Friday, January 24–Jim Wyckoff’s Morning Markets Report
Asian and European stock markets were mostly up overnight. U.S. stock indexes are pointed higher openings when the New York day session begins. European markets were boosted from some upbeat economic data Friday, as the composite purchasing managers index (PMI) came in at 50.9 in January, unchanged from December. The German manufacturing PMI for January came in at 45.2 and beat market expectations. The German manufacturing PMI was reported at 43.7 in December. A reading above 50.0 suggests expansion. European traders were encouraged that economic workhorse Germany is seeing its manufacturing sector improve.
The marketplace this week has waffled on the coronavirus illness that is impacting China and has now killed at least 26 of its citizens, with nearly 1,000 contracting the illness and several cities in China on lockdown. One day the markets are spooked by the matter and then next day they seem to ignore it. Reports Friday said the breakout of coronavirus could lop off over 1% of China’s annual GDP, especially as the main holiday in China, the Lunar New Year, starts this weekend. At least one case of the virus has been found in the U.S. and one has been reported in Singapore. The U.S. State Department on Thursday advised U.S. citizens to reconsider traveling to the impacted regions of China. It’s likely this situation will get worse before it gets better.
The key outside markets today see crude oil prices weaker and trading around $55.35 a barrel. Prices Thursday hit a two-month low as prices are in a steep near-term downtrend.
Meantime, the U.S. dollar index is higher and hit a seven-week high overnight, as the USDX is trending up.
U.S. economic data due for release Friday includes the U.S. flash services PMI and the manufacturing PMI.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are firmer in early U.S. trading and near this week’s contract and record high. Bulls have the solid near-term technical advantage and there are no early close to suggest a market top is close at hand. 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 neutral to bullish early today. Today, shorter-term technical resistance comes in at the contract high of 3,337.50 and then at 3,350.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at this week’s low of 3,301.25 and then at 3,275.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 6.0
March Nasdaq index futures: Prices are higher and hit a contract and record high in early U.S. trading. Bulls have the solid near-term technical advantage to suggest more upside. 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 neutral to bullish early today. Shorter-term technical resistance is seen at the contract high of 9,287.25 and then at 9,300.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 9,200.00 and then at this week’s low of 9,114.75. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 6.5.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are slightly lower in early U.S. trading. Bulls still have had a good week as prices hit a seven-week high Thursday. 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 neutral early today. Shorter-term technical resistance is seen at this week’s high of 159 31/32 and then at 160 13/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 159 1/32 and then at Thursday’s low of 158 25/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5
March U.S. T-Notes: Prices are slightly lower in early U.S. trading. 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 neutral early today. Shorter-term resistance lies at the overnight high of 129.28.0 and then at this week’s high of 130.01.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at Thursday’s low of 129.17.5 and then at 129.10.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0
U.S. DOLLAR INDEX
The March U.S. dollar index is higher and hit a seven-week high in early U.S. trading. Bulls have the overall near-term technical advantage amid a price uptrend in place on the daily chart. 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 bullish early today. The dollar index finds shorter-term technical resistance at the November high of 98.045 and then at 98.250. Shorter-term support is seen at the overnight low of 97.450 and then at this week’s low of 97.150. Wyckoff’s Intra Day Market Rating: 6.0
NYMEX CRUDE OIL
March Nymex crude oil prices are weaker and near Thursday’s two-month low in early U.S. trading. A fledgling price downtrend is in place on the daily bar chart. 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 neutral to bearish early today. Look for buy stops to reside just above technical resistance at Thursday’s high of $56.27 and then at $57.00. Look for sell stops just below technical support at this week’s low of $54.77 and then at $54.00. Wyckoff’s Intra-Day Market Rating: 4.0
GRAINS
US grain futures are weaker in early US pre-market trading Friday. Corn is around 2 cents lower, soybeans around 3 cents lower and wheat is 3 to 4 cents down. The highlight of the day will be the weekly USDA export sales report, which was delayed by one day because of a US holiday Monday. Grain traders will be looking at the export data for bigger buys coming from China, following the “Phase 1” trade deal signed last week. Soybean bulls have faded badly recently to suggest a challenge of the early-December low. However, corn prices on Thursday popped to a 2.5-month high and produced a bullish upside “breakout” from a choppy trading range. The wheat market bulls remain technically strong amid price uptrends in place and prices this week hitting multi-month highs. However, just above the wheat markets lie strong technical resistance levels that have halted rallies in previous years. The grain markets this week have waffled on the coronavirus illness that is impacting China and has now killed at least 26 of its citizens, with nearly 1,000 contracting the illness and several cities in China on lockdown. Reports Friday said the breakout of coronavirus could lop off over 1% of China’s annual GDP, especially as the main holiday in China, the Lunar New Year, starts this weekend. At least one case of the virus has been found in the U.S. and one has been reported in Singapore. The U.S. State Department on Thursday advised U.S. citizens to reconsider traveling to the impacted regions of China. It’s likely this situation will get worse before it gets better, which would be a bearish scenario for the grain markets. Soybean futures are also seeing selling pressure from ideas of big South American soybean crops that have seen few weather problems so far in the growing season.
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