Wednesday, December 1–Jim Wyckoff’s Morning Markets Report
Global stock markets were mostly higher in overnight trading. The U.S. stock indexes are pointed to solidly higher openings when the New York day session begins. Trading has been choppy in the stock indexes this week, amid the new uncertainty about the Omicron coronavirus strain.
In what may have been one of the most important trading days of the year, or even beyond, Tuesday, Fed Chairman Jerome Powell stunned the marketplace by suggesting a tighter U.S. monetary policy is necessary to keep rising inflation at bay and to keep supply chains moving along, especially if the new Omicron strain spreads rapidly worldwide. Powell also admitted that what the Fed had termed “transitory” inflation was incorrect and the central bank would abandon the term. Powell seemed less concerned about the demand side of economies during any new business and public lockdowns that might come from a surge in the Omicron strain. He also implied that if new virus strains continue to develop, new monetary stimulus programs would have limited positive impacts on economies. Many market watchers thought the Federal Reserve would be forced to dial back its recently announced tapering of its bond-buying program if Omicron started to rage. After Powell’s remarks Tuesday, financial markets estimated a 50-50 chance the Fed will raise U.S. interest rates as early as May of 2022. Powell and Treasury Secretary Janet Yellen speak in front of the U.S. House of Representatives today.
The U.S. stock market Tuesday sold off sharply on Powell’s comments. For the past dozen years the U.S. stock market has been boosted by the high levels of liquidity in financial markets, due to monetary policy stimulus. If the global central banks take away the proverbial punch bowl from traders and investors, one has to wonder if the equities markets can continue their years-long trek higher.
What metals traders seemed most concerned about Tuesday was a tighter U.S. monetary policy halting rising inflation sooner rather than later. Remember that hard assets, including metals, have been a historical hedge against rising inflation. Importantly, the U.S. Treasury market Tuesday saw falling yields on the longer-dated maturities, which suggests bond market traders do indeed believe the Fed can successfully tamp down rising inflation in the coming months.
In other overnight news, the Paris-based OECD think tank forecast rising global inflation in 2022, including predicting U.S. annual inflation at 4.4% and Euro zone inflation at 2.7%. Both of those numbers are above the OECD’s September forecasts.
The key “outside markets” see Nymex crude oil prices solidly higher and trading around $69.00 a barrel, after hitting a three-month low of $64.43 on Tuesday. There is an OPEC meeting today that will be closely monitored. The U.S. dollar index is slightly lower. Meantime, The yield on the U.S. Treasury 10-year note is presently fetching 1.492%.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, the U.S. manufacturing PMI, the ISM report on business manufacturing, the global manufacturing PMI, construction spending, the weekly DOE liquid energy stocks report, domestic auto industry sales and the Fed’s beige book.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are solidly higher in early U.S. trading. Bulls have faded badly recently to suggest a near-term market top is in place. 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 neutral early today. Today, shorter-term technical resistance comes in at this week’s high of 4,669.75 and then at 4,700.00. Buy stops likely reside just above those levels. Downside support for active traders is seen at this week’s low of 4,557.00 and then at 4,525.00. Sell stops likely reside below those levels. Wyckoff’s Intra-day Market Rating: 6.0
March Nasdaq index futures: Prices are solidly higher in early U.S. trading. Shorter-term moving averages (4- 9-and 18-day) are neutral early today. The 4-day moving average is below the 9-day and 18-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 this week’s high of 16,456.25 and then at 16,500.00. Buy stops likely reside just above those levels. On the downside, shorter-term support is seen at the overnight low of 16,182.50 and then at last week’s low of 15,988.00. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: 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 and 18-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 163 15/32 and then at the November high of 164 1/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 162 21/32 and then at Tuesday’s low of 162 2/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0
March 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 and 18-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term resistance is seen at the overnight high of 131.15.0 and then at 131.20.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 130.30.5 and then at 130.24.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0
EURO CURRENCY
The March Euro currency futures are near steady in early U.S. trading. Bears have the solid overall near-term technical advantage. The shorter-term moving averages for the Euro 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 for the Euro are neutral to bullish early today. The Euro currency finds shorter-term technical resistance at this week’s high of 1.1417 and then at 1.1450. Buy stops likely reside just above those levels. Shorter-term support is seen at this week’s low of 1.1271 and then at the November low of 1.1221. Sell stops likely reside just below those levels. Wyckoff’s Intra Day Market Rating: 5.0
NYMEX CRUDE OIL
Nymex crude oil prices are sharply higher in early U.S. trading, on corrective bounce after hitting a three-month low Tuesday. The shorter-term moving averages are bearish early today as the 4-day is below 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 $70.00 and then at Tuesday’s high of $71.22. Look for sell stops just below technical support at $68.00 and then at the overnight low of $66.20. Wyckoff’s Intra-Day Market Rating: 6.5
GRAINS
U.S. grain futures were higher in overnight trading on corrective bounces from strong losses posted Tuesday. There is less risk aversion in the marketplace at mid-week and that is giving the grain market bulls some strength. However, as long as the Omicron uncertainty persists in the general marketplace, gains in the grains will likely be limited.
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