Thursday, July 14–Jim Wyckoff’s Morning Markets Report
Global stock markets were mostly down overnight. U.S. stock indexes are pointed toward lower openings when the New York day session beings. Trader and investor risk aversion is keener late this week, following Wednesday’s U.S. consumer price index report that ran hotter than expected at up 9.1% in June, year-on-year, and at a 41-year high. On tap today is the U.S. producer price index report for June, which is expected to see a rise of 0.8% from May, following May’s reading of up 0.8% from April.
A feature in the marketplace for some time has been the strong appreciation of the U.S. dollar against other major currencies. Today, the U.S. dollar index, which is a basket of six major currencies weighted against the greenback, hit another 20-year high. The significant interest rate differentials in major economies, with the U.S. rates being higher, is prompting the so-called “carry trade” to be prominent, whereby international traders and institutions swap out their own currencies in favor of owning the U.S. dollar. History suggests this phenomenon can remain in place for quite some time, only making the greenback stronger.
The other feature is this week’s big downdraft in crude oil futures prices, with Nymex futures overnight falling to a three-month low of $93.24 a barrel. January crude oil futures are now trading at $84 a barrel, suggesting the marketplace thinks crude prices will continue to decline in the coming months. Crude’s plunge has pulled other major commodity market prices down, too. The weakening raw commodity sector is one significant early clue that inflationary pressures have peaked.
The key outside markets today see Nymex crude oil prices lower and trading around $93.75 a barrel. The U.S. dollar index is higher and hit a 20-year high following the hot CPI report Wednesday. The yield on the 10-year U.S. Treasury note is fetching 2.982%. The 2-year/10-year Treasury note yield curve remains inverted and at its most inverted in 22 years. Such is a clue of impending U.S. economic recession.
U.S. economic data due for release Thursday includes the weekly jobless claims report and the PPI.
–Jim
U.S. STOCK INDEXES
September S&P 500 e-mini futures: Prices are solidly lower in early U.S. trading. Bears have the solid 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 bearish early today. Today, shorter-term technical resistance comes in at the overnight high of 3,806.25 and then at 3,850.00. Support for active traders is seen at the July low of 3,744.00 and then at 3,700.00. Wyckoff’s Intra-day Market Rating: 4.0
September Nasdaq index futures: Prices are down in early U.S. trading. 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 average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are bearish early today. Shorter-term technical resistance is seen at Wednesday’s high of 11,970.00 and then at the July high of 12,211.00. On the downside, shorter-term support is seen at this week’s low of 11,479.25 and then at the July low of 11,381.75. 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. Bears are in overall near-term technical control. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is even with the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are bearish early today. Shorter-term technical resistance is seen at this week’s high of 140 14/32 and then at 141 even. Shorter-term support lies at 139 even and then at 138 even. Wyckoff’s Intra-Day Market Rating: 4.0
September U.S. T-Notes: Prices are lower in early U.S. trading. Bears are in overall near-term technical control. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are bearish early today. Shorter-term resistance lies at this week’s high of 119.06.0 and then at 119.16.0. Shorter-term technical support lies at 118.00.0 and then at this week’s low of 117.18.5. 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 lower in early U.S. trading. Bears have the strong overall near-term technical advantage. The shorter-term moving averages for the Euro are bearish early today, as the 4-day is below the 9-day. The 9-day is below the 18-day moving average. Short-term oscillators for the Euro are bearish early today. The Euro currency finds shorter-term technical resistance at Wednesday’s high of 1.0172 and then at 1.0200. Shorter-term support is seen at this week’s low of 1.0046 and then at 1.0000. Wyckoff’s Intra Day Market Rating: 4.0
NYMEX CRUDE OIL
Nymex crude oil prices are lower in early U.S. trading and hit a three-month low overnight. Bears have the near-term technical advantage. The shorter-term moving averages are bearish early today as the 4-day is below the 9-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 $95.00 and then at the overnight high of $97.00. Look for sell stops just below technical support at $92.00 and then at $90.00. Wyckoff’s Intra-Day Market Rating: 4.0
GRAINS
U.S. grain futures were weaker overnight. Bears are in firm near-term technical control. Attention remains on weather forecasts for the Corn Belt, which are for mostly warmer conditions but with better rain chances the next two weeks. Traders are reading that as being benign for the grain markets, at present. But remember that Corn Belt weather in the summertime can “change on a dime.” On tap today is the weekly USDA export inspections 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