Thursday, February 24–Jim Wyckoff’s Morning Markets Report
Russia has initiated a full-blown invasion of Ukraine Thursday, including bombing and missile strikes on key infrastructure and defense installations all over Ukraine. Russian President Putin claimed the attack is an effort to demilitarize Ukraine. Global stock markets sunk sharply on the news, including the U.S. stock indexes. Many major commodity markets saw their prices soar. Russia is a major raw commodity exporter, and Russia and Ukraine are major grain exporters. Nymex and Brent crude oil futures pushed above $100.00 a barrel, with Nymex oil hitting $100.54 a barrel as of this writing. Gold rallied to a 1.5-year high and is around $60 an ounce higher on the day, on safe-haven demand. Grain futures rocketed sharply higher and set multi-year highs in some markets. The U.S. dollar index appreciated sharply and U.S. Treasury yields dropped dramatically. Bitcoin, seen by some as a safe-haven asset, once again sold off sharply when the going in the marketplace gets really tough.
A news headline from Barrons today read, “Russia has actually invaded Ukraine; markets are not ready for that fallout.” The extreme price moves seen in many markets today bear out that notion.
So far, the West and NATO nations have not participated in defending Ukraine with their militaries. However, in the fog of war major mistakes can be made by armies and their leaders. Much of the world is hoping the West and NATO do not get sucked into this conflagration.
All of the above developments make the other worry in the marketplace even greater: rising inflation. The keen marketplace uncertainty and anxiety may well impact the timing of the Federal Reserve’s plans to raise U.S. interest rates. Falling U.S. Treasury yields and potential slowing global economic growth due to the Russia-Ukraine war, and sharply rising energy prices, risk the Fed and other central banks pushing their economies into recession if they raise interest rates too aggressively. A Dow Jones Newswires news headline Thursday morning read, “Russian invasion scrambles prospects for global economy.”
The key outside markets today see Nymex crude oil prices posting big gains and trading around $99.50 a barrel. The U.S. dollar index is sharply higher and hit a three-week high today. The benchmark U.S. 10-year Treasury note is presently yielding 1.875%, well down from over 2.0% seen earlier this month.
U.S. economic data due for release Thursday includes the weekly jobless claims report, the Chicago Fed national activity index, the second estimate of fourth-quarter gross domestic product, new residential sales, the Kansas City Fed manufacturing survey, and the weekly DOE liquid energy stocks report.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are sharply down and hit a 10-month low in early U.S. trading. Prices are trending lower on the daily bar chart and the bears are in firm technical control. 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 bearish early today. Today, shorter-term technical resistance comes in at 4,200.00 and then at the overnight high of 4,224.50. Support for active traders is seen at the overnight low of 4,101.75 and then at 4,075.00. Wyckoff’s Intra-day Market Rating: 3.0
March Nasdaq index futures: Prices are sharply down and hit a 10-month low in early U.S. trading. Bears are in firm control amid a price downtrend in place. Shorter-term moving averages (4- 9-and 18-day) are bearish early today. The 4-day moving below the 9-day and 18-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 13,517.75 and then at 13,750.00. On the downside, shorter-term support is seen at the overnight low of 13,025.75 and then at 13,000.00. Wyckoff’s Intra-Day Market Rating: 3.0.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are sharply up in early U.S. trading, on flight-to-quality buying. Bears still have the overall near-term technical advantage but the bulls have some momentum. 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 the overnight high of 154 26/32 and then at 155 even. Shorter-term support lies at 153 even and then at the overnight low of 152 9/32. Wyckoff’s Intra-Day Market Rating: 7.0
March U.S. T-Notes: Prices are solidly higher in early U.S. trading, on flight-to-quality buying. 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 resistance lies at the overnight high of 127.12.5 and then at 127.16.0. Shorter-term technical support lies at 127.00.0 and then at 126.24.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.5
EURO CURRENCY
The June Euro currency futures are sharply down in early U.S. trading. Bears have the solid overall near-term technical advantage and gained fresh power today. 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 1.1300 and then at the overnight high of 1.1345. Shorter-term support is seen at the overnight low of 1.1196 and then at the January low of 1.1168. Wyckoff’s Intra Day Market Rating: 3.0
NYMEX CRUDE OIL
Nymex crude oil prices are strongly up and hit a 7.5-year high in early U.S. trading. Bulls have the solid overall near-term technical advantage and gained more power today. 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 today. Look for buy stops to reside just above technical resistance at the overnight high of $100.54 and then at $102.00. Look for sell stops just below technical support at $96.00 and then at $95.00. Wyckoff’s Intra-Day Market Rating: 8.0
GRAINS
U.S. grain futures are posting very strong gains in early U.S. pre-market trading, on the Russia-Ukraine news. Soybeans and wheat futures hit multi-year highs. Keen uncertainty regarding the effects on global grain trade from the Russia-Ukraine conflict is boosting grains. Russia and Ukraine are major global grain producers. Grain market bulls have the strong overall near-term technical advantage. However, corn, soybeans and wheat prices are all in historically “thin air.” Look for high daily price volatility in the near 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