Intra-Day Market Rating: 5.0
June U.S. T-Notes: Prices are near steady in early U.S. trading. Bulls have the solid 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 even with the 18-day moving average. Oscillators (RSI, slow stochastics) are bearish early today. Shorter-term resistance lies at Tuesday’s high of 139.01.5 and then at this week’s high of 139.12.5. Shorter-term technical support lies at 138.24.0 and then at this week’s low of 138.18.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0
U.S. DOLLAR INDEX
The June U.S. dollar index is slightly lower in early U.S. trading. Bulls are fading this week but still have the slight 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 bearish early today. The dollar index finds shorter-term technical resistance at the overnight high of 99.570 and then at 99.755. Shorter-term support is seen at this week’s low of 99.245 and then at 99.000. Wyckoff’s Intra Day Market Rating: 4.5
NYMEX CRUDE OIL
July Nymex crude oil prices are modestly higher in early U.S. trading. Bulls are enjoying a price uptrend on the daily bar chart. The shorter-term moving averages 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 (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 $33.10 and then at $34.00. Look for sell stops just below technical support at $31.00 and then at $30.00. Wyckoff’s Intra-Day Market Rating: 5.5
US grain futures are mixed in early U.S. pre-market trading. Not much new at mid-week. The U.S. corn and soybean crops are being planted at a rapid pace amid generally good weather. Grain bears remain in overall technical control, even though market bottoms appear to be in place. The grain market bulls need a major Covid-19 vaccine breakthrough or a serious weather market scare somewhere in a major producing region of the world.
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.