Wednesday, June 5–Jim Wyckoff’s Morning Markets Report
European and Asian stock indexes were mostly firmer overnight. U.S. stock indexes are pointed toward higher openings when the New York day session begins. The U.S. indexes posted solid gains Tuesday after hitting three-month lows Monday.
The world marketplace has been assuaged by notions the U.S. Federal Reserve could lower interest rates as soon as this summer, in an effort to keep U.S. economic expansion alive and to counter the negative effects of the U.S. trade disputes with its major trading partners. This week Fed officials, including Chairman Powell on Tuesday, have hinted the U.S. central bank is leaning toward an easier money policy even though it says it is being “patient” on monetary policy moves. Australia’s central bank may have started the ball rolling on easier money policies by announcing an interest rate cut on Tuesday.
Gold is responding to ideas of lower interest rates and slowing economic growth as prices hit a nearly 3.5-month high overnight. Since late last week gold prices have rallied over $40 an ounce.
In overnight news, the Euro zone producer price index for April was reported at down 0.3% from May and up 2.6%, year-on-year. Retail sales in the trading bloc were also reported today and came in down 0.4% in April and up 1.5%, year-on-year. That downbeat news was somewhat offset by a composite purchasing managers index (PMI) for the Euro zone that came in at 51.8 in May from 51.5 in April. A reading above 50.0 suggests growth in the sector.
The U.S. economic data point of the day comes with the ADP national employment report for May, which is expected to come in at up 173,000 jobs. That report is a precursor to Friday morning’s more important employment situation report for May from the Labor Department. The non-farm jobs component of that report is forecast at up 180,000.
The key “outside markets” today see the U.S. dollar index trading weaker and hitting a three-week low overnight. The greenback bulls have faded recently and the near-term price uptrend for the USDX has been at least temporarily negatged. Meantime, Nymex crude oil prices are slightly lower and trading around $53.50 a barrel after dropping to a nearly five-month low on Monday.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, the U.S. services PMI, the ISM non-manufacturing report on business, the global services PMI, the Federal Reserve’s beige book, and the weekly DOE liquid energy stocks report.
–Jim
U.S. STOCK INDEXES
September S&P 500 e-mini futures: Prices are higher on more short covering and bargain hunting after hitting a three-month low Monday. Prices are still in a five-week-old downtrend on the daily bar chart, but now just barely. The shorter-term moving averages (4-, 9- and 18-day) are still 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 bullish early today. Today, shorter-term technical resistance comes in at 2,845.00 and then at 2,865.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 2,809.50 and then at 2,800.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 6.0
September Nasdaq index futures: Prices are higher on more short covering and bargain hunting after hitting a three-month low on Monday. Prices are still in a five-week-old downtrend on the daily chart. Shorter-term moving averages (4- 9-and 18-day) are still 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 bullish early today. Shorter-term technical resistance is seen at 7,300.00 and then at 7,350.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 7,205.25 and then at 7,150.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0.
U.S. TREASURY BONDS AND NOTES FUTURES
September U.S. T-Bonds: Prices are lower on more profit taking after hitting a contract high on Monday. Bulls still 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 neutral to bearish early today. Shorter-term technical resistance is seen at the overnight high of 154 6/32 and then at the contract high of 155 1/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 153 8/32 and then at 153 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5
September U.S. T-Notes: Prices are slightly up in early U.S. trading. 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 neutral to bullish early today. Shorter-term support lies at this week’s low of 126.22.0 and then at 126.16.0. Sell stops likely reside just below those levels. Shorter-term technical resistance lies at the overnight high of 127.07.0 and then at Monday’s contract high of 127.15.0. Buy stops likely reside just above those levels. Wyckoff’s Intra-Day Market Rating: 5.5
U.S. DOLLAR INDEX
The September U.S. dollar index is slightly up and hit another three-week low overnight. Bulls still have the firm overall near-term technical advantage but are fading and need to show fresh power soon. The shorter-term moving averages for the dollar index 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 for the dollar index are neutral to bearish early today. The dollar index finds shorter-term technical resistance at Tuesday’s high of 96.665 and then at 97.000. Shorter-term support is seen at the overnight low of 96.350 and then at 96.300. Wyckoff’s Intra Day Market Rating: 5.5
NYMEX CRUDE OIL
July Nymex crude oil prices are lower in early U.S. trading. Bears are in near-term technical control. 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 Tuesday’s high of $53.78 and then at this week’s high of $54.63. Look for sell stops just below technical support at this week’s low of $52.11 and then at $51.00. Wyckoff’s Intra-Day Market Rating: 4.5
GRAINS
U.S. grain futures prices were lower overnight on some profit taking from recent gains and a bit drier weather forecasts for the U.S. Midwest in the coming days. Corn prices were down around 7 cents, soybeans off about 5 cents and wheat was down 10 to 15 cents. Make no mistake: this is still a serious weather market in the grains and all trading days in weather markets are not up. There is still keen uncertainty regarding how many acres of corn and soybeans will get planted in the U.S. midsection. Also, technical chart watchers say the recent corrective, pausing price action—especially in corn and soybeans—could be viewed as a positive and suggesting more gains are coming. For wheat, the technicals have slipped this week and the bulls need to step up and show fresh power yet this week, or else a near-term market top could be in place. The U.S. trade rows with China and Mexico are still providing some uncertainty in the grain markets, which is bearish. However, trader sentiment on that front may be improving a bit at mid-week as reports said Mexico will meet with U.S. officials soon regarding illegal immigration.
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