Wednesday, May 29–Jim Wyckoff’s Morning Markets Report
World stock markets were mostly down overnight as risk aversion is back on the front burner of the marketplace. The main concern is the prolonged trade war between the U.S. and China (the world’s two largest economies) that sees no end in sight and appears to be escalating. U.S. stock indexes are pointed toward lower openings when the New York day session begins.
Also unnerving European traders is news today Germany’s unemployment rate unexpectedly surged in May, at up 60,000 versus expectations for a decline of 8,000 workers. Germany is the economic workhorse of the European Union.
It’s summertime again and some European Union instability is due. This time, concerns are rising among Europeans as Italy and Greece are balking about conforming to EU rules on fiscal discipline. And the U.K. can’t seem to figure out how to leave the EU in a smooth fashion.
A feature in the markets this week is falling government bond yields, partly due to “flight-to-safety” buying amid keener risk avoidance among traders and investors. More and more market watchers are thinking the long bull run in equities has ended. Germany today sold a five-year debt instrument today at a record low yield of -0.56%.
The key “outside markets” today see the U.S. dollar index trading slightly higher following good gains Tuesday, while Nymex crude oil prices are solidly lower and trading just below $58.00 a barrel.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, weekly Goldman Sachs and Johnson Redbook retail sales data, and the Richmond Fed business survey.
–Jim
U.S. STOCK INDEXES
September S&P 500 e-mini futures: Prices are lower and hit a 2.5-month low in early U.S. trading. Prices are in a four-week-old downtrend on the daily bar chart to suggest a market top is in place. The 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 is below the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are bearish early today. Today, shorter-term technical resistance comes in at the overnight high of 2,810.25 and then at this week’s high of 2,845.50. Buy stops likely reside just above those levels. Downside support for active traders today is located at 2,775.00 and then at 2,760.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.0
September Nasdaq index futures: Prices are lower and hit a 2.5-month low in early U.S. trading. Prices are in a four-week-old downtrend to suggest a market top is in place. 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 bearish early today. Shorter-term technical resistance is seen at the overnight high of 7,319.25 and then at this week’s high of 7,398.75. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 7,245.00 and then at 7,200.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0.
U.S. TREASURY BONDS AND NOTES FUTURES
September U.S. T-Bonds: Prices are higher and hit another contract high in early U.S. trading. Bulls have the solid overall near-term technical advantage, to suggest more upside. Shorter-term moving averages (4- 9- 18-day) are 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 bullish early today. Shorter-term technical resistance is seen at the overnight contract high of 152 10/32 and then at 152 16/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 151 14/32 and then at 151 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 8.0
September U.S. T-Notes: Prices are higher and hit another contract high overnight. Bulls have the solid overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are 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 bullish early today. Shorter-term support lies at the overnight low of 125.22.5 and then at 125.16.0. Sell stops likely reside just below those levels. Shorter-term technical resistance lies at the overnight contract high of 126.03.0 and then at 126.08.0. Buy stops likely reside just above those levels. Wyckoff’s Intra-Day Market Rating: 8.0
U.S. DOLLAR INDEX
The September U.S. dollar index is slightly higher in early U.S. trading. Bulls have the solid 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 neutral to bullish early today. The dollar index finds shorter-term technical resistance at 97.500 and then at the contract high of 97.715. Shorter-term support is seen at the overnight low of 97.235 and then at this week’s low of 97.065. Wyckoff’s Intra Day Market Rating: 6.0
NYMEX CRUDE OIL
July Nymex crude oil prices are lower in early U.S. trading. A price downtrend is in place on the daily 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 bearish early today. Look for buy stops to reside just above technical resistance at the overnight high of $59.09 and then at this week’s high of $59.57. Look for sell stops just below technical support at last week’s low of $57.33 and then at $57.00. Wyckoff’s Intra-Day Market Rating: 4.0
GRAINS
U.S. grain futures prices were sharply higher again in overnight trading, with corn hitting another nearly 12-month high and wheat another three-month high. Soybeans are now on board with the rally and hit a five-week high overnight. Just this week, soybeans have gained over 50 cents, while corn is up nearly 40 cents and wheat is up nearly 30 cents in two days. It’s a full-blown weather market in the grains, and it’s not even June yet. Very wet U.S. Midwest weather, and more rain in the forecast in the next week, will keep many U.S. farmers out of their fields and continue to keep the seeding of corn at a pace that is the slowest in recent history. Weekly government crop progress reports out Tuesday showed U.S. corn planting at 58%, which is below the average trade estimate of 63 planted at this time of year%. The five-year average is 90% planted. U.S. soybeans were reported at 29% planted. Traders expected 31% planted. The five-year average is 66% planted. Spring wheat was 84% planted vs the 83% estimate and 91% average. Winter wheat crop conditions ratings also declined in Tuesday’s reports, further supporting the wheat market. Importantly for traders to realize is that parabolic price moves in the grains during weather markets tend to put in peaks much sooner than most would reckon. Too, price tops in weather markets usually occur well before the full extent of crop damage ever comes to fruition. Thus, look for price tops in the grain futures to occur sooner rather than later—and probably much soon, for this weather market scare. Remember that the rest of the summer could spark other weather market rallies.
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