Stock market bulls eyeing rising bond yields

Friday, February 19–Jim Wyckoff’s Morning Markets Report

Global stock markets were mixed overnight. U.S. stock indexes are pointed toward firmer openings when the New York day session begins. Global equity markets are ending a mixed week on a quiet note. Overnight, the MSCI Asia Pacific Index was broadly unchanged, while Japan’s Topix index closed 0.7% lower. In Europe, the Stoxx 600 Index was up a bit.

Said broker SP Angel in an email dispatch this morning: “Copper and nickel prices continued to rally on Friday, powering to multi-year highs along with tin as the world looks to build its way out of a Covid-fueled recession. Investors are starting to appreciate that there is insufficient mine capacity to enable rapid transition to a more environmentally conscious global economy. As the U.S., China, EU, U.K. and beyond all look to roll out their own packages of environmental initiatives, the post-crisis demand for industrial metals is widely expected to outstrip near-term and medium-term supply.” As these industrial metals rise, it could be that safe-haven gold and silver markets could be pulled along for the ride.

The key “outside markets” today see the U.S. dollar index trading lower. Meantime, Nymex crude oil futures prices are solidly down and trading around $59.00 a barrel. The U.S. wants to talk with Iran on its nuclear ambitions, and that could put more Iranian oil on the world market in the coming months. The U.S. 10-year Treasury note yield is fetching 1.308%. Government bond yields are on the rise, offering a more competitive asset class that may be pulling money away from the stock markets.

U.S. economic data due for release Friday includes the U.S. flash service and manufacturing PMIs, and existing home sales. U.S. economic data is suggesting the world’s largest economy is picking up steam, highlighted by this week’s retail sales report for January showing an unexpected surge.

–Jim

U.S. STOCK INDEXES

March S&P 500 e-mini futures: Prices are a bit firmer in early U.S. trading. Bulls have the solid overall near-term technical advantage. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are neutral early today. Today, shorter-term technical resistance comes in at Thursday’s high of 3,936.00 and then at the record high of 3,959.25. Buy stops likely reside just above those levels. Downside support for active traders is seen at this week’s low of 3,880.50 and then at 3,850.00. Wyckoff’s Intra-day Market Rating: 5.5

March Nasdaq index futures: Prices are firmer in early U.S. trading. Bulls have the solid overall near-term technical advantage. 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 neutral early today. Shorter-term technical resistance is seen at 13,785.00 and then at the record high of 13,900.50. On the downside, shorter-term support is seen at the overnight low of 13,550.00 and then at this week’s low of 13,468.00. Wyckoff’s Intra-Day Market Rating: 5.5.

U.S. TREASURY BONDS AND NOTES FUTURES

March U.S. T-Bonds: Prices are weaker in early U.S. trading. Prices hit a contract low on Wednesday. Bears have the solid overall near-term technical advantage. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term technical resistance is seen at the overnight high of 164 22/32 and then at Thursday’s high of 165 8/32. Shorter-term support lies at 164 even and then at the contract low of 163 17/32. Wyckoff’s Intra-Day Market Rating: 4.0

March U.S. T-Notes: Prices are down in early U.S. trading. Prices hit a contract low Wednesday. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term resistance lies at the overnight high of 135.28.5 and then at Thursday’s high of 136.02.0. Shorter-term technical support lies at 135.20.0 and then at the contract low of 135.15.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0

EURO CURRENCY

The March Euro currency futures are solidly higher in early U.S. trading. Bulls have the  overall near-term technical advantage but trading has been choppy. The shorter-term moving averages for the Euro are neutral early today, as the 4-day is below the 9-day. The 9-day is above the 18-day moving average. Short-term oscillators for the Euro are bullish early today. The Euro currency finds shorter-term technical resistance at the overnight high of 1.2150 and then at the February high of 1.2176. Shorter-term support is seen at 1.2100 and then at the overnight low of 1.2087. Wyckoff’s Intra Day Market Rating: 6.5

NYMEX CRUDE OIL

March Nymex crude oil prices are lower in early U.S. trading on profit taking after hitting a 13-month high Thursday. Bulls have the solid overall near-term technical advantage amid a price uptrend firmly in place on the daily 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 $60.20 and then at $61.00. Look for sell stops just below technical support at the overnight low of $58.59 and then at $58.00. Wyckoff’s Intra-Day Market Rating: 4.0

GRAINS

U.S. grain futures are mixed to firmer in early U.S. pre-market trading. On tap today is the weekly USDA export sales report. The bulls have the firm overall near-term technical advantage as prices are not trading too far below their recent highs. Overall supply and demand fundamentals are bullish for the grains. Right now the path of least resistance for grain prices remains sideways to higher.

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