Friday, May 7–Jim Wyckoff’s Morning Markets Report
Global stock markets were mixed but mostly higher overnight. U.S. stock indexes are pointed toward modestly higher openings when the New York day session begins. Trader and investor appetite remains mostly upbeat late this week. However, traders have taken note of comments from Fed Governor Lael Brainard Thursday, who said in a report that rising appetite for risk across a variety of asset markets is stretching valuations and creating peril in the U.S. financial system. “Vulnerabilities associated with elevated risk appetite are rising,” she said. The combination of stretched valuations with very high levels of corporate indebtedness may prompt a major “re-pricing event,” she said. Some market watchers are already musing about a hawkish Fed stance at the Jackson Hole, Wyoming annual Fed confab in August.
More and more, the “reflation trade” is coming back into vogue. Copper prices overnight hit a record high amid surging demand for construction and building materials. A Dow Jones Newswire headline Friday read, “Higher Steel, Precious Metals Prices Vex Auto Makers in 1Q.”
In overnight news, China reported its April exports were up 32.3%, year-on-year, while its imports rose 43.1% in the period. Both numbers were even better than expected, further underscoring the voracious demand for raw commodities that is only likely to grow even stronger in the coming months.
The key U.S. data point of the week and arguably of the month comes Friday morning with the Labor Department’s Employment Situation Report for April. Non-farm payrolls are seen up 1 million compared to a rise of 916,000 in March. The unemployment rate is seen at 5.8% versus 6.0% in March.
The key outside markets today see the U.S. dollar index lower. Nymex crude oil prices are slightly lower and trading around $64.65 a barrel. Meantime, the yield on the benchmark 10-year U.S. Treasury note is presently fetching around 1.577%.
Other U.S. economic data due for release Friday includes monthly wholesale trade and consumer credit data.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are modestly higher in early U.S. trading and near the record high. Bulls have the solid overall near-term technical advantage. There are no strong, early clues to suggest a market top is close at hand. The shorter-term moving averages (4-, 9- and 18-day) are neutral early today. The 4-day moving average is below 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 record high of 4,211.00 and then at 4,225.00. Buy stops likely reside just above those levels. Downside support for active traders is seen at Thursday’s low of 4,140.50 and then at this week’s low of 4,120.50. Sell stops likely reside below those levels. Wyckoff’s Intra-day Market Rating: 6.5
June Nasdaq index futures: Prices are slightly higher in early U.S. trading. Shorter-term moving averages (4- 9-and 18-day) are bearish early today. The 4-day moving average is below the 9-day and 18-day. The 9-day average is below the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term technical resistance is seen at 13,700.00 and then at 13,792.50. Buy stops likely reside just above those levels. On the downside, shorter-term support is seen at the overnight low of 13,588.25 and then at 13,500.00. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are weaker in early U.S. trading today. Bears have the overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is seen at this week’s high of 158 23/32 and then at the April high of 159 1/32. Buy stops likely reside just above those levels. Shorter-term support lies at Thursday’s low of 157 29/32 and then at 157 8/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5
June U.S. T-Notes: Prices are weaker in early U.S. trading. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is even with the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term resistance lies at the April high of 132.24.5 and then at 132.28.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at 132.15.0 and then at 132.10.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5
EURO CURRENCY
The June Euro currency futures are firmer in early U.S. trading. The shorter-term moving averages for the Euro are neutral early today, as the 4-day is below the 9-day and 18-day. The 9-day is above the 18-day moving average. Short-term oscillators for the Euro are neutral to bullish early today. The Euro currency finds shorter-term technical resistance at the overnight high of 1.2099 and then at 1.2140. Buy stops likely reside just above those levels. Shorter-term support is seen at 1.2050 and then at this week’s low of 1.1995. Sell stops likely reside just below those levels. Wyckoff’s Intra Day Market Rating: 6.0
NYMEX CRUDE OIL
June Nymex crude oil prices are near steady in early U.S. trading. Bulls have the solid overall near-term technical advantage. 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 to bearish early today. Look for buy stops to reside just above technical resistance at Thursday’s high of $65.98 and then at this week’s high of $66.76. Look for sell stops just below technical support at the overnight low of $64.37 and then at this week’s low of $62.91. Wyckoff’s Intra-Day Market Rating: 5.0
GRAINS
U.S. grain futures are higher in early U.S. pre-market trading and at or near their contract and multi-year highs. The grain market bulls have the solid overall near-term technical advantage amid price uptrends in place on the daily and the longer-term charts. The reflation trade is also fueling the grain market bulls. There are no early chart clues the major bull runs in the grains will end anytime soon.
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