Tuesday, August 6–Jim Wyckoff’s Morning Markets Report
Asian and European stock markets were mixed overnight. Asian stock markets were down and European stock indexes were higher. U.S. stock indexes recovered from follow-through early overnight losses and are set to open higher when the New York day session begins. Serious near-term technical damage has been inflicted on the U.S. stock indexes, to suggest they have put in at least near-term tops. Remember that the historically turbulent stock market months of September and October are right around the corner.
News late Monday that the U.S. labeled China a currency maninpulator initially pushed world stock markets still lower, following Monday’s steep losses. However, China’s central bank then set its currency, the yuan, exchange rate with the U.S. dollar at 6.9683, which was 0.7% down from Monday’s fixing. The yuan depreciated to an 11-year low against the U.S. dollar Monday, at 7.1087 to the dollar. The move on Monday led to ideas China has thrown in the towel on any trade agreement with the U.S. coming anytime soon. However, Tuesday’s yuan fixing below 7 gave pause to those thinking the Chinese government will let the yuan continue to depreciate against the U.S. dollar. Also, China’s central bank knows the downside of letting the yuan fall in value–one being flight of capital out of China, which has very likely already been occurring.
President Trump announced last week that on September 1 the U.S. will impose another 10% tariff on Chinese imports into the U.S. China, in turn, announced it will suspend its purchases of U.S. agricultural products.
Many market watchers now reckon the U.S.-China trade war being ratcheted up another notch will prompt the Federal Reserve to again lower U.S. interest rates soon. Speeches by Federal Reserve officials in the coming days will garner extra scrutiny from the marketplace. St. Louis Fed President James Bullard speaks to the National Economics Club later today.
The key “outside markets” today see Nymex crude oil prices firmer and trading just below $55.00 a barrel. The U.S. dollar index is trading near steady today.
U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the IBD/TIPP economic optimism index.
–Jim
U.S. STOCK INDEXES
September S&P 500 e-mini futures: Prices are higher and have rebounded after hitting a two-month low overnight. 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 2,875.00 and then at 2,900.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at Monday’s low of 2,820.50 and then at 2,800.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 6.0
September Nasdaq index futures: Prices are higher and have rebounded from a two-month low hit overnight. 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 7,500.00 and then at 7,550.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 7,400.00 and then at 7,350.00. 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 weaker on a corrective pullback after hitting another contract high overnight. Bulls still 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 the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term technical resistance is seen at the overnight contract high of 161 31/32 and then at 162 16/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 160 1/32 and then 159 16/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0
September U.S. T-Notes: Prices are weaker on a corrective pullback after hitting another contract high overnight. Bulls still 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 neutral to bearish early today. Shorter-term support lies at the overnight low of 129.15.0 and then at 129.08.0. Sell stops likely reside just below those levels. Shorter-term technical resistance lies at 130.00.0 and then at the overnight contract high of 130.10.5. Buy stops likely reside just above those levels. Wyckoff’s Intra-Day Market Rating: 5.0
U.S. DOLLAR INDEX
The September U.S. dollar index is near steady in early U.S. trading. Bulls still have the overall near-term technical advantage but have faded. More downside pressure this week would suggest the USDX has put in a top. 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 to bearish early today. The dollar index finds shorter-term technical resistance at the overnight high of 97.480 and then at 97.715. Shorter-term support is seen at the overnight low of 96.980 and then at 96.750. Wyckoff’s Intra Day Market Rating: 5.0
NYMEX CRUDE OIL
September Nymex crude oil prices are slightly up in early U.S. trading. Bears have the slight 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 neutral to bearish early today. Look for buy stops to reside just above technical resistance at $56.05 and then at $57.00. Look for sell stops just below technical support at the July low of $53.59 and then at $53.00. Wyckoff’s Intra-Day Market Rating: 5.5
GRAINS
US grain futures prices were mixed to weaker in overnight trading. Bulls are trying to stabilize the bleeding from recent strong selling pressure that has driven the markets to multi-month lows. Corn was down 2 to 3 cents, soybeans around 1 cent higher and wheat down about 3 to 5 cents.
News late Monday that the U.S. labeled China a currency maninpulator initially pushed world stock markets still lower, following Monday’s steep losses. Gain markets worldwide also felt selling pressure. China has confirmed it will suspend the purchase U.S. ag products.
Weather in the US Corn Belt remains mostly non-threatening to the US corn and soybean crops, albeit a bit dry in some areas.
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 jump on the short side of the US grain futures markets.
Trading in the US grain futures markets is now likely to be choppy and sideways ahead of next Monday’s key USDA monthly supply and demand report, which will include estimates of the size of the US crops and the updated US corn-soybean acreage mix that is so much in question at present.
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