Wednesday, October 2–Jim Wyckoff’s Morning Markets Report
Asian and European stocks were mostly lower overnight. U.S. stock indexes are pointed toward lower openings when the New York day session begins. China markets are closed this week for a holiday.
Risk aversion is back in the world marketplace at mid-week, as dour manufacturing reports from the U.S. and Europe on Tuesday have spooked traders and investors. Manufacturing activity in the U.S. slowed to a 10-year low in September, according to the Institute of Supply Management.
The U.S.-China trade war is mostly to blame for the slowdown in global economic and trade growth, many agree. The rhetoric between both sides has been and continues to be upbeat one day and downbeat the next—leaving traders and investors perplexed.
Violence in Hong Kong has escalated this week, with the national holiday in China. A protester was shot by police and is in critical condition, reports said. This is also adding some anxiety to the marketplace.
Traders are still monitoring world government bond markets following a surprisingly very poor pubic acceptance of the latest bond offering from the Japanese government. However, at mid-week U.S. Treasury bonds have recovered amid ideas of an easier monetary policy coming from the Federal Reserve, following the weak manufacturing data reported on Tuesday.
On tap today in the U.S. today is the ADP national employment report, which is a precursor to Friday’s more important employment situation report for September from the U.S. Labor Department. Today’s ADP jobs growth number is expected up 125,000. Friday’s key non-farm payrolls number is forecast to be up 145,000 in September.
The U.S. dollar index is higher in early U.S. trading. The USDX hit a contract and two-year high on Tuesday. Look for the greenback to continue to appreciate for at least the near term. Meantime, Nymex crude oil prices are slightly higher and trading around $53.80 a barrel.
Other U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ISM New York report on business, and the weekly DOE liquid energy stocks report. Federal Reserve officials are also slated to give speeches today.
–Jim
U.S. STOCK INDEXES
December S&P 500 e-mini futures: Prices are lower and hit a four-week low in early U.S. trading. Bulls are fading. There is very strong overhead resistance at the recent highs, scored in July and September. 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 the overnight high of 2,949.00 and then at 2,970.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at 2,900.00 and then at 2,880.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.0
December Nasdaq index futures: Prices are lower and hit a four-week low in early U.S. trading. Bulls are fading to start the month of October. 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 bearish early today. Shorter-term technical resistance is seen at the overnight high of 7,730.50 and then at 7,800.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 7,600.00 and then at 7,550.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0.
U.S. TREASURY BONDS AND NOTES FUTURES
December U.S. T-Bonds: Prices are modestly up in early U.S. trading, on follow-through buying from Tuesday’s bullish upside reversal. Safe-haven demand is featured. 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 this week’s high of 163 11/32 and then at 164 even, Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 162 4/32 and then at 161 16/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
December U.S. T-Notes: Prices are firmer in early U.S. trading, on safe-haven demand and following Tuesday’s bullish reversal. 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 support lies at the overnight low of 130.14.0 and then at 130.08.0. Sell stops likely reside just below those levels. Shorter-term technical resistance lies at this week’s high of 130.29.5 and then at 131.00.0. Buy stops likely reside just above those levels. Wyckoff’s Intra-Day Market Rating: 6.0
U.S. DOLLAR INDEX
The December U.S. dollar index is firmer in early U.S. trading. Prices Tuesday hit a contract and two-year high. Bulls have the solid overall near-term technical advantage. More upside is likely in the near term. 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 bullish early today. The dollar index finds shorter-term technical resistance at the contract high of 99.305 and then at 99.500. Shorter-term support is seen at this week’s low of 98.705 and then at 98.450. Wyckoff’s Intra Day Market Rating: 6.5
NYMEX CRUDE OIL
November Nymex crude oil prices are slightly higher in early U.S. trading, on short covering. Bulls have faded recently. The shorter-term moving averages 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 (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 $54.42 and then at $55.00. Look for sell stops just below technical support at this week’s low of $53.95 and then at $52.50. Wyckoff’s Intra-Day Market Rating: 5.0
GRAINS
US grain futures prices were weaker in overnight trading, on some more consolidation following good gains scored earlier this week in the wake of a bullish USDA report on Monday. Corn was down around 3 cents, soybeans down 4 to 5 cents and wheat around 4 to 6 cents lower. There are growing perceptions among grain traders that the markets have put in seasonal bottoms and will now trend at least sideways, if not sideways to higher, into the end of the year. Weather in the US Midwest is now leaning more toward the bullish camp, as heavy rains have hit parts of the Corn Belt, delaying harvesting of the corn and soybean crops and causing some concerns about quality. In wheat, a major snowstorm in the northern US plains and Canadian prairies has damaged the spring wheat crops in those regions.
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