Tuesday, January 28–Jim Wyckoff’s Morning Markets Report
Asian and European stock markets were mixed to weaker overnight. U.S. stock indexes are pointed toward firmer openings when the New York day session begins, following solid losses Monday. There is still some risk aversion in the global marketplace as the coronavirus outbreak continues to spread in China, with over 100 dead and over 4,500 infected in that country, according to the latest reports. Other countries are also seeing its citizens contract the virus.
Veteran traders know that shock market events like the coronavirus outbreak tend to see the markets factor in worst-case scenarios in the early stages of the affair. Price action in several markets the past few days suggests this event will be factored into most market prices sooner rather than later—and may be already factored in altogether. Reason: Most shock events to markets do not have the worst-case scenario play out. Once traders realize the shock event is not as bad (for markets) as they first thought, the markets’ prices begin to move back toward where they were before the shock occurred. Of course, right now it’s still too early to tell if the markets have fully factored in the coronavirus and its impact on the global economy. By the end of this week, traders and investors should have a better idea whether the outbreak has mostly run its course, from a markets-impact perspective.
The coronavirus outbreak has overshadowed the meeting of the Federal Reserve’s Open Market Committee (FOMC) that begins Tuesday morning and ends Wednesday afternoon with a statement. No change in U.S. monetary policy is expected at this week’s meeting.
The key outside markets today see crude oil prices lower and trading around $52.75 a barrel. Meantime, the U.S. dollar index is slightly higher and hit a two-month high overnight.
U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, durable goods orders, the S&P/Core-Logic home price indexes, the Richmond Fed business survey, and the consumer confidence index.
–Jim
U.S. STOCK INDEXES
March S&P 500 e-mini futures: Prices are firmer in early U.S. trading as the bulls try to stabilize the market, to avoid serious near-term technical damage. The shorter-term moving averages (4-, 9- and 18-day) are neutral early today. The 4-day moving average is below the 9-day and 18-day. The 9-day is above the 18-day moving average. Short-term oscillators (RSI, slow stochastics) neutral early today. Today, shorter-term technical resistance comes in at Monday’s high of 3,269.75 and then at 3,280.50. Buy stops likely reside just above those levels. Downside support for active traders today is seen at Monday’s low of 3,233.00 and then at 3,215.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.5
March Nasdaq index futures: Prices are firmer in early U.S. trading. Bulls have the overall near-term technical advantage but have faded and need to show more power soon to further stabilize the market. Shorter-term moving averages (4- 9-and 18-day) are neutral early today. The 4-day moving average is below the 9-day. The 9-day average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is seen at the overnight high of 9,040.00 and then at Monday’s high of 9,077.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 8,952.50 and then at Monday’s low of 8,925.50. 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 higher and hit another 3.5-month high in early U.S. trading. Bulls have the firm overall near-term technical advantage. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term technical resistance is seen at the overnight high of 162 25/32 and then at 163 even. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 161 25/32 and then at 161 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
March U.S. T-Notes: Prices are firmer and hit another 3.5-month high in early U.S. trading. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term resistance lies at the overnight high of 131.06.0 and then at 131.12.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 130.24.0 and then at Monday’s low of 130.17.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
U.S. DOLLAR INDEX
The March U.S. dollar index is slightly higher and hit a two-month high in early U.S. trading. Bulls have the overall near-term technical advantage amid a price uptrend in place on the daily chart. The shorter-term moving averages for the dollar index are bullish early today, as the 4-day is above the 9-day and 18-day. The 9-day is above 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 the November high of 98.045 and then at 98.250. Shorter-term support is seen at Monday’s low of 97.590 and then at 97.450. Wyckoff’s Intra Day Market Rating: 5.5
NYMEX CRUDE OIL
March Nymex crude oil prices are weaker in early U.S. trading. A steep price downtrend is in place on the daily bar chart. 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 bearish early today. Look for buy stops to reside just above technical resistance at the overnight high of $53.27 and then at Monday’s high of $53.71. Look for sell stops just below technical support at Monday’s low of $52.13 and then at $51.00. Wyckoff’s Intra-Day Market Rating: 4.5
GRAINS
US grain futures are lower again in early US pre-market trading Tuesday. Corn is around 2 cents lower, soybeans around 8 cents lower and wheat is around 5 cents down. Grain traders are still concerned and buyers remain timid as the coronavirus illness has killed over 100 Chinese citizens and appears to be still spreading. There are worries the outbreak will reduce global demand for grains, including possibly enabling China to reduce the grain purchases there were agreed upon in the recently signed partial trade agreement between the U.S. and China—without violating the agreement. Veteran grain traders know that shock market events like the coronavirus outbreak tend to see the grain markets factor in worst-case scenarios in the early stages of the affair. Price action in several other markets the past few days suggests this event will be factored into grain market prices sooner rather than later. Reason: Most shock events to markets do not have the worst-case scenario play out. Once traders realize the shock event is not as bad (for markets) as they first thought, the markets’ prices begin to move back toward where they were before the shock occurred. Of course, right now it’s still too early to tell if the grain markets have fully factored in the coronavirus and its impact on the global grain demand. By the end of this week, grain traders should have a better idea whether the outbreak has mostly run its course, from a grain-markets-impact perspective. Look for buying interest in the grain futures markets to continue to be squelched until this situation stabilizes.
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