Thursday, July 20–Jim Wyckoff’s morning markets report
Here is my mid-summer take on key markets:
–U.S. dollar depreciation: The U.S. dollar index this week hit a 15-month low. Veteran market watchers know that trends in the currency markets tend to be stronger and longer-lasting than price trends in other markets. Look for the USDX to continue to trend lower until at least early September. After the U.S. Labor Day holiday in early September, market participants will get back down to more serious business, what with summer vacations over and the kids back in school. Markets can become more volatile in September, so the price downtrend in the U.S. dollar index could accelerate, or reverse. Until then, the path of least resistance for the USDX will remain sideways to lower—barring an unexpected geopolitical event that would likely drive safe-haven demand into U.S. dollars.
–U.S. stock indexes trending up: The U.S. stock indexes have been trending higher since early May and this week hit new highs for the year. So much for the old stock market adage, “Sell in May and go away.” The uptrends in the stock indexes have been unassuming and with low volatility. Those are signs the uptrends can continue in the coming weeks—at least until early September. Veteran stock market traders know the months of September and October can be rocky ones for the equities market.
–Crude oil prices on the rise: Nymex crude oil futures prices in mid-July hit a 2.5-month high and are presently trending higher. That’s a bullish element for most of the raw commodity sector. Rising oil prices also suggest the general marketplace thinks the U.S./global economy will not slip into recession in the coming months. It appears Nymex crude will continue to trend up in the coming weeks. However, there is strong chart resistance at the $82.00 to $85.00 area that will likely cap gains.
–Gold and Silver bulls come to life: The past couple weeks have seen the gold and silver markets negate their near-term price downtrends on the daily charts and begin price uptrends. The eroding U.S. dollar index, easing inflation fears and a rally in crude oil prices are bullish elements for the precious metals that should continue to support sideways-to-higher price action into the end of summer.
–Government bond yields have dipped: Notions of “light at the end of the tunnel” regarding hawkish major central banks and their interest rate hikes have stabilized government bond yields and even allowed some to decline a bit. This is due to inflationary pressures easing over the past several months. Look for the trajectory of inflation to continue to be down until at least September. That means likely declining government bond yields in the coming weeks, albeit probably just modest dips.
–Grain market bulls coming back to life: The grain market bulls are back in business this week amid weather forecasts for the U.S. Midwest that are turning hotter and drier as the calendar turns to August, and amid the end of the Russia-Ukraine grain-shipping deal this week. Russia attacked a major Ukraine grain terminal earlier this week to add keener uncertainty regarding any grain shipments coming out of the Black Sea region. Technicals are presently fully bullish for soybeans, turning more bullish for corn, and neutral to slightly bearish for wheat. However, if the corn and soybean markets continue to rally, wheat markets will very likely follow suit. The month of August is the most critical growing month of the U.S. soybean crop. So look for soybeans to be the leader of the grain markets in the coming weeks.
In overnight news, China’s central bank left its main interest rates unchanged.
The key outside markets today see the U.S. dollar index slightly down. Meantime, Nymex crude oil prices are slightly up trading around $75.50 a barrel. The benchmark 10-year U.S. Treasury note yield is presently fetching 3.786%.
U.S. economic data due for release Thursday includes the weekly jobless claims report, the Philadelphia Fed business survey, existing home sales and leading economic indicators.
U.S. STOCK INDEXES
September S&P 500 e-mini futures: Prices are slightly down in early U.S. trading and near this week’s 15-month high. Bulls have the solid overall near-term technical advantage. 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 this week’s high of 4,609.25 and then at 4,650.00. Support for active traders is seen at this week’s low of 4,528.00 and then at 4,500.00. Wyckoff’s Intra-day Market Rating: 4.5
September Nasdaq index futures: Prices are lower in early U.S. trading after hitting a contract high on Wednesday. Bulls have the solid near-term technical advantage. 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 contract high of 16,062.75 and then at 16,200.00. On the downside, shorter-term support is seen at this week’s low of 15,799.25 and then at 15,700.00. Wyckoff’s Intra-Day Market Rating: 4.0.
U.S. TREASURY BONDS AND NOTES FUTURES
September U.S. T-Bonds: Prices are lower in early U.S. trading. 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 early today. Shorter-term technical resistance is seen at this week’s high of 127 24/32 and then at 128 even. Shorter-term support lies at Wednesday’s low of 126 22/32 and then at 126 even. Wyckoff’s Intra-Day Market Rating: 4.0
September U.S. T-Notes: Prices are solidly lower in early U.S. trading. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term resistance lies at the overnight high of 112.31.0 and then at this week’s high of 113.08.0. Shorter-term technical support is seen at this week’s low of 112.13.0 and then at 112.00.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0
EURO CURRENCY
The September Euro currency futures are slightly higher in early U.S. trading. Prices hit a 15-month high Tuesday. The shorter-term moving averages for the Euro 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 Euro are neutral early today. The Euro currency finds shorter-term technical resistance at Wednesday’s high of 1.1274 and then at this week’s high of 1.1310. Shorter-term support is seen at this week’s low of 1.1208 and then at 1.1166. Wyckoff’s Intra Day Market Rating: 5.5
NYMEX CRUDE OIL
August Nymex crude oil prices are near steady in early U.S. trading. The shorter-term moving averages are neutral early today as the 4-day is even with 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 the July high of $77.33 and then at $78.00. Look for sell stops just below technical support at this week’s low of $73.84 and then at $72.50. Wyckoff’s Intra-Day Market Rating: 5.0
GRAINS
Grain futures prices were narrowly mixed overnight. Bulls are having a good week. Weather forecasts for the Midwest are turning hotter and drier next week. Russia attacked a major Ukraine grain terminal earlier this week and said it will consider all ships in the Black Sea as hostile. Technicals are fully bullish for soybeans, and modestly bullish for corn and wheat futures. On tap today is the weekly USDA export sales report.
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