Thursday, March 12–Jim Wyckoff’s Morning Markets Report
Global stock markets were sharply lower overnight and U.S. stock index futures are pointed toward sharply lower to limit-down openings when the New York day session begins. U.S. stock indexes are now in bear market territory—down more than 20% from their peaks that occurred just last month.
The Covid-19 pandemic has the global marketplace in panic. President Trump’s Oval Office speech to the American citizens Wednesday night seemed to cause further unease in the markets when he announced no major economic stimulus measures, saying that’s up to the U.S. Congress. On Wednesday evening the NBA basketball league suspended its season after a player contracted coronavirus. The CME Group has closed its trading floors; however, most futures markets have been trading electronically for years. Movie stars Tom Hanks and his wife announced on Twitter they have tested positive for the illness. There are scattered reports the U.S. Treasury markets are becoming stressed.
Following is an edited version of Thursday morning email dispatch from a market analyst: “Markets are in complete crisis mode; past economic data has zero influence on investors’ decisions; central bank emergency easing policies are not being effective and politicians’ actions are only adding more confusion. The one thing that investors are monitoring is how fast the coronavirus is spreading. President Trump’s address to the nation last night was underwhelming. It shows that the U.S., like many other countries, is unable to provide the right action in response to the virus spread. A global recession seems impossible to escape and a massive decline in corporate earnings is inevitable. What is even more worrying is the risks that come with such a recession. Corporates across the globe are over-leveraged after more than a decade of low interest rates, and companies with weak balance sheets are extremely vulnerable to such economic shocks.“
The European Central Bank at its meeting Thursday is expected to announce monetary policy stimulus measures to battle the negative economic effects of the Covid-19 outbreak. With ECB interest rates already below zero, the central bank has limited options on stimulus. At this point, some economists are saying the Euro zone gross domestic product will decline 1.2% in 2020.
The benchmark 10-year U.S. Treasury note sees its yield around 0.68% Wednesday, which is well down from Wednesday’s reading. The U.S. dollar index is trading solidly up in early U.S. trading, as it appears the greenback is getting a safe-haven bid as marketplace anxiety levels rise. Nymex crude oil prices are sharply down and trading around $31.25 a barrel.
U.S. economic data due for release Thursday includes the weekly jobless claims report and the producer price index. Traders and investors are paying little attention to economic reports, at present.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are sharply lower and near limit-down and hit a contract low in early U.S. trading. Bears have the solid overall near-term technical advantage. The 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 is below the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are bearish early today. Today, shorter-term technical resistance comes in at 2,650.00 and then at 2,700.00. Buy stops likely reside just above those levels. Downside support for active traders today is seen at 2,550.00 and then at 2,500.00. Wyckoff’s Intra-day Market Rating: 1.0
June Nasdaq index futures: Prices are sharply and near limit down in early U.S. trading. Bears have the strong overall near-term technical advantage. Shorter-term moving averages (4- 9-and 18-day) are bearish early today. The 4-day moving average is below the 9-day. The 9-day average is below the 18-day. Short-term oscillators (RSI, slow stochastics) are bearish early today. Shorter-term technical resistance is seen at 7,700.00 and then at 7,800.00. On the downside, short-term support is seen at 7,550.00 and then at 7,500.00. Wyckoff’s Intra-Day Market Rating: 1.0.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are sharply higher in early U.S. trading. Bulls have the solid 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 bullish early today. Shorter-term technical resistance is seen at 185 even and then at 186 even. Shorter-term support lies at 182 even and then at 181 even. Wyckoff’s Intra-Day Market Rating: 8.0
June U.S. T-Notes: Prices are sharply higher in early U.S. trading. Bulls have the solid 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 and 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term resistance lies at 139.00.0 and then at 139.13.5. Shorter-term technical support lies at 130.00.0 and then at 137.16.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 8.0
U.S. DOLLAR INDEX
The June U.S. dollar index is higher in early U.S. trading, on safe-haven demand. Bears still have the overall near-term technical advantage. The shorter-term moving averages for the dollar index 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 for the dollar index are bullish early today. The dollar index finds shorter-term technical resistance at 97.000 and then at 97.500. Shorter-term support is seen at 95.500 and then at 96.000. Wyckoff’s Intra Day Market Rating: 6.0
NYMEX CRUDE OIL
April Nymex crude oil prices are sharply lower in early U.S. trading. Bears are in solid overall near-term technical control. 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 to bearish early today. Look for buy stops to reside just above technical resistance at the overnight high of $33.63 and then at $34.00. Look for sell stops just below technical support at $31.00 and then at $30.00. Wyckoff’s Intra-Day Market Rating: 3.0
GRAINS
US grain futures are solidly down in early US pre-market trading. Corn is 4 to 6 cents lower, soybeans around 10 cents down, and wheat 6 to 8 cents down. Grain market bulls are standing on the sidelines as global stock markets are melting down and worldwide economic recession looms. Grain traders will continue to focus on the coronavirus situation until it stabilizes from a markets perspective. That may be a while. Grain market bears have the solid technical and psychological advantage at present, suggesting the path of least resistance for prices will remain sideways to lower.
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