Wednesday, February 5–Jim Wyckoff’s Morning Markets Report
Global stock markets are in full rally mode at mid-week, as Asian and European shares pushed higher as traders and investors have pushed aside earlier concerns about the coronavirus outbreak in China significantly denting world economic growth. The marketplace is reacting to the rate of spread of the illnesses slowing down, even though total numbers of those afflicted is rising. U.S. stock indexes are pointed toward sharply higher openings when the New York day session begins and are at or near their record highs. As is many times the case, an unexpected shock to the marketplace is initially deemed by traders as being close to a worst-case scenario and market prices react accordingly. Then, such turns out not to be the case, as is apparently so with the coronavirus outbreak.
The marketplace this week sees it as especially encouraging that China’s central bank stepped in an provided significant liquidity to China’s financial system, specifically by reducing short-term lending rates with the influx of funding. The effort was in response to the coronavirus outbreak’s negative impact on China’s businesses.
U.S. stock market traders this week are buzzing about the stock price of Tesla, which has soared around 50% since the beginning of January. Some pessimistic stock market watchers are calling Tesla’s move a euphoria that can signal the top in a stock market rally.
The key outside markets today see crude oil prices higher and trading around $50.75 a barrel. Meantime, the U.S. dollar index is firmer.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, the international trade report, the U.S. services PMI, the global services PMI, the weekly DOE liquid energy stocks report, and the ISM non-manufacturing report on business.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are solidly higher in early U.S. trading and near the recent contract and record high. The bulls now have strong confidence that new highs and a fresh leg up in prices are attainable in the near term. The shorter-term moving averages (4-, 9- and 18-day) are neutral early today. The 4-day moving average is even with the 9-day. The 9-day is below the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are bullish early today. Today, shorter-term technical resistance comes in at the contract high of 3,337.50 and then at 3,350.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at 3,300.00 and then at the overnight low of 3,288.25. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 7.0
March Nasdaq index futures: Prices are solidly higher and hit a new 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 bullish early today. Shorter-term technical resistance is seen at the overnight contract high of 9,462.00 and then at 9,500.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 9,400.00 and then at the overnight low of 9,318.50. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 8.0.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are lower in early U.S. trading, on more profit taking after hitting a 3.5-month high Monday. Bulls still have the overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are still 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 bearish early today. Shorter-term technical resistance is seen at 162 even and then at the overnight high of 162 20/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 161 8/32 and then at 161 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0
March U.S. T-Notes: Prices are lower on more profit taking after hitting a 3.5-month high on Monday. Shorter-term moving averages (4- 9- 18-day) are still 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 bearish early today. Shorter-term resistance lies at 131.00.0 and then at the overnight high of 131.04.5. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 130.17.5 and then at 130.00.0. 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 modestly higher 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 below the 9-day. The 9-day is above 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 at the November high of 98.045 and then at 98.250. Shorter-term support is seen at the overnight low of 97.760 and then at Tuesday’s low of 97.635. Wyckoff’s Intra Day Market Rating: 5.5
NYMEX CRUDE OIL
March Nymex crude oil prices are higher in early U.S. trading, on short covering after hitting a 13-month low Tuesday. 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 early today. Look for buy stops to reside just above technical resistance at this week’s high of $51.97 and then at $52.50. Look for sell stops just below technical support at this week’s low of $49.31 and then at $49.00. Wyckoff’s Intra-Day Market Rating: 6.0
GRAINS
US grain futures are steady to higher in early US pre-market trading Wednesday. Corn is up around 1/2 cent, soybeans around 5 cents higher and wheat is around 5 cents up. Global stock markets are in full rally mode at mid-week, as traders and investors have pushed aside earlier concerns about the coronavirus outbreak in China significantly denting world economic growth. That’s also a bullish scenario for the grain markets. The marketplace is reacting to the rate of spread of the illnesses slowing down, even though total numbers of those afflicted is rising. As is many times the case, an unexpected shock to the marketplace is initially deemed by traders as being close to a worst-case scenario and market prices react accordingly. Then, such turns out not to be the case, as is apparently so with the coronavirus outbreak. The marketplace this week sees it as especially encouraging that China’s central bank stepped in an provided significant liquidity to China’s financial system, specifically by reducing short-term lending rates with the influx of funding. The effort was in response to the coronavirus outbreak’s negative impact on China’s businesses. Grain market bulls should not get too excited, however, as US grain exports remain tepid, with soybean prices still fetching more on the world market than South American soybeans. Also, weather conditions in South American growing regions remain mostly favorable, suggesting big corn and soybean crops will be harvested there.
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