Friday, February 28–Jim Wyckoff’s Morning Markets Report
Global stock markets were solidly lower again Friday, the last trading day of the month, as the coronavirus outbreak continues to grip the global marketplace and is causing keen trader and investor anxiety. Here are just a few of the economic ramifications of the coronavirus outbreak, according to reports: China ports are seeing container ship calls down 30% from last year. Oil shipments to China from the Middle East are down 88% from last year’s February deliveries. The International Energy Agency forecasts oil demand to fall by 435,000 barrels a day in the first quarter–the first contraction in 10 years. U.S. stock indexes are pointed toward sharply lower openings and at multi-month lows when the New York day session begins.
Do not be surprised if, as soon as today, the major central banks of the world issue a joint statement declaring they stand ready to stimulate economies by easing their monetary policies, if the coronavirus scare continues to roil the markets. How the marketplace would interpret such a declaration is unclear. It could make market participants even more panicky.
The yield on the benchmark U.S. Treasury 10-year note has dropped to a record low of
1.17%. The 10-year German bond (bund) yield hit a five-month low of -0.616%. What the U.S. Treasury market is telling traders and investors this week is that serious economic damage will be inflicted by the coronavirus—both at home and abroad, including the possibility of a U.S. recession on the horizon. Europe’s economy stands to be hurt even worse by the outbreak.
Nymex crude oil prices solidly lower, at a 14-month low, and trading around $45.50 a barrel in early trading Friday. The U.S. dollar index is trading solidly down again today, as currency traders focus on the coronavirus prompting the Federal Reserve to lower interest rates as soon as March. President Donald Trump also bashed the Fed again this week and implied he wants a weaker greenback. The U.S. dollar, like, gold is a safe-haven asset, but both assets are feeling pressure late this week on the concerns associated with slowing economic growth. There’s an old saying that during an extremely anxious marketplace, traders don’t’ sell what they want, they sell what they can. Such is likely the case for gold this week.
U.S. economic data due for release Friday includes the advance economic indicators report, personal income and outlays, the Chicago ISM business survey, and the University of Michigan consumer sentiment survey.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are solidly down and hit a five-month low in early U.S. trading. This week’s downdraft is a solid chart clue that at least a near-term market top is in place, if not a major top. 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 bearish early today. Today, shorter-term technical resistance comes in at the overnight high of 2,980.50 and then at 3,000.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at 2,900.00 and then at the overnight low of 2,879.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 3.5
March Nasdaq index futures: Prices are down in early U.S. trading and hit a four-month low overnight. This week’s price action is a solid chart clue that a near-term market top is in place. 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 average is even with the 18-day. Short-term oscillators (RSI, slow stochastics) are bearish early today. Shorter-term technical resistance is seen at the overnight high of 8,447.25 and then at 8,500.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 8,250.00 and then at the overnight low of 8,129.25. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 3.5.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are solidly higher and hit another contract high overnight. Bulls have the strong overall near-term technical advantage. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term technical resistance is seen at the overnight contract high of 171 7/32 and then at 172 even. Buy stops likely reside just above those levels. Shorter-term support lies at 169 even and then at the overnight low of 168 18/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 8.5
March U.S. T-Notes: Prices are solidly higher and hit another contract high overnight. Bulls have the strong overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term resistance lies at the contract high of 134.24.0 and then at 135.00.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at 134.00.0 and then at the overnight low of 133.17.5. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 8.0
U.S. DOLLAR INDEX
The March U.S. dollar index is lower and hit a three-week low in early U.S. trading. Bulls are fading fast this week. The shorter-term moving averages for the dollar index are neutral early today, as the 4-day is below the 9-day and 18-day. The 9-day is above the 18-day moving average. Short-term oscillators for the dollar index are bearish early today. The dollar index finds shorter-term technical resistance at the overnight high of 98.475 and then at 99.000. Shorter-term support is seen at the overnight low of 97.975 and then at 97.750. Wyckoff’s Intra Day Market Rating: 4.0
NYMEX CRUDE OIL
April Nymex crude oil prices are lower and hit a 14-month low overnight. The shorter-term moving averages are 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 bearish early today. Look for buy stops to reside just above technical resistance at the overnight high of $47.03 and then at $48.00. Look for sell stops just below technical support at the overnight low of $44.95 and then at $45.00. Wyckoff’s Intra-Day Market Rating: 3.0
GRAINS
US grain futures are mostly down in early US pre-market trading Friday. Corn is near steady, soybeans around 8 to 9 cents lower, and wheat down 2 to 5 cents. Global stock markets were solidly lower again Friday, the last trading day of the month, as the coronavirus outbreak continues to grip the global marketplace and is causing keen trader and investor anxiety. This is fully bearish for the grain markets. Here are just a few of the economic ramifications of the coronavirus outbreak, according to reports: China ports are seeing container ship calls down 30% from last year. Oil shipments to China from the Middle East are down 88% from last year’s February deliveries. The International Energy Agency forecasts oil demand to fall by 435,000 barrels a day in the first quarter–the first contraction in 10 years. Do not be surprised if, as soon as today, the major central banks of the world issue a joint statement declaring they stand ready to stimulate economies by easing their monetary policies, if the coronavirus scare continues to roil the markets. How the grain markets would interpret such a declaration is unclear. It could make market participants even more panicky. Nymex crude oil prices solidly lower, at a 14-month low, and trading around $45.50 a barrel in early trading Friday. That’s another negative for grains. However, one positive for grains is that the U.S. dollar index is trading solidly down again today, as currency traders focus on the coronavirus prompting the Federal Reserve to lower interest rates as soon as March. President Donald Trump also bashed the Fed again this week and implied he wants a weaker greenback. Significant near-term technical damage has been inflicted in the grain futures markets recently, to suggest any sustained rallies or price uptrends are nowhere in sight, and prices are likely to continue to drift sideways to lower in the near term.
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