New Covid strain rattles markets

Monday, December 21–Jim Wyckoff’s Morning Markets Report

Global stock markets were down overnight. U.S. stock indexes are pointed toward sharply lower openings when the New York day session begins. The market place has shuddered to start the holiday-shortened trading week, on news of a new and more easily transmissible strain of Covid-19 that has been detected and is spreading rapidly in the U.K. European countries have quickly banned travel to and from Britain. The news comes just as the world was beginning to breathe a bit of a sigh of relief because of the rapid deployment of vaccines for Covid-19. This new strain of Covid has overshadowed the weekend agreement between U.S. congressional Democrats and Republicans on a new $900 billion financial aid package for Americans.

Further disrupting the marketplace to start the trading week is the failure of the U.K. and the European Union to reach a smooth Brexit agreement and missing a weekend deadline for such to happen.

The U.S. dollar index is sharply higher Monday on safe-haven demand and a rebound after hitting a 2.5-year low last week. The other important outside market sees February Nymex crude oil futures prices sharply lower and trading around $47.00 a barrel. The yield on the benchmark 10-year U.S. Treasury note futures is currently trading around 0.91%.

U.S. economic data due for release Monday is light and includes the Chicago Fed national activity index.

–Jim

U.S. STOCK INDEXES

March S&P 500 e-mini futures: Prices are sharply down in early U.S. trading after hitting another record high overnight. Prices also are scoring a big and bearish “key reversal” down on the daily chart, which is a clue that a market top is now in place. The shorter-term moving averages (4-, 9- and 18-day) are still 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 bearish early today. Today, shorter-term technical resistance comes in at 3,650.00 and then at 3,675.00. Buy stops likely reside just above those levels. Downside support for active traders is seen at the overnight low of 3,596.00 and then at 3,575.00. Wyckoff’s Intra-day Market Rating: 3.5

March Nasdaq index futures: Prices are solidly lower in early U.S. trading. Bulls still have the overall near-term technical advantage. 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 bearish early today. Shorter-term technical resistance is seen at 12,600.00 and then at 12,700.00. On the downside, shorter-term support is seen at the overnight low of 12,463.00 and then at 12,400.00. Wyckoff’s Intra-Day Market Rating: 4.0.

U.S. TREASURY BONDS AND NOTES FUTURES

March U.S. T-Bonds: Prices are solidly higher in early U.S. trading, on safe-haven demand. Bears still have the overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are bearish early today. The 4-day moving average is below the 9-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term technical resistance is seen at the overnight high of 173 24/32 and then at 174 even. Shorter-term support lies at 173 even and then at the overnight low of 172 8/32. Wyckoff’s Intra-Day Market Rating: 6.5

March U.S. T-Notes: Prices are higher and hit a four-week high 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 to bullish early today. Shorter-term resistance lies at the overnight high of 138.08.0 and then at 138.12.0. Shorter-term technical support lies at the overnight low of 137.24.0 and then at last week’s low of 137.19.5. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.5

EURO CURRENCY

The March Euro currency futures are lower early today seeing profit taking from recent gains. Prices last week hit a nearly two-year high. Bulls are in solid technical control. The shorter-term moving averages for the Euro are bullish early today, as the 4-day is above the 9-day. The 9-day is above the 18-day moving average. Short-term oscillators for the Euro are bearish early today. The Euro currency finds shorter-term technical resistance at the overnight high of 1.2266 and then at last week’s high of 1.2303. Shorter-term support is seen at the overnight low of 1.2158 and then at 1.2100. Wyckoff’s Intra Day Market Rating: 4.0

NYMEX CRUDE OIL

February Nymex crude oil prices are sharply lower in early U.S. trading. Bulls still have the firm overall near-term technical advantage amid a price uptrend in place on the daily chart. The shorter-term moving averages 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 (RSI and slow stochastics) are bearish early today. Look for buy stops to reside just above technical resistance at $47.00 and then at $48.00. Look for sell stops just below technical support at the overnight low of $46.25 and then at $46.00. Wyckoff’s Intra-Day Market Rating: 3.5

GRAINS

US grain futures are lower in early U.S. pre-market trading, on profit taking from recent gains and amid the risk-off trading atmosphere today. The grain markets bulls still have the firm overall near-term technical advantage and the supply and demand fundamentals in the grains continue to favor the bulls.

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