Friday, May 31–Jim Wyckoff’s Morning Markets Report
European and Asian stock markets were mostly down overnight as trader and investor anxiety has up-ticked late this week. U.S. stock indexes are also pointed toward lower openings when the New York day session begins and hit three-month lows overnight.
President Trump late Thursday surprisingly announced new trade tariffs set to go into effect in June against imports from Mexico, in order to persuade that country to help the U.S. battle illegal immigration from the Mexican border with the U.S.
To further rattle the markets, there was more dour economic news coming out of China today. Its manufacturing purchasing managers index (PMI) for May came in at 49.4 versus 50.1 in April and a 49.9 forecast. China’s May services PMI was 54.3, the same as in April and in line with market expectations. A reading below 50.0 suggests contraction in the sector, while a number above suggests growth.
The above news developments underscore a recent theme in the marketplace: increasing concerns regarding slowing global economic growth.
Gold and U.S. Treasury prices are rallying on this last trading day of the week and of the month, on safe-haven demand amid the stock market sell off.
The key “outside markets” today see the U.S. dollar index trading modestly down. Meantime, Nymex crude oil prices are lower, hit a 3.5-month low overnight and are trading around $55.50 a barrel.
U.S. economic data due for release Friday includes personal income and outlays, the ISM Chicago business survey, and the University of Michigan consumer sentiment survey.
–Jim
U.S. STOCK INDEXES
September S&P 500 e-mini futures: Prices are lower and hit a nearly three-month low in early U.S. trading. Prices are in a four-week-old downtrend on the daily bar chart to suggest a 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. 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 the overnight high of 2,794.75 and then at Wednesday’s high of 2,810.25. Buy stops likely reside just above those levels. Downside support for active traders today is located at 2,750.00 and then at 2,731.75. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.0
September Nasdaq index futures: Prices are lower and hit a nearly three-month low in early U.S. trading. Prices are in a four-week-old downtrend to suggest a 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. 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 the overnight high of 7,268.00 and then at 7,300.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 7,150.00 and then at 7,100.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0.
U.S. TREASURY BONDS AND NOTES FUTURES
September U.S. T-Bonds: Prices are sharply higher and hit a contract high in early U.S. trading. Bulls have the solid overall near-term technical advantage, to suggest more upside. 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 153 22/32 and then at 154 even. Buy stops likely reside just above those levels. Shorter-term support lies at 153 even and then at the overnight low of 152 16/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.5
September U.S. T-Notes: Prices are solidly higher and hit a contract in early U.S. trading. Bulls have the solid 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 support lies at 126.10.0 and then at the overnight low of 126.02.0. Sell stops likely reside just below those levels. Shorter-term technical resistance lies at the overnight contract high of 126.23.0 and then at 126.28.0. Buy stops likely reside just above those levels. Wyckoff’s Intra-Day Market Rating: 6.5
U.S. DOLLAR INDEX
The September U.S. dollar index is weaker in early U.S. trading. Bulls still 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 neutral to bearish early today. The dollar index finds shorter-term technical resistance at the overnight high of 97.535 and then at this week’s high of 97.625. Shorter-term support is seen at this week’s low of 97.065 and then at last week’s low of 96.880. Wyckoff’s Intra Day Market Rating: 4.5
NYMEX CRUDE OIL
July Nymex crude oil prices are lower and hit a 3.5-month low in early U.S. trading. Bears are in near-term technical control. A price downtrend is in place on the daily chart. 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 the overnight high of $56.61 and then at $57.00. Look for sell stops just below technical support at the overnight low of $54.83 and then at $54.00. Wyckoff’s Intra-Day Market Rating: 4.0
GRAINS
U.S. grain futures prices were lower overnight on corrective pullbacks from recent solid gains and on news the U.S. is prepared to slap trade tariffs on imports from Mexico. The markets are also pausing after corn hit a nearly 12-month high and wheat a three-month high Wednesday. Soybeans hit a five-week high. It’s likely grain trader focus will switch right back to the major weather market playing out this spring. There is some more rain in the forecast in the next week, but it’s more scattered in nature. U.S. corn and soybean planting are at their slowest paces in recent history. In wheat, prices are supported by declining U.S. winter wheat crop conditions, mostly due to wet weather creating quality problems. Traders are also awaiting today’s weekly USDA export sales report, normally due out on Thursday mornings, but delayed due to the U.S. holiday on Monday. However, today’s export sales data will take a back seat to weather and the new U.S. tariffs slapped on Mexico.
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