Wednesday, March 18–Jim Wyckoff’s Morning Markets Report
Global stock markets were down in overnight trading and U.S. stock index futures are presently pointed toward sharply lower to limit-down openings when the New York day session begins.
A more-than-$1 trillion U.S. aid package for U.S. consumers and businesses is so far not assuaging trader and investor confidence at mid-week. Instead, they are considering the consequences of a North American way of life that has been turned upside down. Most retail businesses, schools and universities are closed and streets are seeing much less traffic. Major corporations such as Boeing and U.S. airlines are teetering on bankruptcy. The U.S. Treasury and commercial paper markets are not functioning well despite massive infusions of funds from the Federal Reserve. U.S. Treasury Secretary Mnuchin on Tuesday warned the U.S. unemployment rate could reach 20%. Considering all of the above and knowing that markets have historically factored into their prices major events’ repercussions before they ever fully play out, veteran market watchers are wondering when the worst of this crisis will come to pass, from a markets perspective. At mid-week it appears the markets are saying, “not yet.”
There was some hope late Tuesday that the sharp rise in the 10-year U.S. Treasury note yield back above 1.0% was indicating the government bond market was reckoning the worst of the coronavirus market damage has passed and that the panic in the marketplace had receded. However, looking at the sharply lower U.S. Treasury bond and Treasury note futures prices overnight it appears the rising bond yields are more a case of serious dislocations in that market as opposed to an easing of trader and investor market fears. Wednesday morning the 10-year Treasury note was yielding 1.13%.
The U.S. dollar index is higher in early U.S. trading and has this week hit a three-year high. Nymex crude oil futures prices are solidly down and hit a 17-year low of $25.08 a barrel overnight.
Reports said one U.S. hedge fund manager, Malachite, Management LLC, has closed down, citing “extreme, adverse market conditions.” Reports said the firm specialized in trading volatility. Apparently in these trying times at least one firm should not get what one asks for.
The Commodity Futures Trading Commission has relaxed some of its rules for brokerages, to help them deal with the extreme markets moves that are occurring daily.
In another sign of the times, this afternoon’s conclusion of the Federal Reserve’s Open Market Committee meeting (FOMC) is nowhere near the front burner of the marketplace today, when normally it’s one of the market highlights of the month.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, new residential construction, the conclusion of the FOMC meeting and the weekly DOE liquid energy stocks report.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are sharply lower to limit down in early U.S. trading and not far above the recent for-the-move lows. Bears have the solid overall near-term technical advantage. 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 to bearish early today. Today, shorter-term technical resistance comes in at the overnight high of 2,486.000 and then at Tuesday’s high of 2,542.75. Buy stops likely reside just above those levels. Downside support for active traders today is seen at Tuesday’s contract low of 2,352.00 and then at 2,300.00. Wyckoff’s Intra-day Market Rating: 1.0
June Nasdaq index futures: Prices are sharply lower to limit down in early U.S. trading. Bears have the solid overall near-term technical advantage. Shorter-term moving averages (4- 9-and 18-day) are bearish early today. The 4-day moving average is below the 9-day. The 9-day average is below the 18-day. Short-term oscillators (RSI, slow stochastics) are bearish early today. Shorter-term technical resistance is seen at the overnight high of 7,380.00 and then at 7,500.00. On the downside, short-term support is seen at the contract low of 6,906.00 and then at 6,800.00. Wyckoff’s Intra-Day Market Rating: 1.0.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are sharply lower and hit a three-week low in early U.S. trading. Bulls have lost their overall near-term technical advantage amid extremely volatile and anxious trading. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is below the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are bearish early today. Shorter-term technical resistance is seen at 172 even and then at the overnight high of 173 13/32. Shorter-term support lies at 169 even and then at the overnight low of 167 16/32. Wyckoff’s Intra-Day Market Rating: 2.0
June U.S. T-Notes: Prices are sharply lower and hit a three-week low in early U.S. trading. Bulls have lost their overall near-term technical advantage as a price uptrend on the daily bar chart has been negated. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is below the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are bearish early today. Shorter-term resistance lies at 135.00.0 and then at 135.16.0. Shorter-term technical support lies at the overnight low of 134.02.5 and then at 133.24.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 2.0
U.S. DOLLAR INDEX
The June U.S. dollar index is higher and hit a three-year high in early U.S. trading. Bulls have the strong overall near-term technical advantage. The shorter-term moving averages for the dollar index are neutral early today, as the 4-day is above the 9-day and 18-day. The 9-day is below 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 overnight high of 100.200 and then at 100.500. Shorter-term support is seen at the overnight low of 99.385 and then at 99.000. Wyckoff’s Intra Day Market Rating: 7.5
NYMEX CRUDE OIL
April Nymex crude oil prices are solidly lower and hit a 17-year low in early U.S. trading. Bears are in solid overall near-term technical control. 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 $27.22 and then at $28.00. Look for sell stops just below technical support at $25.00 and then at $24.00. Wyckoff’s Intra-Day Market Rating: 3.0
GRAINS
US grain futures are mixed in early US pre-market trading. The best grain traders are hoping for right now is for their markets to stabilize. Ag futures markets have been hammered to contract lows in most markets. The grain markets will stop bleeding when the global stock and financial markets stabilize, and that’s not the case at mid-weekl. Grain market bears have the solid technical advantage at present, suggesting the path of least resistance for prices will remain sideways at best and most likely sideways to lower for the short 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