Wednesday, May 31–Jim Wyckoff’s morning markets report
Asian and European stock markets were mostly weaker overnight. U.S. stock indexes are pointed toward weaker openings when the New York day session begins.
Traders at mid-week are focusing on weaker-than-expected economic data coming out of China. China’s factory activity contracted for the second straight month. The official purchasing managers index (PMI) for May dropped to 48.8 (below expectations) after a reading of 49.2 in April. A reading below 50.0 suggests contraction in the sector. A report in the Wall Street Journal today said “China’s era of rapid growth is over. Its recovery from zero-Covid is stalling. And now the country is facing deep, structural problems in its economy.” China is a major importer and consumer of raw commodities.
Even though Democrat and Republican leaders’ negotiators have agreed upon a U.S. debt-limit-extension package, the deal still needs to pass the U.S. House and Senate. There are still some worries the measure will not be approved by both bodies. June 5 is the latest deadline set by the U.S. Treasury for the U.S. government debt limit to be extended, or else the government could default on some of its financial obligations.
The key outside markets today see the U.S. dollar index higher. Nymex crude oil prices are lower, hit a nearly four-week low, and are trading around $68.00 a barrel. Concerns about weaker global energy demand have hit crude oil hard this week. Meantime, the benchmark 10-year U.S. Treasury note yield is presently fetching 3.646%.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the Johnson Redbook retail sales index, the Chicago ISM business survey, and the Federal Reserve’s beige book. The U.S. data pace really picks up the rest of this week, highlighted by the U.S. employment situation report from the Labor Department on Friday morning.
–Jim
U.S. STOCK INDEXES
September S&P 500 e-mini futures: Prices are weaker on profit taking after hitting a nine-month high Tuesday. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Today, shorter-term technical resistance comes in at this week’s high of 4,285.25 and then at 4,300.00. Support for active traders is seen at 4,225.00 and then at 4,200.00. Wyckoff’s Intra-day Market Rating: 4.5
September Nasdaq index futures: Prices are slightly lower higher in early U.S. trading, on profit taking after hitting a contract high Tuesday. Bulls have the solid near-term technical advantage. Shorter-term moving averages (4- 9-and 18-day) are bullish early today. The 4-day moving average is above the 9-day and 18-day. The 9-day average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term technical resistance is seen at the contract high of 14,737.00 and then at 14,900.00. On the downside, shorter-term support is seen at 14,400.00 and then at 14,300.00. Wyckoff’s Intra-Day Market Rating: 4.5.
U.S. TREASURY BONDS AND NOTES FUTURES
September U.S. T-Bonds: Prices are higher on short covering after hitting a 2.5-month low last week. 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 bullish early today. Shorter-term technical resistance is seen at 129 even and then at 130 even. Shorter-term support lies at the overnight low of 127 14/32 and then at 127 even. Wyckoff’s Intra-Day Market Rating: 6.0
September U.S. T-Notes: Prices are higher on short covering after hitting a nine-week low last week. 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 114.16.0 and then at 114.24.0. Shorter-term technical support is seen at the overnight low of 114.00.0 and then at 113.24.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
EURO CURRENCY
The September Euro currency futures are lower and hit a 2.5-month low overnight. The shorter-term moving averages for the Euro are bearish early today, as the 4-day is below the 9-day. The 9-day is below the 18-day moving average. Short-term oscillators for the Euro are neutral to bearish early today. The Euro currency finds shorter-term technical resistance at this week’s high of 1.0813 and then at 1.0900. Shorter-term support is seen at the overnight low of 1.0727 and then at 1.0700. Wyckoff’s Intra Day Market Rating: 4.0
NYMEX CRUDE OIL
July Nymex crude oil prices are lower and hit a nearly four-week low in early U.S. trading. 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 bearish early today. Look for buy stops to reside just above technical resistance at the overnight high of $69.69 and then at $71.00. Look for sell stops just below technical support at the overnight low of $67.30 and then at $66.00. Wyckoff’s Intra-Day Market Rating: 4.0
GRAINS
Grain futures prices were lower overnight. Weak economic data coming out of China and the big drop in crude oil prices this week are bearish for the grains. The near-term technical postures for soybeans, meal, bean oil, wheat and corn futures are all overall bearish—and bears have gained fresh downside momentum at mid-week. A fledgling weather market in the grains appears to have quickly fizzled out.
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