Friday, July 26–Jim Wyckoff’s Morning Markets Report
Asian and European stocks mixed to firmer overnight. U.S. stock indexes are pointed toward higher openings when the New York day session beings.
The U.S. economic highlight of the week is the Friday morning report on second-quarter gross domestic product—the first estimate. The GDP growth rate is seen at up 2.0%, year-on-year. That compares to 3.1% GDP growth in the first quarter of this year. A significant miss on the forecast number would likely move the stock and financial markets.
In other overnight news, an ominous report on very low inflation in the European Union was released Friday, showing the Euro zone inflation will be 1.3% in 2019, 1.4% in 2020 and 1.5% in 2021. That’s according to 52 experts surveyed by the European Central Bank. The ECB wants to see annual inflation of around 2%. The report strongly suggests the ECB will ease its monetary policy soon.
Next week, the U.S. Federal Reserve’s Open Market Committee (FOMC) has its money policy meeting beginning Tuesday, and is expected on Wednesday to ease monetary policy with an interest rate cut at the conclusion of the meeting.
A Commerzbank report today said Chinese demand for gold coming out of Hong Kong is down 83% the past year. Historically Hong Kong has been a major supplier of gold to Chinese consumers. The report mostly blamed the weaker Chinese currency, the yuan, on making gold more expensive to purchase by Chinese consumers.
The key “outside markets” today see Nymex crude oil prices higher and trading around $56.35 a barrel. Meantime, the U.S. dollar index is firmer and is near this year’s high.
U.S. economic data due for release Friday includes the GDP report for the second quarter.
–Jim
U.S. STOCK INDEXES
September S&P 500 e-mini futures: Prices are higher in early U.S. trading and not far below this week’s contract and record high. Bulls have the solid overall near-term technical advantage. There are no early chart clues of a market top being close at hand. 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 bullish early today. Today, shorter-term technical resistance comes in at the contract high of 3,027.75 and then at 3,050.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at Thursday’s low of 2,998.00 and then at 2,987.50. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 6.5
September Nasdaq index futures: Prices are higher in early U.S. trading and close to this week’s record and contract high. Bulls have the solid 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 the contract high of 8051.75 and then at 8,100.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 7,987.50 and then at Thursday’s low of 7,917.25. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 6.5.
U.S. TREASURY BONDS AND NOTES FUTURES
September U.S. T-Bonds: Prices are firmer in early U.S. trading. Bulls have the firm 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. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term technical resistance is seen at 155 even and then at this week’s high of 155 18/32. Buy stops likely reside just above those levels. Shorter-term support lies at 154 even and then at this week’s low of 153 23/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
September U.S. T-Notes: Prices are firmer in early U.S. trading. Bulls have the solid overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is even with the 18-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term support lies at the overnight low of 127.06.5 and then at this week’s low of 127.02.5. Sell stops likely reside just below those levels. Shorter-term technical resistance lies at the overnight high of 127.16.0 and then at 127.20.0. Buy stops likely reside just above those levels. Wyckoff’s Intra-Day Market Rating: 5.5
U.S. DOLLAR INDEX
The September U.S. dollar index is higher and hit a two-month high overnight. Prices are very close to this year’s high. Bulls 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 bullish early today. The dollar index finds shorter-term technical resistance at the May high of 97.715 and then at 98.000. Shorter-term support is seen at the overnight low of 97.505 and then at Thursday’s low of 97.220. Wyckoff’s Intra Day Market Rating: 6.5
NYMEX CRUDE OIL
September Nymex crude oil prices are up in early U.S. trading. Trading has been choppy this week. 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 this week’s high of $57.64 and then at $58.00. Look for sell stops just below technical support at this week’s low of $55.33 and then at the July low of $54.85. Wyckoff’s Intra-Day Market Rating: 6.0
GRAINS
U.S. grain futures prices were mixed to weaker in overnight trading. Corn was down just over 1 cent, soybeans up around a penny, and wheat around 4 cents lower.
The weather in the U.S. Corn Belt has been cooler and drier and that has been a bit bearish for the grains. Warmer and still mostly drier conditions in the regions will occur in the coming few days, but with a cool-down next week. This will result in “net-drying” for the Corn Belt. And some extended weather outlooks into August point to hotter and drier conditions for corn and soybean crops that are behind normal in development.
The U.S. government will provide its farmers with an aid package totaling $16 billion, USDA officials said Thursday. The aid is an effort to mitigate the damage to farmers caused by the U.S.-China trade war. Large U.S. agricultural purchases promised by China have been an important factor in any trade agreement, the U.S. has said. High-level U.S.-China trade negotiators will meet in Shanghai next week.
Trade in the U.S. grain markets could be choppy and sideways for the next two weeks, ahead of the all-important Aug. 12 monthly USDA report, at which time the size of the U.S. crops will be updated, as well as revised planted acres for U.S. corn and soybeans. With the very late planting of most of the corn and soybean crop, grain analysts have had a tougher time gauging the crop’s yield potential and the acreage mix.
Besides the currently bearish weather in the U.S. Corn Belt, the appreciating U.S. dollar on the foreign exchange market is a negative element for grain prices. U.S. grain is more expensive to purchase on world markets, in non-U.S. currency, when the greenback appreciates.
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