Rising Global Government Bond Yields Spook the Marketplace

Wednesday, January 10–Jim Wyckoff’s Morning Markets Report

OVERNIGHT DEVELOPMENTS

World stock markets were mostly lower in overnight dealings. U.S. stock indexes are pointed toward lower openings when the New York day session begins. U.S. stock indexes hit record highs on Tuesday and some profit-taking pressure is not unexpected.

The feature in the marketplace Wednesday is rising world government bond yields. This has helped to pressure global stock markets, while boosting safe-haven gold and silver prices.

There have been recent prognostications from noted financial market analysts that the long-term bull market runs in U.S. Treasuries are over. Longer-term technical damage has been inflicted on T-Bond and T-Note charts. This suggests rising interest rates and rising inflation. While the tighter monetary policies that generally come with rising inflation have been bearish for the commodity markets, per recent history, longer-term history actually shows that hard assets benefit from rising inflation. Times of problematic inflation see the investing public generally opt for hard assets over paper assets. The next shoe to drop in this scenario of rising inflation will be a major top being put in the U.S. stock market.

An auction of German government bonds Wednesday saw the highest yields fetched since last July, amid weak investor demand.

The key outside markets on Wednesday morning see the U.S. dollar index lower on a pullback from this week’s gains.
The greenback bears have the overall near-term technical advantage.

Meantime, Nymex crude oil prices are higher and hit another three-year high of $63.57 a barrel overnight. Traders are waiting to see if the U.S. implements new economic sanctions against Iran, which could limit their oil exports. The recent rally in oil prices has been a positive development for the raw commodity sector.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, import and export prices, the monthly wholesale trade report, and the weekly DOE liquid energy stocks report.

–Jim

U.S. STOCK INDEXES

March S&P 500 December e-mini futures: Prices are lower in early U.S. trading, on profit taking. Bulls still have the solid overall near-term technical advantage. However, the market had become short-term overbought and was due for a decent downside correction. The 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 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 overnight high of 2,752.00 and then at the contract and record high of 2,760.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at this week’s low of 2,736.50 and then at 2,723.75. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.0

March Nasdaq index December futures: Prices are lower on profit taking in early U.S. trading. The bulls still have the solid overall near-term technical advantage. However, the market had become short-term overbought and was due for a decent downside correction. 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 neutral to bearish early today. Shorter-term technical resistance is seen at the overnight high of 6,686.75 and then at the contract high of 6,707.25. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 6,643.25 and then at 6,625.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0.

U.S. TREASURY BONDS AND NOTES

March U.S. T-Bonds: Prices are lower and hit a contract low in early U.S. trading. Bears have the solid 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 bearish early today. Shorter-term technical resistance is seen at 150 even and then at 150 14/32. Buy stops likely reside just above those levels. Shorter-term support lies at 149 even and then at 148 16/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 3.0

March U.S. T-Notes: Prices are lower and hit a new contract low in early U.S. trading. Bears have the solid 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 bearish early today. Shorter-term resistance lies at 123.00.0 and then at the overnight high of 123.03.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight contract low of 122.22.5 and then at 122.16.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 3.0

U.S. DOLLAR INDEX

The March U.S. dollar index is solidly lower in early U.S. trading. Bears have the overall near-term technical advantage. The shorter-term moving averages for the dollar index are neutral as the 4-day is above the 9-day. The 9-day is below the 18-day moving average. Short-term oscillators for the dollar index are neutral to bearish early today. The dollar index finds shorter-term technical resistance at 92.00 and then at this week’s high of 92.360. Shorter-term support is seen at this week’s low of 91.610 and then at the January low of 91.470. Wyckoff’s Intra Day Market Rating: 4.0

NYMEX CRUDE OIL

February Nymex crude oil prices are higher in early U.S. trading and hit another three-year high. Bulls have the solid overall near-term technical advantage. Look for buy stops to reside just above technical resistance at $64.00 and then at 65.00. Look for sell stops just below technical support at $63.00 and then at $62.50. Wyckoff’s Intra-Day Market Rating: 6.0

GRAINS

Grain futures were mixed overnight. Grain market bears remain in firm overall near-term technical control. Traders are looking ahead to Friday’s USDA quarterly grain stocks and supply and demand report.