Thursday, May 5–Jim Wyckoff’s Morning Markets Report
Global stock markets were mixed overnight, with European shares mostly up and Asian shares mostly down. U.S. stock indexes are pointed toward lower openings when the New York day session begins, on corrective pullbacks after strong gains posted Wednesday afternoon.
Traders Thursday are still digesting the Federal Reserve move Wednesday afternoon to raise its key interest rate, the Fed funds rate, by 0.5%, which was expected by the marketplace. The rate hike is the first 0.5% increase in 22 years and comes amid the highest U.S. inflation levels in 40 years. The FOMC statement said the Fed will continue to raise interest rates as appropriate. At Fed Chairman Jerome Powell’s press conference, the Fed chief said inflation levels are “much too high” and are presently spreading in the economy but are likely to stabilize soon. However, Powell added that he does not see inflation declining any time soon. Importantly, Powell said the U.S. central bank is not considering 0.75% rate increase increments. He did say 0.5% rate increases are on the table for the next two meetings. On the positive side, Powell said the U.S. economy is strong and well positioned to handle the upcoming Fed interest rate increases. The marketplace’s read on the statement was dovish on U.S. monetary policy. Others might argue the FOMC statement and Powell’s remarks were just less hawkish than previous recent remarks from Federal Reserve officials.
U.S. stock indexes Wednesday afternoon soared on the Fed news, gold posted solid gains and bitcoin and crypto currencies rallied sharply, too. However, the U.S. stock indexes has quickly lost their sizzle as many market watchers reckon not much has really changed regarding overall Fed policy.
The Bank of England is at its regular monetary policy meeting raised its interest rate by 0.25%. The BOE raised its annual inflation forecast significantly, to 10.25%. A rate hike was expected but the inflation forecast was a surprise on the upside.
Traders and investors are now awaiting Friday morning’s U.S. employment situation report for April. The key non-farm jobs number in the report is expected to come in at up 400,000, which compares to a rise of 431,000 in the March report.
The key outside markets today sees Nymex crude oil futures prices slightly up and trading around $108.00 a barrel. Meantime, the U.S. dollar index is higher in early trading after selling off Tuesday afternoon. The yield on the 10-year U.S. Treasury note is presently fetching 2.966%. The 10-year yield early this week briefly hit a 3.5-year high just above 3%.
U.S. economic data due for release Thursday includes the weekly jobless claims report, the Challenger job-cuts report, preliminary productivity and costs, the global services PMI, and monthly chain store sales data.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are lower in early U.S. trading, on a corrective bounce following strong gains posted Wednesday. Prices are still in a downtrend on the daily bar chart but more gains this week would likely negate the downtrend. The shorter-term moving averages (4-, 9- and 18-day) are neutral early today. The 4-day moving average is above the 9-day. The 9-day is below the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are neutral early today. Today, shorter-term technical resistance comes in at this week’s high of 4,303.00 and then at 4,350.00. Support for active traders is seen at 4,200.00 and then at Wednesday’s low of 4,142.75. Wyckoff’s Intra-day Market Rating: 4.0
June Nasdaq index futures: Prices are lower in early U.S. trading after solid gains seen Wednesday. Prices are still trending down on the daily bar chart. Shorter-term moving averages (4- 9-and 18-day) are neutral early today. The 4-day moving average is above the 9-day. The 9-day average is below the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is seen at this week’s high of 13,555.25 and then at 13,750.00. On the downside, shorter-term support is seen at 13,200.00 and then at 13,000.00. Wyckoff’s Intra-Day Market Rating: 4.0.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are lower in early U.S. trading. Bears are in solid technical control. 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 technical resistance is seen at this week’s high of 140 24/32 and then at 141 even. Shorter-term support lies at this week’s low of 139 1/32 and then at the contract low of 138 14/32. Wyckoff’s Intra-Day Market Rating: 4.0
June U.S. T-Notes: Prices are lower in early U.S. trading. Bears are in solid near-term technical control. 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 119.00.0 and the overnight high of 119.09.5. Shorter-term technical support lies at this week’s overnight contract low of 118.04.5 and then at 118.00.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0
EURO CURRENCY
The June Euro currency futures are 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 neutral early today. The Euro currency finds shorter-term technical resistance at the overnight high of 1.0658 and then at 1.0700. Shorter-term support is seen at 1.0550 and then at the contract low of 1.0490. Wyckoff’s Intra Day Market Rating: 4.0
NYMEX CRUDE OIL
Nymex crude oil prices are slightly higher in early U.S. trading. The shorter-term moving averages 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 (RSI and slow stochastics) are neutral to bullish early today. Look for buy stops to reside just above technical resistance at the April high of $109.20 and then at $110.00. Look for sell stops just below technical support at $106.00 and then at $105.00. Wyckoff’s Intra-Day Market Rating: 6.0
GRAINS
U.S. grain futures prices were higher in early U.S. pre-market trading. Bulls have regained their footing late this week. Sharply higher crude oil prices this week are supporting the grains. Bulls have the near-term chart advantage. 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