Tuesday, February 4–Jim Wyckoff’s Morning Markets Report
Asian stock markets rebounded overnight after Monday’s sell-off. European stock markets were also higher and U.S. stock indexes are pointed toward sharply higher openings when the New York day session begins. So far this week trader and investor risk appetites are keener and the marketplace appears to be moving beyond the coronavirus outbreak that continues to spread. Latest counts show over 20,000 Chinese citizens afflicted with over 425 dead, with air travel to China being significantly curtailed and global and domestic business there disrupted.
China’s central bank this week has injected large amounts of money into its financial system to help out domestic businesses that are being hurt by the coronavirus outbreak. This move has helped to assuage Asian investors.
In other overnight news, the Euro zone producer price index in December was reported unchanged from November and down 0.7%, year-on-year. Those numbers were in line with market expectations.
The markets took in stride the highly anticipated Iowa presidential caucuses that have yet to declare a Democratic winner, due to technological issues with the vote count.
The key outside markets today see crude oil prices firmer and trading around $50.75 a barrel. Meantime, the U.S. dollar index is slightly higher on some follow-through strength after good gains posted Monday.
U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the ISM New York report on business, the IBD/TIPP economic optimism index, and manufacturers’ shipments and inventories.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are solidly higher in early U.S. trading. More gains this week would give the bulls confidence that new highs are attainable in the near term. The shorter-term moving averages (4-, 9- and 18-day) are still 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) neutral to bullish early today. Today, shorter-term technical resistance comes in at the overnight high of 3,284.75 and then at last week’s high of 3,297.50. Buy stops likely reside just above those levels. Downside support for active traders today is seen at 3,250.00 and then at the overnight low of 3,236.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 7.0
March Nasdaq index futures: Prices are solidly higher in early U.S. trading and back close to the recent contract and record high. Bulls have the firm overall near-term technical advantage. 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 bullish early today. Shorter-term technical resistance is seen at last week’s high of 9,248.75 and then at the contract high of 9,287.25. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 9,150.00 and then at 9,100.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 7.0.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: Prices are solidly lower in early U.S. trading, on profit taking after hitting a 3.5-month high Monday. Bulls still have the 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 bearish early today. Shorter-term technical resistance is seen at 163 even and then at 163 16/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 162 14/32 and then at 162 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 3.5
March U.S. T-Notes: Prices are lower on profit taking after hitting a 3.5-month high on Monday. Shorter-term moving averages (4- 9- 18-day) are still 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 131.10.0 and then at 131.16.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 131.00.0 and then at 130.28.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0
U.S. DOLLAR INDEX
The March U.S. dollar index is modestly higher in early U.S. trading. Bulls have the overall near-term technical advantage. The shorter-term moving averages for the dollar index 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 dollar index are neutral to bullish early today. The dollar index finds shorter-term technical resistance at the overnight high of 97.810 and then at November high of 98.045. Shorter-term support is seen at 97.500 and then at last week’s low of 97.165. Wyckoff’s Intra Day Market Rating: 5.5
NYMEX CRUDE OIL
March Nymex crude oil prices are up in early U.S. trading after hitting a 13-month low overnight. A steep price downtrend is still in place on the daily bar 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 Monday’s high of $51.97 and then at $52.50. Look for sell stops just below technical support at the overnight low of $49.66 and then at $49.00. Wyckoff’s Intra-Day Market Rating: 5.5
GRAINS
US grain futures are posting decent gains in early US pre-market trading Tuesday. Corn is up around 4 cents, soybeans around 8 cents higher and wheat is around 8 cents up. So far this week trader and investor risk appetites are keener and the marketplace appears to be moving beyond the coronavirus outbreak that continues to spread. That’s a positive for the grain markets, too. Latest counts show over 20,000 Chinese citizens afflicted with over 425 dead, with air travel to China being significantly curtailed and global and domestic business there disrupted. Importantly, China’s central bank this week has injected large amounts of money into its financial system to help out domestic businesses that are being hurt by the coronavirus outbreak. This move has helped to assuage Asian investors. This has given grain traders some confidence that China will step up its purchases of U.S. ag products. As one market analyst quipped,” The Chinese people still have to eat.” Grain traders are still looking at the crude oil market, which hit a 13-month low overnight and has dropped over $13.00 a barrel from the January high. Nymex crude dipped below $50.00 a barrel this week. If crude oil prices keep declining, grain markets will also struggle. However, there are chart clues that the oil market has bottomed out, or is very close to doing so.
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