Thursday, January 27–Jim Wyckoff’s Morning Markets Report
Global stock markets were mostly lower overnight. U.S. stock indexes are pointed toward near steady openings when the New York day session begins. The marketplace is still jittery Thursday morning following the conclusion of the Federal Reserve’s Open Market Committee (FOMC) meeting Wednesday afternoon. The FOMC statement did not move markets much, but Fed Chairman Powell’s press conference saw Powell seemingly lean more hawkish than most expected. Powell gave no specific timeframe on upcoming rate increases and said the Fed will be “nimble.” The marketplace wanted more clarity on timing of the rate hikes and did not get it. In fact, Powell’s presser may have made the Fed’s monetary policy even less clear. And markets don’t like uncertainty. Still, many are thinking the Fed will make five interest rate increases within the next year. Fed watchers also think the central bank might start to shrink its balance sheet faster than what had been expected (quantitative tightening). “The Fed seems to be in a hurry now,” said one analyst.
Powell’s comment yesterday that the U.S. labor markets conditions are consistent with maximum employment means that the central bank is firmly focused rising inflation. This morning’s core personal consumption expenditures (PCE) number for the fourth quarter (as part of the GDP report) will give the latest check on inflation. Economists estimate the number will rise to 4,9% while GDP for the period will rise to an annualized 5.5% for the period.
Still on the front-burner of the marketplace is the Russia showdown with Western nations as Russia
appears poised to invade Ukraine. NATO allies are sending arms to Ukraine and putting NATO troops on higher alert, including 8,500 U.S. troops. Russian demands on Ukraine not being able to join NATO have been rejected by the U.S. This situation appears to be deteriorating and will likely get worse before it gets better.
The key outside markets today see crude oil prices firmer and trading around $87.50 a barrel after hitting a seven-year high on Wednesday. The U.S. dollar index is higher and hit a 1.5-year high today. The U.S. Treasury 10-year note yield is presently fetching 1.835%–up from earlier this week.
U.S. economic data due for release Thursday includes the weekly jobless claims report, the advance fourth-quarter GDP report, durable goods orders, pending home sales and the Kansas City Fed manufacturing survey.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are slightly higher in early U.S. trading. Prices Monday hit a seven-month low. Prices are trending lower on the daily chart, to suggest a 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 support comes in at 4,300.00 and then at the overnight low of 4,263.25. Sell stops likely reside just below those levels. Resistance for active traders is seen at the overnight high of 4,368.00 and then at 4,400.00. Buy stops likely reside just above those levels. Wyckoff’s Intra-day Market Rating: 5.5
March Nasdaq index futures: Prices are slightly higher in early U.S. trading. Prices Monday hit a seven-month low. Prices are trending lower on the daily chart to suggest a market top is in place. 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 average is below the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term technical resistance is seen at the overnight high of 14,282.25 and then at 14,500.00. On the downside, shorter-term support is seen at 14,000.00 and then at this week’s low of 13,706.00. Wyckoff’s Intra-Day Market Rating: 5.5.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are higher in early U.S. trading. Bears have the solid overall near-term technical advantage. Prices have been trending lower for seven weeks. 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 bullish early today. Shorter-term technical resistance is seen at Wednesday’s high of 155 18/32 and then at 156 even. Shorter-term support lies at this week’s low of 153 29/32 and then at the contract low of 153 7/32. Wyckoff’s Intra-Day Market Rating: 6.0
March U.S. T-Notes: Prices are slightly higher in early U.S. trading. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is even with 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 127.24.0 and then at 127.28.0. Shorter-term technical support lies at this week’s low of 127.06.5 and then at the contract low of 127.02.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5
EURO CURRENCY
The March Euro currency futures are lower and hit a 22-month low in early U.S. trading. Bears have the solid overall near-term technical advantage and have gained power this week. 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 bearish early today. The Euro currency finds shorter-term technical resistance at 1.1200 and then at the overnight high of 1.1253. Shorter-term support is seen at the overnight low of 1.1162 and then at 1.1100. Wyckoff’s Intra Day Market Rating: 3.5
NYMEX CRUDE OIL
March Nymex crude oil prices are higher and hit a seven-year high in early U.S. trading. Bulls have the solid overall near-term technical advantage amid a seven-week-old 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. The 9-day is above the 18-day moving average. Short-term oscillators (RSI and slow stochastics) are bullish early today. Look for buy stops to reside just above technical resistance at $89.00 and then at $90.00. Look for sell stops just below technical support at the overnight low of $86.34 and then at $85.00. Wyckoff’s Intra-Day Market Rating: 7.0
GRAINS
U.S. grain futures are mixed to higher in early U.S. pre-market trading. The corn and soybean markets are being supported by very dry weather in South American growing regions. Corn and bean bulls have the solid overall near-term technical advantage. Wheat prices have rebounded strongly recently and the bulls also have the firm near-term technical advantage. The “inflation trade” is also working in favor of the grain market bulls. On tap today is the weekly USDA export sales 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.
Jim Wyckoff