Tuesday, May 12–Jim Wyckoff’s Morning Markets Report
Global stock markets were narrowly mixed in overnight trading. U.S. stock indexes are pointed toward slightly lower openings when the New York day session begins. Traders and investors are assessing the markets ramifications of a very possible “second wave” of the Covid-19 pandemic as major global economies start to reopen their businesses and transportation infrastructure. There is growing sentiment that economic recoveries will be slower than initially expected and which had been factored into current market prices, including the solid rallies in many global stock indexes. If marketplace notions continue to shift to slower economic recoveries it’s likely that many markets (especially the stock markets) will have to do some serious re-pricing—to the downside.
The Trump administration’s chief pandemic health official, Dr. Anthony Fauci, will testify before the U.S. Senate today and will warn of the high potential for infections to rise if the U.S. economy begins to reopen too early. Many states are starting to reopen more of their businesses. Government leaders have to walk a tightrope of balancing a likely increase of infections upon reopening businesses versus continued economic damage if they don’t, and that itself will take a significant human health toll. There is no single, correct solution to the matter. It’s a no-win situation for government leaders making those decisions.
The U.S. Federal Reserve late Monday announced it will begin buying corporate bond exchange traded funds (ETFs) for the first time ever, in a further effort to grease the skids of the U.S. financial system. It’s quite extraordinary to see the range of expectations of economists regarding the Covid-19-induced monetary policy stimuli from the major central banks and the future economic impact of such. Some economists forecast price inflation, some call for price deflation and others call for price “stagflation,” or higher inflation with little to no economic growth. Two markets to watch closely that will very likely provide a clue on which scenario will play out are crude oil and gold. If those markets push solidly higher on a sustained basis then inflation would be most likely. If they grind sideways or lower, deflation would most likely to be the case for an extended period of time. One should hope that inflation is the outcome, not because it is such a good thing, but because extended price deflation is a very bad thing for most markets. What do you think? Drop me an email at jim@jimwyckoff.com. I always enjoy hearing from my valued readers.
Speaking of inflation levels, or lack thereof, today’s U.S. consumer price index for April is due out and is expected to come in down 0.8% from March.
The important outside markets today see Nymex futures higher early today and trading around $25.00 a barrel. The U.S. dollar index is weaker today. The yield on the benchmark U.S. Treasury 10-year note is currently around 0.7%.
U.S. economic reports out Tuesday include the weekly Goldman Sachs and Johnson-Redbook retail sales reports, the NFIB small business index, the consumer price index, the monthly Treasury budget statement and real earnings.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are slightly up in early U.S. trading. Bulls have the near-term technical advantage amid a near-term uptrend that has turned sideways on the daily chart. The shorter-term moving averages (4-, 9- and 18-day) are still 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 bullish early today. Today, shorter-term technical resistance comes in at Monday’s high of 2,947.00 and then at the April high of 2,965.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at the overnight low of 2,894.50 and then at last Friday’s low of 2,879.75. Wyckoff’s Intra-day Market Rating: 5.5
June Nasdaq index futures: Prices are firmer in early U.S. trading. A price uptrend is in place on the daily chart. 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 bullish early today. Shorter-term technical resistance is seen at Monday’s high of 9,339.00 and then at 9,400.00. On the downside, shorter-term support is seen at Monday’s low of 9,118.50 and then at 9,000.00. Wyckoff’s Intra-Day Market Rating: 5.5.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are slightly up in early U.S. trading. Bulls have the overall technical advantage but are fading a bit early 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 bearish early today. Shorter-term technical resistance is seen at Monday’s high of 179 26/32 and then at 180 even. Shorter-term support lies at Monday’s low of 178 15/32 and then at the May low of 178 1/32. Wyckoff’s Intra-Day Market Rating: 4.5
June U.S. T-Notes: Prices are near steady in early U.S. trading. Bulls have the firm overall near-term technical advantage but trading has been sideways at higher levels for weeks. 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 even with the 18-day moving average. Oscillators (RSI, slow stochastics) are bearish early today. Shorter-term resistance lies at Monday’s high of 139.02.0 and then at 139.10.0. Shorter-term technical support lies at 138.16.0 and then at the May low of 138.08.5. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0
U.S. DOLLAR INDEX
The June U.S. dollar index is lower in early U.S. trading. Bulls have the overall near-term technical advantage but trading has been sideways and choppy recently. The shorter-term moving averages for the dollar index are neutral early today, as the 4-day is even with the 18-day. The 9-day is below the 18-day moving average. Short-term oscillators for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at the overnight high of 100.510 and then at 100.975. Shorter-term support is seen at Monday’s low of 99.690 and then at 99.460. Wyckoff’s Intra Day Market Rating: 4.0
NYMEX CRUDE OIL
June Nymex crude oil prices are higher in early U.S. trading. It strongly appears a market bottom is in place. 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 bullish early today. Look for buy stops to reside just above technical resistance at the May high of $26.74 and then at $27.00. Look for sell stops just below technical support at $25.00 and then at Monday’s low of $23.67. Wyckoff’s Intra-Day Market Rating: 6.5
GRAINS
US grain futures are mixed in early US pre-market trading. The big data point of the day for the grain markets is the monthly USDA supply and demand report. Grain bears remain in overall technical control, even though market bottoms may be in place or close at hand.
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