Monday, May 6–Jim Wyckoff’s Morning Markets Report
World stock markets were rattled and traded sharply lower overnight on news that President Trump tweeted a threat to further increase U.S. trade tariffs on Chinese goods. The sense of the marketplace had been that a U.S.-China trade deal was close and could be finalized late this week. Commodity markets were also roiled overnight on ideas any escalation in the U.S.-China trade war would translate into slower global economic growth. U.S. stock indexes are pointed toward sharply lower openings when the New York day session begins.
As of this writing the Chinese trade delegation was still headed to the U.S. for talks this week. Upon reflection, many traders and investors realize they should not have become so optimistic on the trade war being resolved, given Turmp’s propensity to make knee-jerk decisions.
China stock markets fell from 5% to 7% overnight, making those losses the largest one-day declines in three years.
The Chinese yuan plunged on the world foreign exchange market. The U.S. dollar index is trading slightly up today, while Nymex crude oil prices are lower and trading around $61.00 a barrel.
Adding to geopolitical concerns to start the trading week, the U.S. is sending a naval task force, including an aircraft carrier, to the Middle East as a show of force against Iran. A U.S. official said the U.S. warships are “fully prepared” to respond to any attack from Iran or others.
Gold prices are just slightly higher and not seeing much of a safe-haven bid amid the ramped-up geopolitical situation.
U.S. economic data due for release Monday includes the employment trends index and the global services PMI.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are solidly lower and hit a four-week low overnight. Bulls still have the near-term technical advantage but a price uptrend on the daily chart is now in jeopardy. The 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 is above the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are bearish early today. Today, shorter-term technical resistance comes in at the overnight high of 2,917.75 and then at 2,935.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 2,883.50 and then at 2,865.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 3.5
June Nasdaq index futures: Prices are lower and hit a two-week low in early U.S. trading. Bulls have the overall near-term technical advantage but a price uptrend on the daily bar chart is now in jeopardy. 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 bearish early today. Shorter-term technical resistance is seen at 7,750.00 and then at the overnight high of 7,810.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 7,667.50 and then at 7,650.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 3.5.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are higher 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- and 18-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 148 24/32 and then at 149 even. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 147 21/32 and then at 147 16/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
June U.S. T-Notes: Prices are higher in early U.S. trading. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is even with the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term resistance lies at 124.00.0 and then at last week’s high of 124.04.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 123.18.0 and then at 123.12.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.5
U.S. DOLLAR INDEX
The June U.S. dollar index is slightly higher early today. Bulls have the firm 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 to bearish early today. The dollar index finds shorter-term technical resistance at 97.500 and then at last week’s high of 98.865. Shorter-term support is seen at Friday’s low of 97.185 and then at 97.000. Wyckoff’s Intra Day Market Rating: 5.5
NYMEX CRUDE OIL
June Nymex crude oil prices are lower and hit a five-week low in early U.S. trading. Bulls are fading. A price uptrend on the daily bar chart was negated last week, to suggest a market top is in place. 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 bearish early today. Look for buy stops to reside just above technical resistance at $62.00 and then at $62.50. Look for sell stops just below technical support at $61.00 and then at the overnight low of $60.04. Wyckoff’s Intra-Day Market Rating: 4.0
GRAINS
Grain futures were sharply lower overnight on the surprising deterioration in U.S.-China trade talks. Grain market bears have the firm overall near-term technical advantage. Focus is on U.S. Corn Belt weather, which is a mixed bag now. It’s bullish for corn because of planting delays, which in turn is bearish for soybeans due to more bean acres likely planted. For wheat the wet weather is a mixed bag.
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