Monday, June 3–Jim Wyckoff’s Morning Markets Report
European and Asian stock markets were mostly down overnight. U.S. stock indexes are also pointed toward lower openings when the New York day session begins and hit three-month lows overnight.
Risk aversion is keener to start the trading week and the month. The ongoing U.S. trade war with China and new worries about a U.S. trade dispute with Mexico have traders and investors jittery. In fact, some analysts are now saying the Federal Reserve will have to lower U.S. interest rates this year to offset a slowing pace of economic growth caused by the trade disputes.
Gold prices hit a nine-week high overnight on safe-haven demand. Meantime, bond yields in the U.S., Germany and other countries are on the decline as investors seek out safe-haven assets and shed riskier assets like equities.
The European banking sector has been hit especially hard by falling government bond yields that equate to lower interest rates, which in turn hurt banks’ profits. The eight largest banks in the European Union now have a smaller combined market value than JP Morgan, despite the European banks having three times as many assets.
The Euro zone got more downbeat economic news today when the May manufacturing purchasing managers index (PMI) came in at 47.7 versus the forecast for 47.9. Any reading below 50.0 suggests contraction in the sector.
The key “outside markets” today see the U.S. dollar index trading modestly down. Meantime, Nymex crude oil prices are higher and trading around $54.00 a barrel after dropping to a nearly five-month low in overnight trading.
U.S. economic data due for release Monday includes the U.S. manufacturing purchasing managers’ index (PMI), the ISM manufacturing report on business, construction spending, the global manufacturing PMI, and domestic auto industry sales.
–Jim
U.S. STOCK INDEXES
September S&P 500 e-mini futures: Prices are lower and hit a three-month low in early U.S. trading. Prices are in a five-week-old downtrend on the daily bar chart to suggest more pressure coming. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are bearish early today. Today, shorter-term technical resistance comes in at 2,775.00 and then at Friday’s high of 2,794.75. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 2,734.50 and then at 2,720.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.0
September Nasdaq index futures: Prices are lower and hit a three-month low in early U.S. trading. Prices are in a five-week-old downtrend to suggest more pressure. Shorter-term moving averages (4- 9-and 18-day) are bearish early today. The 4-day moving average is below the 9-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 7,137.75 and then at 7,175.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 7,093.00 and then at 7,050.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0.
U.S. TREASURY BONDS AND NOTES FUTURES
September U.S. T-Bonds: Prices are higher and hit a contract high in early U.S. trading. Bulls have the solid overall near-term technical advantage, to suggest more upside. 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 neutral to bullish early today. Shorter-term technical resistance is seen at the overnight contract high of 155 1/32 and then at 155 16/32. Buy stops likely reside just above those levels. Shorter-term support lies at 154 even and then at the overnight low of 153 23/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.5
September U.S. T-Notes: Prices are solidly higher and hit a contract in early U.S. trading. 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 neutral to bullish early today. Shorter-term support lies at 127.00.0 and then at the overnight low of 126.23.0. Sell stops likely reside just below those levels. Shorter-term technical resistance lies at the overnight contract high of 127.10.5 and then at 127.16.0. Buy stops likely reside just above those levels. Wyckoff’s Intra-Day Market Rating: 6.5
U.S. DOLLAR INDEX
The September U.S. dollar index is weaker in early U.S. trading. 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 bearish early today. The dollar index finds shorter-term technical resistance at the overnight high of 97.175 and then at 97.500. Shorter-term support is seen at the overnight low of 97.970 and then at 96.880. Wyckoff’s Intra Day Market Rating: 4.5
NYMEX CRUDE OIL
July Nymex crude oil prices are firmer after hitting a nearly five-month low overnight. Bears are in near-term technical control. A price downtrend is in place on the daily chart. 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 early today. Look for buy stops to reside just above technical resistance at $55.00 and then at $56.00. Look for sell stops just below technical support at $53.00 and then at the overnight low of $52.11. Wyckoff’s Intra-Day Market Rating: 5.5
GRAINS
U.S. grain futures prices were narrowly mixed overnight as the strong price rallies take a pause to start the trading week. The new U.S.-Mexico trade tensions are also giving the grain market bulls some pause. Traders are also awaiting today’s weekly USDA export inspections report.
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