Tuesday, December 31–Jim Wyckoff’s Morning Markets Report
Asian stock indexes were mostly firmer overnight, while European stock indexes mixed to lower in quieter trading. The U.S. stock indexes are also pointed toward slightly higher openings when the New York day session begins, on this last trading day of 2019. Many U.S. markets close early today for the New Year’s holiday on Wednesday, when most global markets are closed.
Trader and investor attitudes remain upbeat going into 2020, due in large part to the world’s two largest economies, the U.S. and China, seeing a thaw in the more-than-two-year-old trade war that has slowed global economic growth. Most believe a partial trade deal will be signed in January.
A feature in a generally quiet, holiday marketplace the past few days has been many currencies rallying significantly against the U.S. dollar, including the Swiss franc, Euro currency, Japanese yen, Canadian dollar and Australian dollar. The U.S. dollar index hit a five-month low overnight and is poised to close at a technically bearish monthly low close today, which would suggest more downside price pressure for the greenback in early January, or longer. This is a bullish development for the raw commodity sector, as most raw commodities are priced in U.S. dollars on the world market.
The other key “outside market” today sees Nymex crude oil prices modestly up and trading close to a multi-month high at around $61.80 a barrel.
U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the U.S. house price index, the Case-Shiller home index, and the consumer confidence index.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are slightly up in early U.S. trading and not far below last week’s record and contract high. Bulls have the solid overall near-term technical advantage. There are no early clues that a market top is close at hand. 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 Monday’s high of 3,244.25 and then at the contract high of 3,254.00. Buy stops likely reside just above those levels. Downside support for active traders today is Monday’s low of 3,217.25 and then at 3,200.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.5
March Nasdaq index futures: Prices are slightly up but not far below last week’s contract and record high. 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. 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 Monday’s high of 8,809.75 and then at the contract high of 8,843.50. Buy stops likely reside just above those levels. On the downside, short-term support is seen at Monday’s low of 8,691.25 and then at 8,650.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5.
U.S. TREASURY BONDS AND NOTES FUTURES
March U.S. T-Bonds: 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 neutral early today. The 4-day moving average is above the 9-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is seen at the overnight high of 156 16/32 and then at last week’s high of 157 1/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 155 30/32 and then at Monday’s low of 155 10/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5
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 neutral early today. The 4-day moving average is above the 9-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term support lies at the overnight low of 128.13.5 and then at Monday’s low of 128.05.0. Sell stops likely reside just below those levels. Shorter-term technical resistance lies at Monday’s high of 128.22.0 and then at 128.28.0. Buy stops likely reside just above those levels. Wyckoff’s Intra-Day Market Rating: 4.5
U.S. DOLLAR INDEX
The March U.S. dollar index is lower and hit a five-month low in early U.S. trading. Bears have the overall near-term technical advantage. The shorter-term moving averages for the dollar index are neutral early today, as the 4-day is below the 9-day and 18-day. The 9-day is even with the 18-day moving average. Short-term oscillators for the dollar index are bearish early today. The dollar index finds shorter-term technical resistance at the overnight high of 96.415 and then at Monday’s high of 96.630. Shorter-term support is seen at 96.000 and then at 95.750. Wyckoff’s Intra Day Market Rating: 4.0
NYMEX CRUDE OIL
February Nymex crude oil prices are slightly higher and not far below Monday’s multi-month high in early U.S. trading. Bulls have the solid near-term technical advantage and are keeping in place a three-month-old uptrend on the daily bar 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 neutral to bearish early today. Look for buy stops to reside just above technical resistance at Monday’s high of $62.34 and then at $63.00. Look for sell stops just below technical support at Monday’s low of $61.09 and then at $60.00. Wyckoff’s Intra-Day Market Rating: 5.5
GRAINS
US grain futures prices were narrowly mixed overnight and trading around 1 cent on either side of unchanged in pre-holiday trading. Grain market bulls are exiting 2019 with a bit of momentum on their side, especially in soybeans and wheat. A feature in a generally quiet, holiday marketplace the past few days has been many currencies rallying significantly against the U.S. dollar, including the Swiss franc, Euro currency, Japanese yen, Canadian dollar and Australian dollar. The U.S. dollar index hit a five-month low overnight and is poised to close at a technically bearish monthly low close today, which would suggest more downside price pressure for the greenback in early January, or longer. This is a bullish development for the raw commodity sector, including the grains, as most raw commodities are priced in U.S. dollars on the world market. The US-China trade war has significantly thawed amid recent positive comments from officials on both sides, and that’s also supportive for grain markets as the year winds down. A partial trade agreement is expected to be signed in January. The January 10th monthly USDA supply and demand report is the next major data point for the grain markets, as estimates of the updated size of the US corn and soybean crops will be issued following a rocky harvest season that was plagued by inclement weather. Weather in South American corn and soybean regions remains mostly non-threatening, but grain traders will continue to monitor mildly dry pockets that could become a bigger concern in January.
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