Friday, January 8–Jim Wyckoff’s Morning Markets Report
Global stock markets were mostly up overnight. U.S. stock indexes are pointed toward higher openings and new record highs when the New York day session begins. Trader and investor risk appetite remains upbeat, due in part to notions a Democratic president and Congress will provide massive spending in the coming months to prop up U.S. businesses and Americans hit hard by the Covid-19 pandemic, which is still raging but which also sees some light at the end of the dark tunnel due to successful vaccines.
The data point of the week, if not the month, is today’s Employment Situation Report issued by the Labor Department. That report is expected to show a U.S. unemployment rate of 6.8% and a non-farm jobs rise of 50,000 in December, versus a rise of 245,000 in November. However, the big miss on the downside in the ADP national employment report on Wednesday has many thinking the same will occur in Friday’s jobs report—a big contraction in non-farm jobs. A big miss on the jobs consensus forecast may or may not significantly move markets. Reason: Traders and investors are so keenly focused on the bullish aspects of the likely end of the raging pandemic this year and the ensuing expected booms in world economies. That focus did not even waver when the U.S. Capitol was stormed by an angry mob this week, as the U.S. stock market continued to march higher.
A feature this first week of the trading year is the re-emergence of the inflation trade. Many commodity futures markets are in bull runs, led by crude oil. The U.S. Treasury markets are seeing rising yields, with the benchmark 10-year note yield now fetching 1.10%, after trading below the 1.0% level since late last winter. To anyone who has studied economics, it seems nearly unfathomable that the massive injections of liquidity into global financial systems over the past months (read that central banks printing money) cannot produce problematic inflation down the road. Rising commodity prices are a harbinger of that problematic inflation scenario.
The key “outside markets” today see the U.S. dollar index slightly up, while Nymex crude oil futures prices are higher, hit a 10-month high overnight and are trading around $51.50 a barrel.
Other U.S. economic data due for release Friday includes monthly wholesale trade data and consumer credit.
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are firmer and hit a record high in early U.S. trading. Bulls have the solid overall near-term technical advantage. A near-term price uptrend is in place on the daily bar chart. 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 bullish early today. Today, shorter-term technical resistance comes in at the overnight record high of 3,817.75 and then at 3,850.00. Buy stops likely reside just above those levels. Downside support for active traders is seen at 3,773.00 and then at 3,750.00. Wyckoff’s Intra-day Market Rating: 7.0
March Nasdaq index futures: Prices are higher and hit a record high in early U.S. trading. Bulls have the solid overall 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 bullish early today. Shorter-term technical resistance is seen at 13,000.00 and then at 13,100.00. On the downside, shorter-term support is seen at the overnight low of 12,919.00 and then at 12,750.00. Wyckoff’s Intra-Day Market Rating: 7.0.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are weaker again in early U.S. trading and hit another contract low overnight. Bears have the solid overall near-term technical advantage amid a price downtrend in place on the daily chart. 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 170 even and then at 171 even. Shorter-term support lies at the overnight contract low of 168 15/32 and then at 168 even. Wyckoff’s Intra-Day Market Rating: 4.0
March U.S. T-Notes: Prices are weaker and hit a contract low in early U.S. trading. 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 resistance lies at 137.00.0 and then at Thursday’s high of 137.09.5. Shorter-term technical support lies at the overnight contract low of 136.23.5 and then at 136.16.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0
The March Euro currency futures are lower on more profit taking after hitting a two-year high on Wednesday. Bulls are still in solid technical control. The shorter-term moving averages for the Euro are bullish early today, as the 4-day is above the 9-day. The 9-day is above the 18-day moving average. Short-term oscillators for the Euro are bearish early today. The Euro currency finds shorter-term technical resistance at 1.2300 and then at this week’s high of 1.2368. Shorter-term support is seen at the overnight low of 1.2230 and then at 1.2200. Wyckoff’s Intra Day Market Rating: 4.0
NYMEX CRUDE OIL
February Nymex crude oil prices are higher in early U.S. trading and hit another 10-month high overnight. Bulls have the solid overall near-term technical advantage amid a price uptrend in place on the daily chart. The shorter-term moving averages are bullish early today as the 4-day is above the 9-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 overnight high of $51.66 and then at $52.00. Look for sell stops just below technical support at the overnight low of $50.81 and then at $50.00. Wyckoff’s Intra-Day Market Rating: 7.0
US grain futures are mixed but mostly higher in early U.S. pre-market trading. The grain markets bulls have the strong overall near-term technical advantage amid price uptrends in place on the daily charts. The steep price gains in the grains recently suggest market tops are likely to occur sooner rather than later. The next big highlight for the grain markets is next Tuesday’s USDA supply and demand reports.
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.