Wednesday, March 25–Jim Wyckoff’s Morning Markets Report
Global stock markets were mostly higher in overnight trading. U.S. stock index futures are presently pointed toward mixed openings when the New York electronic day session begins. The equity markets are buoyed by news the U.S. Congress has agreed to a $2 trillion financial aid package for U.S. businesses and citizens so negatively impacted by the Covid-19 outbreak. News reports said the U.K.’s Prince Charles has tested positive for Covid-19.
Given Tuesday’s record gains in the U.S. stock indexes, many traders and investors are now wondering if the bottoms are in place for the U.S. stock indexes, which dropped into bear market territory at the fastest rate ever over the past three weeks. Some of the big shots on the TV business news channels are saying “not yet. It’s too early.” Those big shot TV commentators being in general agreement on that matter makes at least a few long-time market watchers think they might be wrong, because they usually are.
Metals traders are still buzzing about the wild price action in the gold futures and London cash (spot) market Tuesday. April Comex gold futures shot sharply higher Tuesday morning amid keen trader concern that London spot gold price quotes had become unreliable or had been halted. U.K. market-makers had ostensibly shut down as gold mines around the globe have curtailed operations due to the Covid-19 outbreak. With the U.K. government-ordered lock-down, many gold market makers were working from home Tuesday, creating even more confusion. The big gold traders in Europe who normally would base their trading decisions on the London spot gold price got spooked when the London spot price was “way out of whack” to the gold futures price—at as much as a $100.00 discount to Comex gold futures at one point early Tuesday morning. The confusion in the London spot market prompted the big European metals traders to rush to buy Comex gold futures as a hedge, as they felt they could not get what they felt were accurate or fair London spot gold prices. Also, there have been many reports the supply of physical gold bullion worldwide is hard to come by. That led to ideas Comex futures traders long (buyers) the gold market in the nearby contracts could hold their positions into expiration of those contracts and thereby take delivery of physical gold, per futures contract specifications. The credibility of this notion was bolstered late Tuesday evening when the London Bullion Market Association (LBMA) and major banks asked CME Group (parent company for Comex) to change physical delivery specifications for gold futures contracts to allow 400-ounce bars of gold, which is the standard for London traders. Currently, CME only allows 100-ounce bars to be delivered. Then later Tuesday evening the CME Group came out and announced a whole new gold futures contract was created, which would allow both 400-ounce and 100-ounce bars acceptable for delivery. The new gold futures contract, if approved by regulators, would start to trade in a few weeks. The upshot of this matter for all traders of all markets is that the London spot gold market had operated efficiently for over 150 years—until Tuesday. Such are the times we are experiencing at present.
The important markets today see Nymex crude oil prices slightly down and trading around $23.65 a barrel. The U.S. dollar index is sharply lower again after hitting a 17-year high on Monday. The 10-year U.S. Treasury note yield is trading around 0.85% Wednesday.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, durable goods orders, the weekly DOE liquid energy stocks report and the monthly house price index.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are slightly lower in early U.S. trading after sharp gains scored Tuesday. Bears have the firm overall near-term technical advantage. 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 to bullish early today. Today, shorter-term technical resistance comes in at the overnight high of 2,498.00 and then at 2,550.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at the overnight low of 2,386.00 and then at 2,350.00. Wyckoff’s Intra-day Market Rating: 4.5
June Nasdaq index futures: Prices are slightly lower in early U.S. trading after sharp gains seen Tuesday. Bears 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 to bullish early today. Shorter-term technical resistance is seen at 7,600.00 and then at the overnight high of 7,758.00. On the downside, short-term support is seen at the overnight low of 7,377.00 and then at 7,300.00. Wyckoff’s Intra-Day Market Rating: 4.0.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are slightly lower in early U.S. trading, on a normal corrective pullback from strong gains seen Monday. 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 neutral to bullish early today. Shorter-term technical resistance is seen at Tuesday’s high of 179 4/32 and then at 180 even. Shorter-term support lies at the overnight low of 177 12/32 and then at 177 even. Wyckoff’s Intra-Day Market Rating: 4.0
June U.S. T-Notes: Prices are modestly lower in early U.S. trading, on a corrective pullback. 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 neutral early today. Shorter-term resistance lies at the overnight high of 137.17.5 and then at 138.00.0. Shorter-term technical support lies at Tuesday’s low of 136.29.5 and then at 136.16.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5
U.S. DOLLAR INDEX
The June U.S. dollar index is solidly down in early U.S. trading on a corrective pullback after hitting a 17-year high Monday. Bulls still 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 and 18-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 102.110 and then at 102.500. Shorter-term support is seen at the overnight low of 101.240 and then at 101.000. Wyckoff’s Intra Day Market Rating: 4.0
NYMEX CRUDE OIL
May Nymex crude oil prices are modestly down in early U.S. trading. Bears have the firm overall near-term technical advantage amid a price downtrend in place. 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 the overnight high of $25.24 and then at $26.00. Look for sell stops just below technical support at $20.00 and then at $22.00. Wyckoff’s Intra-Day Market Rating: 4.5
GRAINS
US grain futures are mixed to firmer in early US pre-market trading. The grain futures markets appear to have stabilized at present. If the U.S. stock market stabilizes, normalcy will return to the grain markets and that would be bullish for grain futures prices.
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