Tuesday, March 17–Jim Wyckoff’s Morning Markets Report
Global stock markets were mixed in overnight trading. U.S. stock indexes are pointed toward higher openings when the New York day session begins, following the record-setting losses scored on Monday and which drove the U.S. stock market deeper into bear market territory. Look for another volatile trading session in the U.S. markets.
The U.S. stock market hit its daily lows on Monday during President Trump’s afternoon news conference, in which he painted a bleaker picture of the coronavirus pandemic and its impact on the U.S. economy. He said it could be August or later before things in the U.S. start to return to normal. “Social distancing” has dramatically increased and Trump recommended no public gatherings larger than 10 people for at least the next few weeks. Trump acknowledged the U.S. economy will likely slip into recession for at least a short while this year. Traders took note of Trump’s more somber demeanor at his press conference, as he seemed more conciliatory and less fiery when asked pointed and even nit-picking “gotcha” questions by some reporters.
It’s very likely many small retail businesses in the U.S., which do not have deep financial pockets, will not survive the social distancing safety measures that appear likely to remain in place for weeks to come, or longer. The U.S. government has promised aid to local main street merchants, but the likely cumbersome and slow process of receiving the federal government aid will be too late for many small businesses to stay afloat.
The gold market in less than two weeks’ time has lost over $200 an ounce from its multi-year high above $1,700. The sharp sell off in gold highlights the “sell what you can” trader/investor mentality that continues to grip the global marketplace. Silver prices have careened to an 11-year low this week, with platinum and palladium also suffering sharp losses.
The steep price losses across the raw commodity spectrum, led by crude oil, are raising fears of price deflation setting in for the global economy, including some even mentioning a global economic depression as being possible.
In overnight news, the closely watched German ZEW economic expectations index for March came in at -43.1 versus -15.7 in February and market expectations for a March reading of -30.0.
One positive note in this dire scenario laid out above is that North Americans appear to be taking the coronavirus outbreak much more seriously than many had initially reckoned. Pundits a couple weeks ago were saying North Americans could not be shut in like the Chinese were forced to do by their government. The dramatic shift in the psychology of North American citizens in just a week’s time is a testament to their resolve. China’s economy and commerce are reported to be starting to recover after its citizens were shut in for a few weeks.
One more potential positive on this matter could be that a vaccine for the virus could come much sooner than health experts are now forecasting. This long-time market watcher/reporter covered the energy markets during the 1991 first Gulf War. When Iraqi leader Saddam Hussein and his army were driven out of Kuwait by coalition forces, Saddam set fire to most of the hundreds of Kuwaiti oil wells. The massive fires showed up as big black spots on satellite photos of the entire Middle East. Oil experts said it would be many months or even a couple years before all those fires could be extinguished. Coalition firefighters had all those fires put out in about a month’s time. Sometimes even experts can be well off the mark on their forecasting.
The benchmark 10-year U.S. Treasury note sees its yield around 0.8% Monday, which is about the same as later Monday. The U.S. dollar index is solidly higher in early U.S. trading. Nymex crude oil prices are slightly up and trading around $29.00 a barrel.
U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, retail sales, industrial production and capacity utilization, the NAHB housing market index, manufacturing and trade inventories, and the Federal Reserve’s FOMC meeting begins.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are modestly up in early U.S. trading. Bears have the solid overall near-term technical advantage amid the recent price downdraft that drove the market to a contract low on Monday. 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) are neutral early today. Today, shorter-term technical resistance comes in at the overnight high of 2,498.000 and then at 2,550.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at Monday’s contract low of 2,350.00 and then at 2,300.00. Wyckoff’s Intra-day Market Rating: 5.5
June Nasdaq index futures: Prices are higher in early U.S. trading after hitting a contract low on Monday. Bears still have the solid overall near-term technical advantage. Shorter-term moving averages (4- 9-and 18-day) are bearish early today. The 4-day moving average is below the 9-day. The 9-day average is below the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is seen at the overnight high of 7,277.25 and then at 7,400.00. On the downside, short-term support is seen at 7,000.00 and then at Monday’s low of 6,906.00. Wyckoff’s Intra-Day Market Rating: 5.5.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are sharply lower in early U.S. trading. Bulls still have the firm overall near-term technical advantage amid extremely volatile trading. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is even with the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are bearish early today. Shorter-term technical resistance is seen at 180 even and then at the overnight high of 181 19/32. Shorter-term support lies at the overnight low of 178 1/32 and then at 177 even. Wyckoff’s Intra-Day Market Rating: 4.0
June U.S. T-Notes: Prices are sharply lower in early U.S. trading. Bulls still have the firm overall near-term technical advantage amid a price uptrend on the daily bar chart. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is even with the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are bearish early today. Shorter-term resistance lies at 137.16.0 and then at the overnight high of 138.04.0. Shorter-term technical support lies at Monday’s low of 136.20.0 and then at 136.00.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0
U.S. DOLLAR INDEX
The June U.S. dollar index is sharply higher and hit a three-week high in early U.S. trading. 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 above the 9-day and 18-day. The 9-day is below the 18-day moving average. Short-term oscillators for the dollar index are bullish early today. The dollar index finds shorter-term technical resistance at the February high of 99.440 and then at 99.750. Shorter-term support is seen at 98.500 and then at the overnight low of 98.105. Wyckoff’s Intra Day Market Rating: 7.5
NYMEX CRUDE OIL
April Nymex crude oil prices are firmer in early U.S. trading. Bears are in solid overall near-term technical control. 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 early today. Look for buy stops to reside just above technical resistance at $30.00 and then at $31.00. Look for sell stops just below technical support at the March low of $27.34 and then at $27.00. Wyckoff’s Intra-Day Market Rating: 5.5
GRAINS
US grain futures are narrowly mixed in early US pre-market trading. Grain and livestock futures markets have been hammered to contract lows in most markets. The grain markets will stop bleeding when the global stock and financial markets stabilize. Grain market bears have the solid technical advantage at present, suggesting the path of least resistance for prices will remain sideways at best and most likely sideways to lower for the short term.
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