World Markets Subdued as China’s Party Congress Convenes

Wednesday, October 18–Jim Wyckoff’s Morning Markets Report

OVERNIGHT DEVELOPMENTS

World stock markets were mostly firmer overnight, but in quieter trading. U.S. stock indexes are pointed toward firmer openings when the New York day session begins. The U.S. stock indexes are at record highs this week. Hopes for tax cuts in the U.S. are helping to lift the U.S. stock market.

Gold prices are weaker again in pre-U.S.-day-session trading. The bears have gained some downside technical momentum this week. A higher U.S. dollar index this week is also working against the gold and silver bulls.

The geopolitical scene has been quieter the past couple weeks and that’s allowed world trader/investor risk appetite to uptick, which is bullish for the stock markets and bearish for safe-haven gold.

China on Wednesday started its twice-a-decade Party Congress meetings, in which major economic and cultural planning initiatives are laid out for the next five years. Traders and investors will keep a close watch for any pronouncements coming out of those meetings. China’s President Xi Jinping’s opening speech contained no surprises to the markets. He urged the government to play a greater role in the Chinese economy. He also said he wanted China to become more open in world market dealings.

The key “outside markets” Wednesday morning see the U.S. dollar index higher, as the greenback is having a good week, so far. Meantime, Nymex crude oil futures prices are modestly up and trading just above $52.00 a barrel.

U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, new residential construction, the weekly DOE liquid energy stocks report, and the Federal Reserve’s beige book.

–Jim

U.S. STOCK INDEXES

S&P 500 December e-mini futures: Prices are slightly higher in early U.S. trading and hit another contract and record high. The market is still way overbought and due for a decent downside correction soon. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are neutral to bullish early today. Today, shorter-term technical resistance comes in at the contract high of 2,560.50 and then at 2,575.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at this week’s low of 2,550.75 and then at last week’s low of 2,539.25. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 6.0

Nasdaq index December futures: Prices are firmer and hit another contract and record high overnight. Shorter-term moving averages (4- 9-and 18-day) are bullish early today. The 4-day moving average is above the 9-day and 18-day. The 9-day average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term technical resistance is seen at the contract high of 6,131.50 and then at 6,150.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at this week’s low of 6,098.00 and then at 6,075.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0.

U.S. TREASURY BONDS AND NOTES

December U.S. T-Bonds: Prices are lower in early U.S. trading. Trading has turned choppy this week. 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 neutral to bearish early today. Shorter-term technical resistance is seen at last week’s high of 154 5/32 and then at 154 16/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 153 10/32 and then at 153 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0

December U.S. T-Notes: Prices are lower in early U.S. trading. 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 below the 18-day moving average. Oscillators (RSI, slow stochastics) are bearish early today. Shorter-term resistance lies at 125.10.0 and then at the overnight high of 125 14.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 125.03.5 and then at 125.00.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0

U.S. DOLLAR INDEX

The December U.S. dollar index is higher in early U.S. trading. 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 bullish early today. The dollar index finds shorter-term technical resistance at the overnight high of 93.655 and then at the October high of 94.100. Shorter-term support is seen at the overnight low of 93.260 and then at this week’s low of 92.930. Wyckoff’s Intra Day Market Rating: 5.5

NYMEX CRUDE OIL

November Nymex crude oil prices are firmer in early U.S. trading. Bulls have the overall near-term technical advantage. Look for buy stops to reside just above technical resistance at this week’s high of $52.37 and then at the September high of $52.86. Look for sell stops just below technical support at this week’s low of $51.21 and then at $51.00. Wyckoff’s Intra-Day Market Rating: 5.5

GRAINS

Grain futures markets were weaker again overnight. Recent price action still suggests the corn market does not have much downside potential. Soybean bulls have and uptrend in place to suggest sideways to higher price action in the near term. And wheat bears continue to struggle, but if corn and soybeans can rally, wheat will at least stabilize.