Wednesday, May 22–Jim Wyckoff’s Morning Markets Report
World stock markets were mixed overnight. U.S. stock indexes are also pointed toward narrowly mixed openings when the New York day session begins. Risk appetite among traders and investors is a bit keener this week, as the U.S.-China trade war rhetoric from both sides has died down the past few days.
In overnight news, St. Louis Federal Reserve Bank President James Bullard said in a speech in Hong Kong late Wednesday that the U.S. central bank may need to lower interest rates if inflation levels continue at very low levels. The Federal Reserve would like to see annual U.S. inflation around the 2% level. Bullard is a voting member of the Federal Open Market Committee (FOMC).
In another sign of worldwide inflation that is very low, or even problematic, Germany’s government auctioned 10-year bonds (bunds) for an average yield of -0.07%. That’s the lowest yield in almost three years.
The key “outside markets” today see the U.S. dollar index slightly down but still not far below this year’s high, which is a two-year high. Meantime, Nymex crude oil prices are also weaker and trading around $62.50 a barrel.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the FOMC minutes and the weekly DOE liquid energy stocks report. U.S. Treasury Secretary Steven Mnuchin also speaks to a U.S. House committee today.
–Jim
U.S. STOCK INDEXES
June S&P 500 e-mini futures: Prices are slightly lower in early U.S. trading. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are neutral to bullish early today. Today, shorter-term technical resistance comes in at this week’s high of 2,876.50 and then at last week’s high of 2,894.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at this week’s low of 2,832.50 and then at 2,820.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.5
June Nasdaq index futures: Prices are slightly down in early U.S. trading. 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 early today. Shorter-term technical resistance is seen at 7,500.00 and then at this week’s high of 7,559.25. Buy stops likely reside just above those levels. On the downside, short-term support is seen at Tuesday’s low of 7,400.75 and then at this week’s low of 7,361.50. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5.
U.S. TREASURY BONDS AND NOTES FUTURES
June U.S. T-Bonds: Prices are near steady in early U.S. trading. Prices are still within striking distance of the contract high scored in March. Bulls have the solid overall near-term technical advantage. 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 bearish early today. Shorter-term technical resistance is seen at Tuesday’s high of 149 18/32 and then at this week’s high of 150 even. Buy stops likely reside just above those levels. Shorter-term support lies at this week’s low of 148 30/32 and then at 148 20/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0
June U.S. T-Notes: Prices are slightly up in early U.S. trading and not far from the March contract high. Bulls have the solid overall near-term technical advantage. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term support lies at this week’s low of 124.04.5 and then at 124.00.0. Sell stops likely reside just below those levels. Shorter-term technical resistance lies at Tuesday’s high of 124.11.5 and then at this week’s high of 124.19.0. Buy stops likely reside just above those levels. Wyckoff’s Intra-Day Market Rating: 5.5
U.S. DOLLAR INDEX
The June U.S. dollar index is slightly down in early U.S. trading. Bulls still have the solid overall near-term technical advantage as the index is near this year’s high. The shorter-term moving averages for the dollar index are bullish early today, as the 4-day is above the 9-day and 18-day. The 9-day is above the 18-day moving average. Short-term oscillators for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at the contract high of 98.085 and then at 98.250. Shorter-term support is seen at this week’s low of 97.635 and then at 97.250. Wyckoff’s Intra Day Market Rating: 5.0
NYMEX CRUDE OIL
July Nymex crude oil prices are weaker in early U.S. trading. The shorter-term moving averages are neutral early today as the 4-day is above the 9-day and 18-day. The 9-day is even with 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 this week’s high of $63.81 and then at $64.00. Look for sell stops just below technical support at $62.00 and then at $61.00. Wyckoff’s Intra-Day Market Rating: 4.5
GRAINS
U.S. grain futures prices were mixed to weaker in overnight trading, on corrective pullbacks from recent solid gains that pushed corn and wheat markets to three-month highs earlier this week. The soybean futures market is rattled at mid-week after a Bloomberg report on Tuesday said the Trump administration is considering, in light of the U.S.-China trade war that has hurt U.S. ag markets, an aid plan for U.S. farmers that includes a $2.00-per-bushel government payment for soybean growers. If realized, this plan would very likely mean U.S. farmers would plant as many soybean acres as they can, even if it’s very late in the planting season. Still, given the soybean market’s only moderate selling pressure in light of what would be a very bearish development if realized, traders are skeptical of the subsidy being fully implemented. Weather in the U.S. Midwest remains soggy, which continues to limit U.S. corn and soybean seeding progress. Lower production levels for corn and soybeans are now a real possibility this year due to the late planting. Wheat futures will continue in a follower’s role. If soybeans and corn continue to rally, wheat will, too.
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