Monday, October 16–Jim Wyckoff’s morning markets report
Asian and European stocks were mixed overnight. U.S. stock indexes are pointed to narrowly mixed openings when the New York day session begins. There were no major developments in the Middle East over the weekend that moved markets significantly. Still, risk appetite in the general marketplace remains dented as Israel appears poised for an all-out invasion of at least parts of the Gaza strip. The situation remains highly uncertain.
Marketplace focus is also on China’s economy. Broker SP Angel said today in an email dispatch that China’s yuan currency is under pressure as Chinese officials continue to move to restrict cash outflows. The “carry trade” continues to draw capital out of China and into the U.S. dollar, with a U.S.-China yield gap of 1.9% on in the 10-year government bonds. The People’s Bank of China has conducted medium-term lending facility operations of $108 billion to add liquidity to the banking system, said the broker. The PBOC kept the one-year policy loan rate unchanged at 2.5% as expected. Analysts see the moves as an effort to relieve stress on the banking sector. Meantime, property developer Evergrande’s debt sparked a bank run on the Bank of Cangzhou in Hebei province, reports said. Chinese officials are appealing for order following a crowd of people forming and looking to withdraw funds from that bank. “In many respects Evergrande and Country Garden are too big and too important to fail. We expect the Chinese state to avoid its ‘sub-prime, Lehman Bros’ moment and put in new management along with significant state support,” said SP Angel.
The U.S. political and economic situation is also not far from the front burner of the marketplace. Recent “Feds speak” may be leaning a bit less hawkish, but that’s debatable. A Wall Street Journal headline today reads “Chance of a recession ticks below 50%. A recession is no longer the consensus.” Meantime, the U.S. House of Representatives remains without a speaker.
The key outside markets today see the U.S. dollar index weaker. Nymex crude oil prices are near steady and trading around $87.75 a barrel. The yield on the benchmark U.S. Treasury 10-year note yield is presently fetching 4.689%.
U.S. economic data due for release Monday includes the Empire State manufacturing survey and Treasury monthly budget statement.
U.S. STOCK INDEXES
December S&P 500 e-mini futures: Prices are a bit firmer in early U.S. trading. The shorter-term moving averages (4-, 9- and 18-day) are neutral early today. The 4-day moving average is above 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 4,400.00 and then at the October high of 4,430.50. Support for active traders is seen at 4,350.00 and then at last week’s low of 4,299.50. Wyckoff’s Intra-day Market Rating: 5.5
December Nasdaq index futures: Prices are near steady in early U.S. trading. Shorter-term moving averages (4- 9-and 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. Short-term oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is seen at 15,250.00 and then at Friday’s high of 15,366.75. On the downside, shorter-term support is seen at 15,000.00 and then at 14,900.00. Wyckoff’s Intra-Day Market Rating: 5.0.
U.S. TREASURY BONDS AND NOTES FUTURES
December U.S. T-Bonds: Prices are solidly lower in early U.S. trading. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is seen at the overnight high of 112 27/32 and then at last week’s high of 114 10/32. Shorter-term support lies at 111 even and then at last week’s low of 110 11/32. Wyckoff’s Intra-Day Market Rating: 4.0
December U.S. T-Notes: Prices are lower in early U.S. trading. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term resistance lies at the overnight high of 107.22.5 and then at 108.00.0. Shorter-term technical support is seen at 107.00.0 and then at 106.24.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0
The December Euro currency futures are slightly up in early U.S. trading. Bears are in firm overall near-term technical control. The shorter-term moving averages for the Euro 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 for the Euro are neutral early today. The Euro currency finds shorter-term technical resistance at 1.0600 and then at the October high of 1.0668. Shorter-term support is seen at 1.0500 and then at the October low of 1.0482. Wyckoff’s Intra Day Market Rating: 5.5
NYMEX CRUDE OIL
November Nymex crude oil prices are near steady in early U.S. trading. The shorter-term moving averages are neutral early today as the 4-day is above the 9-day. The 9-day is below 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 $88.00 and then at $89.00. Look for sell stops just below technical support at $86.00 and then at $85.00. Wyckoff’s Intra-Day Market Rating: 5.0
Grain futures prices were mostly firmer in overnight trading. Keener risk aversion in the marketplace at present will likely limit the upside for the grains in the near term. Harvesting of soybeans and corn is in full swing and that is also a bearish seasonal factor amid commercial hedge selling. Technicals are still overall bearish for corn, wheat and soybeans. Due out today is the weekly USDA export inspections 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.