Wednesday, October 31–Jim Wyckoff’s Morning Markets Report
OVERNIGHT DEVELOPMENTS
Global stock markets were mixed to mostly higher overnight. U.S. stock indexes are pointed toward higher openings when the New York day session begins. There is still strong near-term technical evidence the U.S. stock indexes have put in market tops. Volatility in the U.S. stock market could still appear at any time, as seen with Monday afternoon’s price swoon.
Today is the last trading day of the month, which makes it a more important trading day, from a technical chart perspective.
China’s official purchasing managers’ index also fell to 50.2 in October from 50.8 in September. The October number is the lowest in two years. A reading below 50.0 suggests contraction in the sector.
The Chinese yuan has dropped to a 10-year low against the U.S. dollar this week. There is a debate on whether the Chinese government wants the yuan to depreciate to gain world trade advantages. Or, the government may want to stem the yuan’s slide due to fears of capital flight out of China.
In another sign of the stark divergence between the U.S. and European Union economies, the Euro zone reported its unemployment rate for October today, at 8.1%. The U.S. rate is 3.7%. Meantime, the Euro zone inflation rate rose to a nearly six-year high of 2.2%, basis its latest consumer price index report for October issued today.
The key outside markets today find November Nymex crude oil prices firmer on a corrective bounce and trading around $66.50 a barrel after hitting a nine-week low on Tuesday. Meantime, the U.S. dollar index is slightly higher and hit a new multi-month high overnight.
The key U.S. economic data point of the week, if not the month, will be Friday’s November employment report from the Labor Department.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, the employment cost index, the ISM Chicago business survey, the weekly DOE liquid energy stocks report, and the U.S. Treasury quarterly refunding announcement.
–Jim
U.S. STOCK INDEXES
December S&P 500 e-mini futures: Prices are higher in early U.S. trading. Recent price action still suggests a market top is in place. Prices Monday hit a six-month low. Prices are still in a steep three-week-old downtrend on the daily bar chart. The 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 is below the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are bullish early today. Today, shorter-term technical resistance comes in at this week’s high of 2,707.00 and then at 2,725.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 2,682.00 and then at 2,650.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.5
December Nasdaq index December futures: Prices are higher in early U.S. trading, on a corrective bounce after hitting a six-month low on Monday. Recent price action still suggests a market top is in place. 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 bullish early today. Shorter-term technical resistance is seen at 6,900.00 and then at 7,000.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 6,816.75 and then at 6,800.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5.
U.S. TREASURY BONDS AND NOTES
December U.S. T-Bonds: Prices are lower in early U.S. trading today. A fledgling price uptrend is still in place on the daily bar chart, but just barely now. 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 bearish early today. Shorter-term technical resistance is seen at the overnight high of 138 24/32 and then at 139 even. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 138 6/32 and then at 138 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0
December U.S. T-Notes: Prices are lower in early U.S. trading. A fledgling uptrend is still in place on the daily bar chart, but now just barely. 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 bearish early today. Shorter-term resistance lies at the overnight high of 118.21.5 and then at 118.28.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 118.15.0 and then at 118.10.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0
U.S. DOLLAR INDEX
The December U.S. dollar index is higher and hit a contract and multi-month high overnight. 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 neutral to bullish early today. The dollar index finds shorter-term technical resistance at the overnight high of 96.850 and then at 97.000. Shorter-term support is seen at the overnight low of 96.660 and then at Tuesday’s low of 96.395. Wyckoff’s Intra Day Market Rating: 6.0
NYMEX CRUDE OIL
December Nymex crude oil prices are firmer in early U.S. trading. Recent strong selling pressure suggests this market has topped out. 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 bullish early today. Look for buy stops to reside just above technical resistance at the overnight high of $67.00 and then at this week’s high of $67.95. Look for sell stops just below technical support at this week’s low of $65.33 and then at $65.00. Wyckoff’s Intra-Day Market Rating: 5.5
GRAINS
Grain futures prices were mixed overnight. Not much new this week. The grain market bears still have the overall near-term technical advantage. The upside will continue to be limited in the next few weeks by big U.S. corn and soybean crops being harvested, and tepid world demand for U.S. wheat. Any progress on the U.S.-China trade war front would be bullish for the grains, but an escalation would be bearish.
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