Friday, August 2–Jim Wyckoff’s Morning Markets Report
Asian and European stocks were lower overnight. U.S. stock indexes are pointed toward weaker openings when the New York day session begins. A busy trading week got unexpectedly much busier at midday Thursday when President Trump announced he is going to slap another 10% tariff on Chinese imports into the U.S. The U.S. stock market dropped, U.S. Treasury futures prices soared to new contract highs, the yield on the 10-year U.S. Treasury note dropped to 1.84%, the U.S. dollar dropped, grains and crude oil prices tanked, while the gold market rallied sharply on safe-haven demand.
The escalation of the U.S.-China trade war has other implications, too, including significantly increasing the likelihood the Federal Reserve will again lower interest rates in the coming months.
The Chinese yuan on Friday dropped to its lowest level against the U.S. dollar since last November. Trump has called out China for devaluing its currency to gain trade advantages.
Traders are now awaiting Friday morning’s U.S. employment situation report for July, arguably the most important monthly report for the U.S. economy. The key non-farm payrolls number is expected to be up around 165,000. In June, non-farm payrolls were up 224,000.
In other overnight news, the Euro zone producer price index for June came in at down 0.6% from May and up 0.7%, year-on-year.
The key “outside markets” today see Nymex crude oil prices higher and trading just above $55.00 a barrel. The U.S. dollar index is weaker.
Other U.S. economic data due for release Friday includes the international trade report, the ISM New York report on business, manufacturers’ shipments and inventories and the University of Michigan consumer sentiment survey.
–Jim
U.S. STOCK INDEXES
September S&P 500 e-mini futures: Prices are lower and hit a five-week low in early U.S. trading. A bearish weekly low close today would suggest a near-term market top is in place. The shorter-term moving averages (4-, 9- and 18-day) are neutral early today. The 4-day moving average is below the 9-day and 18-day. The 9-day is even with the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are bearish early today. Today, shorter-term technical resistance comes in at 2,969.50 and then at 3,000.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 2,933.50 and then at 2,914.75. 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 five-week low in early U.S. trading. A bearish weekly low close today 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 below the 9-day and 18-day. The 9-day average is even with the 18-day. Short-term oscillators (RSI, slow stochastics) are bearish early today. Shorter-term technical resistance is seen at the overnight high of 7,806.00 and then at 7,900.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 7,735.75 and then at 7,700.00. 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 sharply higher and hit a contract high in early U.S. trading. Bulls have the strong 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 bullish early today. Shorter-term technical resistance is seen at the overnight contract high of 158 31/32 and then at 160 even. Buy stops likely reside just above those levels. Shorter-term support lies at 158 even and then at the overnight low of 157 11/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 8.0
September U.S. T-Notes: Prices are sharply higher and hit a contract high in early U.S. trading. Bulls have the strong overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above with the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term support lies at the overnight low of 128.17.0 and then at 128.10.0. Sell stops likely reside just below those levels. Shorter-term technical resistance lies at the overnight high of 129.04.5 and then at 129.10.0. Buy stops likely reside just above those levels. Wyckoff’s Intra-Day Market Rating: 8.0
U.S. DOLLAR INDEX
The September U.S. dollar index is weaker on profit taking after hitting a contract high on Thursday. Bulls still have the strong 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 98.225 and then at 98.500. Shorter-term support is seen at the overnight low of 97.935 and then at 97.500. Wyckoff’s Intra Day Market Rating: 5.0
NYMEX CRUDE OIL
September Nymex crude oil prices are higher in early U.S. trading, on a corrective bounce from the steep losses seen Thursday. Bears now have the overall near-term technical advantage. The shorter-term moving averages are neutral early today as the 4-day is even with the 9-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 $56.00 and then at $57.00. Look for sell stops just below technical support at the overnight low of $54.15 and then at this week’s low of $53.59. Wyckoff’s Intra-Day Market Rating: 5.5
GRAINS
US grain futures prices were higher in overnight trading, on corrective bounces from this week’s strong selling pressure. Corn was up around 3 cents, soybeans around 6 cents up and wheat about 3 cents higher.
The grain markets got another unexpected bearish body blow at midday Thursday when President Trump announced he is going to slap another 10% tariff on Chinese imports into the U.S. Part of the reason Trump made the move is because China has not made good on its promise to buy more U.S. agricultural products.
Other bearish elements at work in the grains this week include notions the US corn and soybean crops are faring surprisingly well as the critical growing month of August begins. Also, Corn Belt weather forecasts up to mid-August are not now threatening to the US corn or soybean crops.
Thursday morning’s weekly USDA export sales report reminded traders of tepid worldwide demand for US grains. The recent appreciation in the US dollar is further dampening hopes US grains can become more competitive on the world export market.
Technically, this week key near-term technical price levels were breached on the downside in corn, soybeans and wheat. This has prompted the technical-based bears and the big speculative “fund” traders to establish new short positions in the US grain futures markets.
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