Friday, March 5–Jim Wyckoff’s Morning Markets Report
Global stock markets were mostly lower overnight. U.S. stock indexes are pointed toward narrowly mixed openings when the New York day session begins. Traders are awaiting Friday morning’s Employment Situation Report for February from the U.S. Labor Department—arguably the most important U.S. data point of the month. The key non-farm payrolls number is seen up 210,000 in February. A big miss from expectations on the non-farm jobs number would likely significantly move markets.
The marketplace is still buzzing about a speech by Fed Chairman Jerome Powell Thursday at a jobs summit. Powell said he does not see inflation becoming long-term problematic but it may see a short-term spike as the U.S. economy recovers from the pandemic later this year. Powell added that the recent rise in government bond yields is notable but also probably not a longer-term phenomenon. He also said the U.S. still faces a long road to full economic recovery. What traders took away from the speech is that the Fed appears willing to let bond yields rise (prices fall) without intervention from the central bank. The 10-year U.S. Treasury note saw its yield quickly push toward 1.6% after Powell’s comments, despite many analysts calling Powell’s remarks overall dovish on U.S. monetary policy. It’s been said many times that bond traders are the smartest traders around. What the bond market is telling the marketplace is that bond traders really do not believe Powell’s assessment that inflation will not continue to heat up in the coming months, and that higher inflation in the coming months could prompt the Fed to raise interest rates much sooner than many had reckoned up until just recently. The U.S. Treasury’s 10-year note was yielding 1.54% early Friday morning.
In other overnight news, China’s economic leaders set the world’s second-largest economy’s annual growth rate for 2021 at 6% or above. That figure was seen as modest by some economists, who are predicting China’s gross domestic product to advance at an 8% clip this year. On the inflation front, China’s officials are looking for around 3% consumer price inflation on the year.
The key “outside markets” today see Nymex crude oil futures prices solidly higher, hitting a 14-month high, and trading around $65.50 a barrel. An OPEC meeting this week saw the cartel and Russia ostensibly stand pat on crude oil production levels, when most thought the members would ramp up production levels by at least 500,000 barrels a day, if not 1 million. Crude oil prices shot higher as that news hit the wires on Thursday.
Meantime, the U.S. dollar index is higher is higher and hit a 3.5-month high overnight, supported by the rise in U.S. Treasury yields.
Other U.S. economic data due for release Friday includes the international trade report and consumer credit.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are slightly up in early U.S. trading after hitting a four-week low on Thursday. Bulls have the overall near-term technical advantage but are fading. 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 3,800.00 and then at Thursday’s high of 3,832.00. Buy stops likely reside just above those levels. Downside support for active traders is seen at this week’s low of 3,710.50 and then at 3,700.00. Wyckoff’s Intra-day Market Rating: 5.5
June Nasdaq index futures: Prices are slightly weaker after hitting a nearly three-month low on Thursday. Bulls are fading. 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 neutral to bearish early today. Shorter-term technical resistance is seen at 12,500.00 and then at 12,600.00. On the downside, shorter-term support is seen at this week’s low of 12,296.50 and then at 12,200.00. Wyckoff’s Intra-Day Market Rating: 4.5.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are weaker in early U.S. trading and near the recent contract low. Bears have the solid 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 and 18-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term technical resistance is seen at the overnight high of 157 15/32 and then at 158 even. Shorter-term support lies at the overnight low of 156 14/32 and then at the contract low of 156 8/32. Wyckoff’s Intra-Day Market Rating: 4.0
June U.S. T-Notes: Prices are weaker in early U.S. trading and near the recent contract low. 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 neutral to bearish early today. Shorter-term resistance lies at the overnight high of 132.17.0 and then at 132.24.0. Shorter-term technical support lies at the overnight low of 132.05.5 and then at the contract low of 131.31.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0
EURO CURRENCY
The June Euro currency futures are lower and hit a more-than-three-month low in early U.S. trading. Bears have gained the overall near-term technical advantage amid the recent sell off. The shorter-term moving averages for the Euro 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 Euro are bearish early today. The Euro currency finds shorter-term technical resistance at the overnight high of 1.2000 and then at 1.2050. Shorter-term support is seen at the overnight low of 1.1940 and then at 1.1900. Wyckoff’s Intra Day Market Rating: 4.0
NYMEX CRUDE OIL
April Nymex crude oil prices are solidly higher and hit a 14-month high in early U.S. trading. Bulls have the solid overall near-term technical advantage amid a price uptrend in place on the daily chart. 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 bullish early today. Look for buy stops to reside just above technical resistance at $66.00 and then at $67.00. Look for sell stops just below technical support at the overnight low of $63.82 and then at $63.00. Wyckoff’s Intra-Day Market Rating: 7.0
GRAINS
U.S. grain futures are mixed to firmer in early U.S. pre-market trading. Markets may remain choppy and sideways up until the late-March USDA planting intentions report, which is one of the most important grain market reports of the year. Grain market bulls still have the firm overall near-term technical advantage as prices are mostly trending up—both on a near-term and longer-term basis. Grains may be impacted more by the outside markets in the near term, if they become significantly more volatile, such as the stock, bond and currency 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