Wednesday, August 7–Jim Wyckoff’s Morning Markets Report
Asian stock markets were down overnight and European stock indexes were firmer. U.S. stock indexes are pointed toward higher openings when the New York day session begins. Serious near-term technical damage has been inflicted on the U.S. stock indexes recently, to suggest they have put in at least near-term tops.
The U.S.-China trade war continues to be on the front burner of the marketplace. China’s central bank on Wednesday set its currency, the yuan, exchange rate with the U.S. dollar at 6.9996. That’s the lowest fixing set by the central bank in 11 years, but still just below the 7 level that the U.S. has ostensibly deemed problematic. This exchange rate will continue to be closely monitored by the world marketplace, as China is already being accused of using its currency as a trade weapon. The U.S. designated China as a currency manipulator earlier this week.
In other overnight news, New Zealand’s central bank cut its interest rate more than expected Wednesday, by 0.5%. This sparked a sell off in the Australian dollar.
Gold prices hit a new six-year high above $1,500 overnight. The global marketplace is seeking safe-haven assets amid the recent stock market sell off and heightened geopolitical tensions.
The key “outside markets” today see Nymex crude oil prices slightly weaker and trading around $53.50 a barrel. The U.S. dollar index is trading modestly higher early today.
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
September S&P 500 e-mini futures: Prices are firmer and have rebounded after hitting a two-month low early Tuesday. Still, recent serious technical damage suggests a near-term market top is in place. 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 to bullish early today. Today, shorter-term technical resistance comes in at 2,900.00 and then at 2,925.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 2,854.50 and then at 2,820.50. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.5
September Nasdaq index futures: Prices are higher and have rebounded from a two-month low hit Tuesday. Still, recent serious near-term chart damage suggests 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 to bullish early today. Shorter-term technical resistance is seen at 7,600.00 and then at 7,650.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 7,451.00 and then at 7,400.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0.
U.S. TREASURY BONDS AND NOTES FUTURES
September U.S. T-Bonds: Prices are solidly higher and hit another contract high overnight. Bulls have the strong overall near-term technical advantage. There are no early chart clues to suggest a market top is close at hand. 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 contract high of 162 20/32 and then at 163 even. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 161 19/32 and then 161 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 7.0
September U.S. T-Notes: Prices are higher and hit another contract high overnight. Bulls have the strong overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above with the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term support lies at the overnight low of 129.30.0 and then at 129.20.0. Sell stops likely reside just below those levels. Shorter-term technical resistance lies at the overnight contract high of 130.13.0 and then at 130.20.0. Buy stops likely reside just above those levels. Wyckoff’s Intra-Day Market Rating: 7.0
U.S. DOLLAR INDEX
The September U.S. dollar index is slightly up in early U.S. trading. Bulls 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. The 9-day is above the 18-day moving average. Short-term oscillators for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at 97.715 and then at 98.000. Shorter-term support is seen at the overnight low of 97.225 and then at 97.000. Wyckoff’s Intra Day Market Rating: 5.5
NYMEX CRUDE OIL
September Nymex crude oil prices are slightly lower and hit a six-week low in early U.S. trading. Bears have the overall near-term technical advantage. The shorter-term moving averages 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 (RSI and slow stochastics) are bearish early today. Look for buy stops to reside just above technical resistance at $54.00 and then at $55.00. Look for sell stops just below technical support at the overnight low of $53.15 and then at $52.50. Wyckoff’s Intra-Day Market Rating: 4.5
GRAINS
US grain futures prices were mixed in overnight trading. Bulls are working to stabilize the markets after recent strong selling pressure that pushed prices to multi-month lows. Corn was fractionally higher, soybeans around 1 cent higher and wheat down about 1 to 2 cents.
Trading action in the US grain futures markets has quieted down at mid-week and is likely to remain that way until next Monday’s key USDA monthly supply and demand report, which will include estimates of the size of the US and world crops and the updated US corn-soybean acreage mix that is so much in question at present.
Grain market bears are still enjoying fundamentals that are firmly on their side.
Monday the U.S. labeled China a currency manipulator. China retaliated by saying it will suspend the purchase U.S. ag products.
Weather in the US Corn Belt remains mostly benign to the US corn and soybean crops, albeit still a bit dry in some areas. The extended weather forecasts out to the middle of August are also non-threatening. It appears the next weather threat to the corn and soybean crops would be an early frost, which some weather forecasters say is a higher probability this year.
Technically, serious chart damage has been inflicted on the grains the past two weeks. This has prompted the technical-based bears and the big speculative “fund” traders to get on the short side of the US grain futures 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