Friday, July 24–Jim Wyckoff’s Morning Markets Report
Global stock markets were mostly weaker in overnight trading. The U.S. stock indexes are pointed toward slightly lower openings when the New York day session begins. Risk aversion is keener to end the trading week. As expected China has retaliated against the U.S. for closing China’s consulate in Houston, Texas this week by kicking the Americans out of their consulate in Chengdu, China. The world’s two largest economies continue on a downward spiral in their already-tense relationship. U.S. Secretary of State Mike Pompeo on Thursday also delivered a harsh speech on China, coming close to suggesting a regime change.
At mid-week there were slightly upbeat ideas of another U.S. government financial aid package to Americans coming soon. However, reports said the Republican members of the Senate have scrapped their initial plan over disagreements with the Trump administration. Now, hopes for a new aid plan for consumers before the August congressional recess appear dim. This is also a negative for equities markets.
In overnight news, Russia’s central bank lowered its main interest rate by 0.25%, to 4.25%. The central bank said it may have to lower rates again, adding that it expects Russian GDP to be at -4.5 to -5.5% in 2020.
The Euro zone got some more better-than-expected economic news Friday, as its flash composite purchasing managers index came in at 54.8 in July versus expectations of 51.0. A reading above 50.0 suggests growth in the sector.
The important outside markets today see Nymex crude oil prices firmer and trading around $41.50 a barrel. The U.S. dollar index is slightly up in early trading after hitting a 1.5-year low overnight. The yield on the benchmark U.S. Treasury 10-year note is currently around the 0.58% level.
U.S. economic data due for release Friday includes the flash manufacturing purchasing managers index (PMI), the services PMI, and new residential sales.
–Jim
U.S. STOCK INDEXES
September S&P 500 e-mini futures: Prices are weaker in early U.S. trading on some profit taking from recent gains that saw prices hit a five-month high Thursday. Bulls still have the solid overall near-term technical advantage amid a four-month-old price uptrend in place. 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 the overnight high of 3,239.00 and then at this week’s high of 3,384.50. Buy stops likely reside just above those levels. Downside support for active traders today is seen at this week’s low of 3,190.25 and then at 3,150.00. Wyckoff’s Intra-day Market Rating: 4.5
September Nasdaq index futures: Prices are lower in early U.S. trading on some profit taking. Bulls remain in firm overall technical control, but a bearish weekly low close on Friday would suggest a near-term market top is in place. 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 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 10,597.00 and then at 10,750.00. On the downside, shorter-term support is seen at the overnight low of 10,377.25 and then at 10,250. Wyckoff’s Intra-Day Market Rating: 4.0.
U.S. TREASURY BONDS AND NOTES FUTURES
September U.S. T-Bonds: Prices are slightly higher in early U.S. trading and hit a 4.5-month high overnight. Bulls have the solid chart 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 early today. Shorter-term technical resistance is seen at the overnight high of 181 30/32 and then at 182 16/32. Shorter-term support lies at the overnight low of 180 31/32 and then at 180 16/32. Wyckoff’s Intra-Day Market Rating: 6.0
September U.S. T-Notes: Prices are slightly weaker in early U.S. trading after hitting a 4.5-month high overnight. Bulls have the solid 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 bearish early today. Shorter-term resistance lies at the overnight high of 139.25.0 and then at 140.00.0. Shorter-term technical support lies at 139.16.0 and then at this week’s low of 139.10.5. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5
EURO CURRENCY
The September Euro currency futures are weaker in early U.S. trading on a corrective pullback from recent solid gains. Bulls still have the solid overall near-term technical advantage. The shorter-term moving averages for the Euro 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 Euro are neutral to bearish early today. The Euro currency finds shorter-term technical resistance at this week’s high of 1.1640 and then at 1.1675. Shorter-term support is seen at Thursday’s low of 1.1553 and then at 1.1500. Wyckoff’s Intra Day Market Rating: 4.5
NYMEX CRUDE OIL
September Nymex crude oil prices are firmer in early U.S. trading. A gentle price uptrend on the daily chart is in place, but just barely. 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 neutral early today. Look for buy stops to reside just above technical resistance at this week’s high of $42.51 and then at $43.00. Look for sell stops just below technical support at $41.00 and then at $40.00. Wyckoff’s Intra-Day Market Rating: 5.5
GRAINS
US grain futures are firmer in early U.S. pre-market trading. The weather in the U.S. Corn Belt remains non-threatening. U.S.-China relations are deteriorating. Those elements are bearish. Soybean futures are maintaining a near-term price uptrend but bulls need to show more power soon to keep it alive. Same goes for wheat. My bias is that if corn continues to languish, the upside will be limited for soybeans and wheat. Here’s a wild card: It could be that some countries could start stockpiling historically cheap grains in the coming weeks. That could put, or maybe has put, market bottoms in place for the grains, and could even see price uptrends developing.
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