Thursday, August 27–Jim Wyckoff’s Morning Markets Report
Global stock markets were mixed overnight. The U.S. stock indexes are pointed toward modestly weaker openings when the New York day session begins. After the S&P 500 and Nasdaq stock indexes hit record highs this week, U.S. traders and investors are now a bit more risk averse late this week, as racial tensions in America are on the rise again. Several professional sports teams opted not to play their games Wednesday, following police shooting an African American man in Wisconsin. Also, Hurricane Laura is set to inflict catastrophic damage on the Louisiana and eastern Texas coast Thursday, including a storm surge of sea water weather officials are calling “un-survivable.”
Focus of the marketplace today will also be on Federal Reserve Chairman Jerome Powell’s speech on the U.S. economy, as part of the annual Jackson Hole meeting that is this year virtual. The speech is scheduled to start at 9:10 a.m. eastern time. Many expect inflation to be a main topic of Powell’s speech. Said one analyst in a dispatch this morning: “So far, we have only seen rising prices in asset classes such as stocks in particular, but throughout the past decade, the consumer price index has averaged around 1.5%, so missing the Fed’s 2% inflation target. ‘Average inflation targeting’ is the new formula expected to be endorsed by Powell today. It’s a policy framework that allows inflation to run above or below the 2% target, but given that inflation has been running below target for several years, the objective would be to allow price rises to overshoot for more extended periods before tightening policy. However, the idea of allowing inflation to run above target for extended periods is hard to sell to politicians, so it will be interesting to see how Powell is likely to package the new policy framework.”
Rallying prices in many raw commodity markets just recently appear to be sensing that inflation, and maybe even problematic inflation, could be in store in the coming months, following the massive infusion of central bank liquidity into the global financial system in recent months, to stimulate economies crippled by Covid-19 lockdowns.
The important outside markets today see Nymex crude oil prices slightly down and trading around $43.30 a barrel. Hurricane Laura is lashing Texas and Louisiana and has shut in much of the U.S. Gulf coast oil and gas installations. That pushed gasoline futures prices to a five-month high this week. The U.S. dollar index is a bit weaker and not far above its recent two-year low. The yield on the U.S. Treasury 10-year note is trading around 0.68% today.
U.S. economic data due for release Thursday includes the weekly jobless claims report, the revised estimate of second-quarter gross domestic product, pending home sales and the Kansas City Fed manufacturing survey.
–Jim
U.S. STOCK INDEXES
September S&P 500 e-mini futures: Prices are weaker in early U.S. trading, but close to this week’s record high in early U.S. trading. Bulls still have the solid overall near-term technical advantage amid a five-month-old price uptrend in place. There are no early chart clues to suggest a market top is close at hand. The 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 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 the record high of 3,483.50 and then at 3,500.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at Wednesday’s low of 3,436.75 and then at this week’s low of 3,393.50. Wyckoff’s Intra-day Market Rating: 4.5
September Nasdaq index futures: Prices are modestly weaker after Wednesday hitting another record high. Bulls remain in solid overall technical control. 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 neutral to bearish early today. Shorter-term technical resistance is seen at the record high of 12,001.50 and then at 12,100.00. On the downside, shorter-term support is seen at 11,900.00 and then at 11,800.00. Wyckoff’s Intra-Day Market Rating: 4.5.
U.S. TREASURY BONDS AND NOTES FUTURES
September U.S. T-Bonds: Prices are slightly up in early U.S. trading. Bulls still have the overall near-term chart advantage but have faded this week and need to stabilize the market soon. 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 neutral early today. Shorter-term technical resistance is seen at the overnight high of 178 16/32 and then at 179 even. Shorter-term support lies at 178 even and then at this week’s low of 177 12/32. Wyckoff’s Intra-Day Market Rating: 5.0
September U.S. T-Notes: Prices are slightly up in early U.S. trading. Bulls still have the firm near-term technical advantage but have faded this week. 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 neutral early today. Shorter-term resistance lies at the overnight high of 139.14.0 and then at 139.20.0. Shorter-term technical support lies at this week’s low of 139.00.5 and then at the August low of 138.28.5. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5
EURO CURRENCY
The September Euro currency futures are slightly weaker in early U.S. trading. Bulls still have the solid overall near-term technical advantage. Prices have been trending up for over three months. 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 bearish early today. The Euro currency finds shorter-term technical resistance at this week’s high of 1.1855 and then at 1.1888. Shorter-term support is seen at this week’s low of 1.1776 and then at last week’s low of 1.1758. Wyckoff’s Intra Day Market Rating: 5.0
NYMEX CRUDE OIL
October Nymex crude oil prices are slightly down in early U.S. trading. Bulls have the overall near-term technical advantage, but prices have been trading sideways at higher levels for weeks. 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 bearish early today. Look for buy stops to reside just above technical resistance at this week’s high of $43.78 and then at $44.00. Look for sell stops just below technical support at $42.50 and then at $42.00. Wyckoff’s Intra-Day Market Rating: 5.0
GRAINS
US grain futures are higher in early U.S. pre-market trading. Bulls are having a very good week, amid deteriorating late-season crop conditions for U.S. corn and soybeans. Meantime, China is keeping up its solid pace of purchases of U.S. corn and soybeans. Focus of the marketplace late this week is on inflation—a bullish element for raw commodity markets. Speculators are showing more interest in the grain futures markets on the long side. Look for more upside price action in the grains in the near term.
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