Thursday, January 6–Jim Wyckoff’s Morning Markets Report
Global stock markets were lower overnight. U.S. stock indexes are pointed toward mixed openings when the New York day session begins, after Wednesday’s strong sell off that came in the wake of the afternoon release of the FOMC minutes from the Federal Reserve. The Fed minutes indicated a “very tight” U.S. job market and rising inflation might require the central bank to raise interest rates even sooner than many already expected, and begin reducing its overall asset balance sheet. The minutes suggested inflationary concerns outweigh the economic risks posed by the rampant Omicron variant of the coronavirus. The probability that the Fed will raise interest rates in March rose to greater than 70%, according to the Fed funds futures market.
The yield on the U.S. 10-year Treasury note is presently fetching 1.732%. U.S. bond yields have been on the rise for three weeks and have taken a big jump this week, including after the hawkish FOMC minutes. For perspective, the German 10-year bond (bund) is presently yielding -0.096% and the U.K. 10-year bond (gilt) yield is trading at 1.148%.
Gold prices dropped sharply overnight, in the wake of the FOMC minutes. Rising U.S. interest rates as evidenced by rising U.S. Treasury yields are bullish for the U.S. dollar. Gold and the greenback many times move in the opposite direction on a daily basis. However, the U.S. dollar index has shown little reaction to the Fed minutes.
The key “outside markets” today see Nymex crude oil futures prices higher, at a seven-week high and trading around $79.25 a barrel. The U.S. dollar index is slightly up early today.
Attention will soon turn to Friday’s U.S. employment situation report for December, which is expected to see its key non-farm payrolls component show a rise of 425,000 after a rise of 210,000 in the November report. The overall unemployment rate is seen at 4.1% in December compared to 4.2% reported in the November report.
U.S. economic data due for release Thursday includes the weekly jobless claims report, the Challenger job-cuts report, the U.S. international trade report, the ISM report on business services, the global services PMI, the monthly chain store sales index, and manufacturers’ shipments and inventories.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are near steady in early U.S. trading, following Wednesday’s sharp losses. Bulls still have the firm overall near-term technical advantage. The shorter-term moving averages (4-, 9- and 18-day) are neutral early today. The 4-day moving average is below the 9-day. The 9-day is above the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Today, shorter-term technical resistance comes in at 4,725.00 and then at 4,750.00. Buy stops likely reside just above those levels. Downside support for active traders is seen at the overnight low of 4,668.00 and then at 4,650.00. Sell stops likely reside just below those levels. Wyckoff’s Intra-day Market Rating: 5.0
March Nasdaq index futures: Prices are weaker and hit a three-week low in early U.S. trading. Bulls have the overall near-term technical advantage but are fading again. Shorter-term moving averages (4- 9-and 18-day) are neutral early today. The 4-day moving average is below the 9-day and 18-day. The 9-day average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are bearish early today. Shorter-term technical resistance is seen at the overnight high of 15,813.00 and then at 16,000.00. On the downside, shorter-term support is seen at the overnight low of 15,620.25 and then at 15,500.00. Wyckoff’s Intra-Day Market Rating: 4.0.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are lower and hit a contract low in early U.S. trading. Bears have the solid overall near-term technical advantage amid this week’s downdraft in price. Prices have been trending lower for four weeks. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are bearish early today. Shorter-term technical resistance is seen at 156 even and then at the overnight high of 156 20/32. Shorter-term support lies at the overnight contract low of 155 17/32 and then at 155 even. Wyckoff’s Intra-Day Market Rating: 3.0
March U.S. T-Notes: Prices are lower and hit a contract low in early U.S. trading. 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 bearish early today. Shorter-term resistance lies at the overnight high of 129.00.0 and then at 129.08.0. Shorter-term technical support lies at the overnight contract low of 128.16.0 and then at 128.08.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 3.0
EURO CURRENCY
The March Euro currency futures are near steady in early U.S. trading. Bears have the solid overall near-term technical advantage. The shorter-term moving averages for the Euro are neutral early today, as the 4-day is below the 9-day and 18-day. The 9-day is above the 18-day moving average. Short-term oscillators for the Euro are neutral to bearish early today. The Euro currency finds shorter-term technical resistance at the December high of 1.1403 and then at the December high of 1.1417. Shorter-term support is seen at this week’s low of 1.1287 and then at 1.1247. Wyckoff’s Intra Day Market Rating: 5.0
NYMEX CRUDE OIL
February Nymex crude oil prices are higher and hit a seven-week high in early U.S. trading. Bulls have the solid overall near-term technical advantage amid a price uptrend in place on the daily chart. The shorter-term moving averages are bullish early today as the 4-day is above the 9-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 the overnight high of $79.37 and then at $80.00. Look for sell stops just below technical support at $78.00 and then at $77.00. Wyckoff’s Intra-Day Market Rating: 6.5
GRAINS
U.S. grain futures are lower in early U.S. pre-market trading, as the bulls are spooked by the hawkish Fed minutes and keener risk aversion today. The corn and soybean bulls have the firm overall near-term technical advantage, but wheat prices are still trending lower on the daily bar charts. Look for the rising inflation worries to ultimately be bullish for the grain futures markets.
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