Wednesday, February 7–Jim Wyckoff’s Morning Markets Report
OVERNIGHT DEVELOPMENTS
World stock markets posted solid rebounds overnight, following the lead of the U.S. stock indexes Tuesday. However, U.S. stock indexes are under solid selling pressure Wednesday morning, ahead of the U.S. day session. Serious near-term technical damage has been inflicted on the U.S. stock indexes recently, to suggest more selling pressure in the near term. Volatility is back in the stock and financial markets, after a long period of quieter daily trading.
Stalwart stock market bulls are blaming algorithmic traders for the steep sell-off, and pointing to solid economic fundamentals in place around the world as indicating this is just a downside correction in a still-bullish equities market. However, the fact of the matter is that traders/investors who entered the equities markets just a few months ago (and there are many) are now under water, or close to it. How much pain are these weak longs willing to suffer before they bail out on fear, or get washed out due to margin calls? Any analyst can pontificate about sound market fundamentals at present, but the traders and investors with skin in the game are more worried about losing their money than they are market fundamentals. In other words, trading markets is still a money game.
Gold prices are near steady today, with the slumping stock market (bullish) being offset by a higher U.S. dollar index (bearish).
In overnight news, the European Union economists forecast the bloc’s GDP at up 2.3% in 2018, with inflation at 1.5%. Both of those numbers are just a bit higher than the EU’s previous forecast.
The key “outside markets” on Wednesday morning see the U.S. dollar index higher on some more safe-haven demand. Meantime, Nymex crude oil prices are weaker and trading just above $63.00 a barrel. The shaky world equity markets have prompted some selling pressure in the crude oil markets.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, consumer credit and the weekly DOE liquid energy stocks report.
–Jim
U.S. STOCK INDEXES
March S&P 500 December e-mini futures: Prices are lower in early U.S. trading. Major near-term chart damage has been inflicted recently, to strongly suggest the long bull market run in stocks has ended. 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 neutral early today. Today, shorter-term technical resistance comes in at 2,700.00 and then at 2,720.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 2,660.50 and then at 2,650.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.0
March Nasdaq index December futures: Prices are lower in early U.S. trading. With this week’s major near-term chart damage, there are chart clues a near-term 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 and 18-day. The 9-day average is below the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is seen at the overnight high of 6,672.50 and then at 6,700.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 6,565.00 and then at 6,540.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0.
U.S. TREASURY BONDS AND NOTES
March U.S. T-Bonds: Prices are slightly higher in early U.S. trading, on tepid short covering and slight safe-haven demand. Bears have the 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 bullish early today. Shorter-term technical resistance is seen at the overnight high of 146 12/32 and then at 147 even. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight 145 16/32 and then at 145 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0
March U.S. T-Notes: Prices are slightly lower in early U.S. trading. Bears have the 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 bullish early today. Shorter-term resistance lies at the overnight high of 122.19.5 and then at 122.24.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 121.04.5 and then at 121.00.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5
U.S. DOLLAR INDEX
The March U.S. dollar index is higher in early U.S. trading. Bears still have the overall near-term technical advantage, although the recent rally begins to hint a market bottom is in place. The shorter-term moving averages for the dollar index are neutral as the 4-day is above the 9-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 this week’s high of 89.920 and then at 90.250. Shorter-term support is seen at the overnight low of 89.325 and then at 89.000. Wyckoff’s Intra Day Market Rating: 6.0
NYMEX CRUDE OIL
March Nymex crude oil prices are modestly lower and hit a three-week low in early U.S. trading. Bulls still have the overall near-term technical advantage, but have faded a bit recently. Look for buy stops to reside just above technical resistance at $64.00 and then at $64.50. Look for sell stops just below technical support at $63.00 and then at $62.50. Wyckoff’s Intra-Day Market Rating: 4.5
GRAINS
Grain futures were slightly firmer overnight. Grain market traders are still wary amid the global stock markets’ high volatility. That means less buying interest in the grains. Still, the long bear market in the grains appears to have ended.