Tuesday, October 16–Jim Wyckoff’s Morning Markets Report
OVERNIGHT DEVELOPMENTS
Global stock markets were mixed overnight, with European stocks mostly up and Asian stocks mostly down. U.S. stock indexes are pointed toward firmer openings when the New York day session begins.
European shares were lifted today by reports the new Italian government is more or less falling in line with European Union constricts, with the new Italian Prime Minister saying Italy’s membership in the EU is “unrenounceable.”
The rift between the U.S. and Saudi Arabia regarding a missing Saudi journalist who many think was killed by the Saudi Kingdom is still on the front burner of the marketplace. The U.S. Secretary of State is in Saudi Arabia talking to the king. President Trump over the weekend said there would be “severe punishment” of the Saudi Kingdom if it was determined it killed the journalist. Some reports are now saying a Saudi may admit to killing the journalist.
In other overnight news, China’s consumer price index hit a seven-month high in September—at up 0.7% from August and up 2.5%, year-on-year.
The closely watched German economic indicator, the ZEW index, dropped to -24.7 in October from -10.6 in September. ZEW officials said the steep drop is mostly due to worries about world trade wars—especially the U.S. vs. China.
In a sign of the wide spread between U.S. government and German government bond yields, the German government auctioned a two-year note today, which fetched an average yield of -0.56%. The U.S. two-year note is currently yielding 2.87%.
The key outside markets today find the U.S. dollar index slightly higher. Meantime, November Nymex crude oil prices lower and trading just above $71.00 a barrel.
U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, industrial production and capacity utilization, the NAHB housing index, and Treasury international capital data. The Treasury will also issue a report on world currency markets, but is not expected to label China a currency manipulator.
–Jim
U.S. STOCK INDEXES
December S&P 500 e-mini futures: Prices are firmer in early U.S. trading. Recent price action strongly suggests that at least a near-term market top is in place, if not a major top. A bearish pennant pattern has now formed on the daily bar chart. 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 bullish early today. Today, shorter-term technical resistance comes in at Monday’s high of 2,778.75 and then at last Friday’s high of 2,785.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at Monday’s low of 2,745.25 and then at 2,725.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.5
December Nasdaq index December futures: Prices are higher in early U.S. trading. Recent price action strongly suggests a near-term market top is in place, if not a major market top. A bearish pennant pattern has formed on the daily bar chart. 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 neutral to bullish early today. Shorter-term technical resistance is seen at Monday’s high of 7,179.00 and then at 7,200.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at Monday’s low of 7,060.75 and then at 7,035.00. 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 weaker in early U.S. trading today. Bears have the solid overall near-term technical advantage as a six-week-old downtrend is in place on the daily chart. 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 below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is seen at the overnight high of 138 15/32 and then at last week’s high of 138 31/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 138 even and then at 137 23/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5
December U.S. T-Notes: Prices are slightly lower in early U.S. trading. Bears have the solid overall near-term technical advantage. Prices are in a six-week-old downtrend on the daily bar chart. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is above the 9-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term resistance lies at the overnight high of 118.08.0 and then at last week’s high of 118.14.5. Buy stops likely reside just above those levels. Shorter-term technical support lies at 118.00.0 and then at 117.28.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5
U.S. DOLLAR INDEX
The December U.S. dollar index is slightly lower in early U.S. trading. Bulls still have the 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 bearish early today. The dollar index finds shorter-term technical resistance at Monday’s high of 95.060 and then at 95.470. Shorter-term support is seen at Monday’s low of 94.635 and then at 94.500. Wyckoff’s Intra Day Market Rating: 5.0
NYMEX CRUDE OIL
November Nymex crude oil prices are lower in early U.S. trading. Recent strong selling pressure still 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 bearish early today. Look for buy stops to reside just above technical resistance at the overnight high of $72.04 and then at Monday’s high of $72.70. Look for sell stops just below technical support at last week’s low of $70.51 and then at $70.00. Wyckoff’s Intra-Day Market Rating: 4.5
GRAINS
Grain futures prices were mixed to weaker overnight. While market bottoms look to be in place for all three major grain markets, the upside is limited by big U.S. corn and soybean crops being harvested—despite current harvest delays. Still, my bias is for choppy and sideways-to-higher price action into the end of this year.
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