Friday, February 21–Jim Wyckoff’s Morning Markets Report
Asian and European shares were mostly down overnight. U.S. stock indexes are pointed toward weaker openings when the New York day session begins. Risk-off trading attitudes are keen as the trading week winds down, as the coronavirus continues to spread in Asia, and its impact on the global economy is perceived to be getting much more serious.
Reports overnight said China’s auto sales fell over 90% in February as coronavirus restrictions prevented buyers from visiting car dealerships. Over 21 million autos were sold in China in 2019, making China the world’s largest auto market. The Hubei province is still in lock-down and officials there have pushed back the date for businesses to reopen to 10 March. That date could be further delayed if covid-19 is not contained by then.
China recorded over 800 new cases Thursday (up from around 400 Wednesday), with the total number of afflicted now at over 75,000 and over 2,200 dead. South Korea has reported over 200 confirmed covid-19 cases. The capital has banned all rallies in major downtown areas.
From a marketplace perspective the covid-10, or coronavirus, situation is still very fluid regarding the economic impact on major world economies. Traders and investors are vacillating daily on whether the outbreak’s rate of spread is accelerating or declining. This uncertainty will continue to support buying interest in safe-haven assets like gold, U.S. Treasuries and the U.S. dollar, and the movement of money out of riskier assets like stocks. Gold prices hit another seven-year high of around $1,640 overnight.
Manufacturing indexes from the major world economies are starting to show the negative effects of the covid-19 outbreak. U.S. companies are also mentioning the illness as impacting their bottom lines when earnings reports are released.
The key outside markets today see crude oil prices lower and trading around $52.75 a barrel. Meantime, the U.S. dollar index is weaker on a corrective pullback after hitting a multi-month high Thursday.
U.S. economic data due for release Friday includes the US flash manufacturing PMI, the services PMI, and existing home sales.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are down in early U.S. trading on profit taking after hitting a contract and record high Thursday. The bulls still have the solid technical advantage. There are no early chart clues to suggest a market top is close at hand. The shorter-term moving averages (4-, 9- and 18-day) are neutral early today. The 4-day moving average is even with 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 the overnight high of 3,369.25 and then at the contract high of 3,397.50. Buy stops likely reside just above those levels. Downside support for active traders today is seen at this week’s low of 3,339.25 and then at 3,325.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.0
March Nasdaq index futures: Prices are lower in early U.S. trading on profit taking after hitting another contract and record high Thursday. Bulls still have the solid 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 the overnight high of 9,623.75 and then at the contract high of 9,763.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at this week’s low of 9,517.00 and then at 9,500.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are solidly higher and hit a contract high in early U.S. trading, on safe-haven demand. Bulls have the solid overall near-term technical advantage. 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 bullish early today. Shorter-term technical resistance is seen at the overnight contract high of 165 2/32 and then at 165 16/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 164 even and then at 163 16/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 7.0
March U.S. T-Notes: Prices are higher in early U.S. trading and near the recent contract high. Bulls have the firm overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term resistance lies at the overnight high of 131.27.5 and then at 132.00.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 131.14.0 and then at 131.08.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.5
U.S. DOLLAR INDEX
The March U.S. dollar index is weaker in early U.S. trading on a corrective pullback after hitting a contract and multi-month high Thursday. Bulls still have the solid overall near-term technical advantage. The shorter-term moving averages for the dollar index 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 dollar index are neutral to bearish today. The dollar index finds shorter-term technical resistance at the contract high of 99.815 and then at 100.000. Shorter-term support is seen at Thursday’s low of 99.445 and then at 99.275. Wyckoff’s Intra Day Market Rating: 4.5
NYMEX CRUDE OIL
April Nymex crude oil prices are lower in early U.S. trading, on a corrective pullback from this week’s gains. 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 neutral to bearish early today. Look for buy stops to reside just above technical resistance at the overnight high of $53.86 and then at this week’s high of $54.66. Look for sell stops just below technical support at $52.50 and then at $52.00. Wyckoff’s Intra-Day Market Rating: 4.0
GRAINS
US grain futures are steady to slightly weaker in early US pre-market trading Friday.
Risk-off trading attitudes around the globe are keen as the trading week winds down, as the coronavirus continues to spread in Asia, and its impact on the global economy is perceived to be getting much more serious. That’s bearish for the grain markets. Reports overnight said China’s auto sales fell over 90% in February as coronavirus restrictions prevented buyers from visiting car dealerships. The Hubei province is still in lock-down and officials there have pushed back the date for businesses to reopen to 10 March. That date could be further delayed if covid-19 is not contained by then. China recorded over 800 new cases Thursday (up from around 400 Wednesday), with the total number of afflicted now at over 75,000 and over 2,200 dead. South Korea has reported over 200 confirmed covid-19 cases. The capital has banned all rallies in major downtown areas. From a grain markets perspective the covid-10, or coronavirus, situation is still very fluid regarding the economic impact on major world economies, including demand for grains. Traders and investors are vacillating daily on whether the outbreak’s rate of spread is accelerating or declining. This uncertainty will continue to limit buying interest in the grains. Traders are watching the new supply and demand numbers from annual USDA Ag Outlook conference that ends today. So far, there have been no surprising numbers to significantly move the grain futures markets. Friday also sees the USDA export sales report released—one day later this week because of the US holiday on Monday. Grain market bulls want to see more Chinese activity in the weekly US export sales data.
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
Great content! Super high-quality! Keep it up! 🙂