Wednesday, October 24–Jim Wyckoff’s Morning Markets Report
OVERNIGHT DEVELOPMENTS
Global stock markets were mixed to firmer overnight, rebounding from solid losses Tuesday, as risk aversion is a bit less today than it was on Tuesday. U.S. stock indexes are pointed toward lower openings when the New York day session begins.
The S&P 500 stock index on Tuesday dropped below what was strong chart support at its October low. Such suggests a new leg down in prices is coming for the U.S. stock market. That’s bullish for hard assets such as gold and silver.
There are still geopolitical issues looming over the world marketplace, including the U.S.-China trade war, U.S.-Saudi Arabia tensions over the murdered Saudi journalist, and Italy’s recalcitrance over forming its budget to meet European Union constricts. The EU Wednesday rejected the latest Italian draft budget.
All of the above have pushed world stock markets and crude oil prices sharply lower, as well as rallied safe-haven assets like gold, U.S. Treasuries and the U.S. dollar.
In overnight news, the Euro zone got some dour economic data when the composite Markit purchasing managers index (PMI) fell to 52.7 in October from 54.1 in September. The October number was lower than expected and the lowest level in two years.
Traders and investors in Europe are awaiting Thursday’s European Central Bank regular monetary policy meeting. No change in EU monetary policy is expected, but ECB chief Mario Draghi’s press conference could provide clues on future moves by the central bank. Also, Draghi could comment on the rift between Italy’s new government and the EU.
The U.S. economic highlight this week will be the first estimate of third-quarter GDP due out Friday morning. GDP is seen up 3.4% in the third quarter, on an annual basis.
The key outside markets today find the U.S. dollar index higher and hitting a nine-week high overnight. Meantime, November Nymex crude oil prices are weaker and trading just above $66.00 a barrel. Oil prices fell to a two-month low on Tuesday.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the monthly house price index, the flash services PMI, the flash manufacturing PMI, new residential sales, the weekly DOE liquid energy stocks report and the Federal Reserve’s beige book.
–Jim
U.S. STOCK INDEXES
December S&P 500 e-mini futures: Prices are down in early U.S. trading. Prices Tuesday hit a five-month low. Recent price action suggests that at least a near-term market top is in place, if not a major top. The shorter-term moving averages (4-, 9- and 18-day) are bearish early today. The 4-day moving average is below the 9-day. The 9-day is below 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 the overnight high of 2,750.00 and then at this week’s high of 2,782.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 2,719.25 and then at Tuesday’s low of 2,692.25. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.0
December Nasdaq index December futures: Prices are lower in early U.S. trading. Recent price action suggests a near-term market top is in place, if not a major market top. Shorter-term moving averages (4- 9-and 18-day) are bearish early today. The 4-day moving average is below the 9-day. The 9-day average is below the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term technical resistance is seen at 7,100.00 and then at the overnight high of 7,175.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 7,052.25 and then at 7,000.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0.
U.S. TREASURY BONDS AND NOTES
December U.S. T-Bonds: Prices are higher in early U.S. trading today, on more safe-haven demand. Bears still have the overall near-term technical advantage but a two-month-old downtrend on the daily chart has been negated. Shorter-term moving averages (4- 9- 18-day) are bearish early today. The 4-day moving average is below the 9-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term technical resistance is seen at the overnight high of 138 26/32 and then at this week’s high of 139 7/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 138 3/32 and then at this week’s low of 137 20/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
December U.S. T-Notes: Prices are higher in early U.S. trading, on safe-haven demand. Bears still have the overall near-term technical advantage but a two-month-old downtrend on the daily bar chart has been negated. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is even with the 18-day moving average. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term resistance lies at the overnight high of 118.18.5 and then at this week’s high of 118.21.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 118.07.0 and then at 118.00.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
U.S. DOLLAR INDEX
The December U.S. dollar index is higher and hit a nine-week high in early U.S. trading. Bulls have the solid overall near-term technical advantage. 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 bullish early today. The dollar index finds shorter-term technical resistance at the overnight high of 96.195 and then at the August high of 96.450. Shorter-term support is seen at 96.000 and then at the overnight low of 95.665. Wyckoff’s Intra Day Market Rating: 6.0
NYMEX CRUDE OIL
December Nymex crude oil prices are slightly higher in early U.S. trading. Prices hit a two-month low Wednesday. Recent strong selling pressure suggests this market has topped out. 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 $67.00 and then at $67.50. Look for sell stops just below technical support at this week’s low of $65.74 and then at $65.00. Wyckoff’s Intra-Day Market Rating: 5.0
GRAINS
Grain futures prices were weaker overnight. The grain market bears continue to hold the overall near-term technical advantage, even though it appears harvest lows are in place. The upside will continue to be limited by big U.S. corn and soybean crops being harvested, and tepid world demand for U.S. wheat.
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