Tuesday, January 7–Jim Wyckoff’s Morning Markets Report
Asian and European stock markets were mostly firmer overnight. U.S. stock indexes are pointed toward narrowly mixed openings when the New York day session begins. It appears risk aversion in the global marketplace has at least temporarily subsided following last week’s geopolitical shockwave that occurred when a U.S. drone strike killed a leading Iranian general in Baghdad, Iraq. U.S. stock indexes rebounded Monday to close firmer. Gold and oil prices have backed down from their spike highs scored on Monday.
It could be that many traders and investors figure Iran will not execute a major retaliation against the U.S. and its vaunted military, knowing such a move would invite a likely massive and devastating counter-attack from the U.S.—as was threatened by President Trump in a weekend tweet. Other veteran market watchers reckon Iran will retaliate against the U.S. but not right away. However, virtually all market participants agree the U.S. drone strike further stokes and already volatile Middle East.
In overnight news, the Euro zone December consumer price index was reported up 1.3%, year-on-year, versus November’s reading of up 1.0%. The December reading was in line with market expectations.
The key “outside markets” today see crude oil prices weaker and trading around $63.00 a barrel. Meantime, the U.S. dollar index is firmer.
U.S. economic data due for release Tuesday includes the weekly Goldman Sacs and Johnson Redbook retail sales reports, U.S. international trade data, the ISM non-manufacturing report on business, and manufacturers’ shipments and inventories.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are near steady in early U.S. trading. A “key reversal” down on the daily bar chart that occurred last Friday has been negated with this week’s upside price action. The shorter-term moving averages (4-, 9- and 18-day) are bullish early today. The 4-day moving average is above with the 9-day. The 9-day is above the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Today, shorter-term technical resistance comes in at the overnight high of 3,254.50 and then at the contract high of 3,263.50. Buy stops likely reside just above those levels. Downside support for active traders today is seen at 3,225.00 and then at last week’s low of 3,206.75. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.0
March Nasdaq index futures: Prices are firmer in early U.S. trading. A bearish “key reversal” down on the daily bar chart has been negated with this week’s upside price action. 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 early today. Shorter-term technical resistance is seen at the overnight high of 8,894.75 and then at the contract high of 8,907.25. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 8,800.00 and then at 8,750.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are slightly up in early U.S. trading. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is even with the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term technical resistance is seen at this week’s high of 158 25/32 and then at 159 even. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 157 18/32 and then at 157 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5
March U.S. T-Notes: Prices are firmer 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 and 18-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 Monday’s high of 129.21.0 and then at 129.28.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 129.05.0 and then at 129.00.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5
U.S. DOLLAR INDEX
The March U.S. dollar index is firmer in early U.S. trading. Bears have the overall near-term technical advantage amid a price downtrend in place on the daily chart. The shorter-term moving averages for the dollar index 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 dollar index are neutral early today. The dollar index finds shorter-term technical resistance at Monday’s high of 96.585 and then at last week’s high of 96.795. Shorter-term support is seen at Monday’s low of 96.230 and then at last week’s low of 96.020. Wyckoff’s Intra Day Market Rating: 5.5
NYMEX CRUDE OIL
February Nymex crude oil prices are weaker on a corrective pullback after hitting a 22-month high of $64.72 Monday. Bulls still have the solid near-term technical advantage amid a three-month-old uptrend on the daily bar 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 bearish early today. Look for buy stops to reside just above technical resistance at the overnight high of $63.15 and then at $64.00. Look for sell stops just below technical support at the overnight low of $62.30 and then at $62.00. Wyckoff’s Intra-Day Market Rating: 4.5
GRAINS
US grain futures were weaker again overnight as the bulls are fading. Corn was off around 1/2 cent, soybeans down 1/2 to 2 cents and wheat also around 3 cents lower. The grain market bulls need a dose of fresh, bullish fundamental news, which has been lacking the past couple weeks. Monday’s CFTC Commitments of Traders report showed the big speculative fund traders net short 82,456 corn futures contracts, short 3,159 soybean futures contracts, and long 27,270 wheat futures contracts. These figures suggest the so-called “smart money” in the grain futures are more bearish corn, somewhat bearish soybeans and bullish wheat. However, the CFTC data also suggests some friendly news for the corn and soybean markets in the near term could prompt heavy short-covering buying from the big funds. That positive news could come with Friday’s monthly USDA supply and demand report, which is now the major focus for the grain markets. The agency will update estimates of the size of the US corn and soybean crops. The key “outside markets” remain friendly for the grain futures markets, as the U.S. dollar index is trending lower and crude oil prices are trending higher. Other raw commodity markets like gold, silver, sugar and cotton are also making bull moves, which should further support some speculative buying interest in the grains 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