Friday, March 20–Jim Wyckoff’s Morning Markets Report
Global stock markets were mostly higher in overnight trading. U.S. stock index futures are presently pointed toward solidly higher openings when the New York day session begins. Trading today will be extra important for the marketplace, from a psychological perspective. After Thursday’s gains, if the U.S. stock indexes can on Friday put together a two-day winning streak for the first time in weeks, then many traders and investors will head into the weekend thinking the markets panic has now passed and most markets have at least stabilized.
Make no mistake, the economic and human toll from the Covid-19 pandemic will continue to rise, and likely dramatically on both counts. California is headed for a complete lockdown of its citizens, and some health officials are predicting the most populous state in the U.S. (and the world’s fifth- largest economy) will see up to half of its population infected by the illness.
Many economists are now saying U.S. GDP will drop by over 10% for at least one quarter—and that could be light, given most U.S. stores are presently shuttered.
Two key markets, U.S. Treasuries and gold, are late this week providing key clues the marketplace panic is over and that markets are stabilizing–even if there is more downside in the stock market and much more downside in the global economy in the coming weeks.
The U.S. Treasury bond futures market has seen prices rebound solidly late this week (yields falling). It appears the U.S. Treasury market has become more liquid as the week has progressed. Treasury buyers are stepping back into the fray with more confidence in the bond market. It seems contradictive that bond yields would be falling while trader and investor fears are easing a bit. However, the rally in the Treasury futures and falling yields in the cash market suggest more economic and stock market damage are expected by bond traders, and thus the safe-haven moves to own U.S. Treasuries. The benchmark U.S. 10-year Treasury note yield was trading around 1.04% Friday morning.
The same goes for gold. Prices are rallying Friday as more confident buyers are stepping in after the yellow metal had been pounded down recently on a “sell what you can” trader mentality that also pervaded many markets earlier this week. The buying in gold late this week is also likely safe-haven demand, along with short covering in the futures market following the recent big losses.
The U.S. dollar index early Friday morning has backed down from its massive gains seen this week that saw the USDX hit a three-year high. It’s likely just a corrective pullback and certainly not signal the USDX has hit a peak. The rush to hold greenbacks has further roiled an already anxious foreign exchange market. This week’s price action in the USDX reaffirms the U.S. dollar’s status as the supreme-quality asset to own when times get really, really tough.
Nymex crude oil futures prices are solidly up again early today and have made a dramatic rebound after hitting an 18-year low of $20.06 a barrel on Wednesday. Crude prices are currently trading around $27.50 a barrel. The huge rebound in crude late this week does suggest that important market has put in a price bottom.
U.S. economic data due for release Friday includes is light and includes existing home sales. In a sign of the times, this week’s Federal Reserve FOMC meeting came and went with nary a mention on the business news channels and completely ignored by the marketplace. The Fed has been actively intervening in the markets all week, including last weekend’s surprise interest rate cut.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are solidly higher in early U.S. trading. Bears still have the solid overall near-term technical advantage. The shorter-term moving averages (4-, 9- and 18-day) are bearish early today. The 4-day moving average is below the 9-day and 18-day. The 9-day is below the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are neutral to bullish early today. Today, shorter-term technical resistance comes in at the overnight high of 2,499.000 and then at 2,542.75. Buy stops likely reside just above those levels. Downside support for active traders today is seen at 2,400.00 and then at 2,350.00. Wyckoff’s Intra-day Market Rating: 7.0
June Nasdaq index futures: Prices are sharply higher in early U.S. trading. Bears still have the firm overall near-term technical advantage. 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 the overnight high of 7,629.00 and then at 7,700.00. On the downside, short-term support is seen at 7,500.00 and then at 7,400.00. Wyckoff’s Intra-Day Market Rating: 8.0.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are sharply higher in early U.S. trading. Bulls have regained upside momentum late this week. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is below the 9-day and 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term technical resistance is seen at 176 even and then at 177 even. Shorter-term support lies at 174 even and then at 173 even. Wyckoff’s Intra-Day Market Rating: 7.0
June U.S. T-Notes: Prices are solidly higher in early U.S. trading. Bulls have regained upside momentum late this week. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is below the 9-day and 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term resistance lies at 136.16.0 and then at 137.00.0. Shorter-term technical support lies at 136.00.0 and then at 135.16.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.5
U.S. DOLLAR INDEX
The June U.S. dollar index is solidly lower after hitting another three-year high overnight. Bulls still have the strong overall near-term technical advantage and today’s pullback is so far just a normal downside correction. The shorter-term moving averages for the dollar index 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 dollar index are neutral to bearish early today. The dollar index finds shorter-term technical resistance at the overnight high of 103.825 and then at 104.000. Shorter-term support is seen at the overnight low of 101.905 and then at 101.500. Wyckoff’s Intra Day Market Rating: 4.0
NYMEX CRUDE OIL
April Nymex crude oil prices are solidly higher in early U.S. trading. Bears still have the overall near-term technical advantage amid a price downtrend in place. However, the late-week strong price rebound suggests this market has bottomed out. The shorter-term moving averages are still 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 bullish early today. Look for buy stops to reside just above technical resistance at the overnight high of $27.89 and then at $29.00. Look for sell stops just below technical support at the overnight low of $24.73 and then at $24.00. Wyckoff’s Intra-Day Market Rating: 6.5
GRAINS
US grain futures are up again in early US pre-market trading, on more short covering and bargain hunting following recent selling pressure. There is a ray of hope late this week that the grain market bears are finally exhausted. Still, the global stock and financial markets need to continue to stabilize before the grain markets start to see sustained rebounds. Gains in the grain futures Friday would go a long way in suggesting the markets have hit their bottoms for this latest down-move.
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