Monday, August 5–Jim Wyckoff’s Morning Markets Report
Asian and European stock markets tumbled overnight, amid heightened worries about an escalating trade war between the world’s two largest economies—the U.S. and China. U.S. stocks are set to open solidly lower when the New York day session begins.
The Chinese currency, the yuan, depreciated to a new record low against the U.S. dollar Monday, at 7.1087 to the dollar. This is leading to ideas China has thrown in the towel on any trade agreement with the U.S. coming anytime soon. China’s central bank appeared to condone the decline in its currency, saying the yuan’s fall is the result of U.S. protectionism and that the yuan remains stable. In the past, China’s central bank had stepped in to boost the yuan when it reached 7 to the dollar.
President Trump announced late last week that on September 1 he will slap another 10% tariff on Chinese imports into the U.S. The U.S. stock market has dropped, U.S. Treasury futures prices have hit new contract highs, the yield on the 10-year U.S. Treasury note has dropped well below 2.00%, the U.S. dollar has dropped, and grains and crude oil prices have also fallen. The gold market has rallied sharply and hit a six-year high overnight, on safe-haven demand.
The escalation of the U.S.-China trade war has other implications, too, including significantly increasing the likelihood the Federal Reserve will again lower U.S. interest rates in the coming months.
Major protesting in the streets of Hong Kong also has the world marketplace uneasy to start the trading week.
The key “outside markets” today see Nymex crude oil prices weaker and trading just above $55.00 a barrel. The U.S. dollar index is also weaker.
U.S. economic data due for release Monday includes the U.S. services PMI, the ISM non-manufacturing report on business, the global services PMI, and the employment trends index.
–Jim
U.S. STOCK INDEXES
September S&P 500 e-mini futures: Prices are solidly lower and hit a seven-week low in early U.S. trading. Last Friday’s bearish weekly low close 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 bearish early today. Today, shorter-term technical resistance comes in at 2,900.00 and then at 2,920.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 2,887.25 and then at 2,875.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 3.0
September Nasdaq index futures: Prices are solidly lower and hit a six-week low in early U.S. trading. Friday’s bearish weekly low close 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 bearish 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 7,551.75 and then at 7,500.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 3.0.
U.S. TREASURY BONDS AND NOTES FUTURES
September U.S. T-Bonds: Prices are sharply higher and hit another contract high in early U.S. trading. 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 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 contract high of 160 24/32 and then at 161 even. Buy stops likely reside just above those levels. Shorter-term support lies at 160 even and then 159 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 9.0
September U.S. T-Notes: Prices are sharply higher and hit another contract high in early U.S. trading. 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 129.00.0 and then at the overnight low of 128.27.0. Sell stops likely reside just below those levels. Shorter-term technical resistance lies at the overnight contract high of 129.25.5 and then at 130.00.0. Buy stops likely reside just above those levels. Wyckoff’s Intra-Day Market Rating: 9.0
U.S. DOLLAR INDEX
The September U.S. dollar index is lower in early U.S. trading. Bulls still have the overall near-term technical advantage but are now fading a bit. The shorter-term moving averages for the dollar index 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 for the dollar index are bearish early today. The dollar index finds shorter-term technical resistance at the overnight high of 97.930 and then at Friday’s high of 98.225. Shorter-term support is seen at 97.250 and then at 97.000. Wyckoff’s Intra Day Market Rating: 4.0
NYMEX CRUDE OIL
September Nymex crude oil prices are lower 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 $56.00 and then at $57.00. Look for sell stops just below technical support at the overnight low of $54.68 and then at $54.00. Wyckoff’s Intra-Day Market Rating: 4.0
GRAINS
US grain futures prices were lower in overnight trading, amid a world stock market sell off, amid heightened worries about an escalating trade war between the world’s two largest economies—the U.S. and China. Corn was down around 6 cents, soybeans off around 6 to 7 cents and wheat down about 6 to9 cents. The Chinese currency, the yuan, depreciated to a new record low against the U.S. dollar Monday, at 7.1087 to the dollar. This is leading to ideas China has thrown in the towel on any trade agreement with the U.S. coming anytime soon. China’s central bank appeared to condone the decline in its currency, saying the yuan’s fall is the result of U.S. protectionism and that the yuan remains stable. In the past, China’s central bank had stepped in to boost the yuan when it reached 7 to the dollar.
President Trump announced late last week that on September 1 he will slap another 10% tariff on Chinese imports into the U.S. This is a body blow to the US grain markets, many of which up to last year had been major exporters to China.
Weather in the US Corn Belt remains mostly non-threatening to the the US corn and soybean crops.
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.
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