Tuesday, February 6–Jim Wyckoff’s Morning Markets Report
OVERNIGHT DEVELOPMENTS
World stock markets tumbled sharply overnight, following the strong losses in the U.S. stock indexes Monday. The Dow Jones Industrial Average saw its largest point decline ever, at one point in afternoon trading Monday. However, percentage-wise, the drop did not come close to the 1987 crash. U.S. stock indexes are pointed toward solidly lower openings again, when the New York day session begins. Worries about rising interest rates and inflation worldwide have really spooked the global equities markets.
Somewhat ironically, world bond markets yields are falling Tuesday on some safe-haven demand from the steep downdraft in world stock markets. Still, don’t look for the world bond markets to make a sustainable recovery in prices.
Gold is higher and seeing safe-haven demand Tuesday, after showing just a modest uptick Monday during the U.S. stock market pounding in the day session. Look for gold to continue to make gains if the world stock market continues to erode.
Some Asian-based stock market volatility indexes that are tied to exchange traded funds had to immediately close down due to the huge spike in stock market volatility early this week.
In other news, a Bank of International Settlements official said Tuesday that bitcoin and other crypto currencies have become “a combination of a bubble, a Ponzi scheme and an environmental disaster” and could undermine the broader world financial system. Bitcoin prices have tumbled sharply the past couple weeks, losing about two-thirds of its value during that time.
The key “outside markets” on Tuesday morning see the U.S. dollar index slightly lower. The greenback rallied Monday when the U.S. stock market sold off. Meantime, Nymex crude oil prices are weaker and trading just below $64.00 a barrel. The very shaky world equity markets have prompted some selling pressure in the crude oil markets.
U.S. economic data due for release Tuesday includes the weekly Johnson Redbook and Goldman Sachs retail sales reports, the international trade in goods and services report, and the IDB/TIPP economic optimism index.
–Jim
U.S. STOCK INDEXES
March S&P 500 December e-mini futures: Prices are lower and hit a four-month low in early U.S. trading. Major near-term chart damage has been inflicted just recently, to strongly suggest the long bull market run in stocks has ended. The 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 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 2,644.50 and then at 2,650.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 2,529.00 and then at 2,515.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.0
March Nasdaq index December futures: Prices are lower and hit a two-month low in early U.S. trading. With this week’s major near-term chart damage, there are chart clues a near-term 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 and 18-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 6,500.00 and then at the overnight high of 6,539.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 6,300.00 and then at the overnight low of 6,260.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 3.0.
U.S. TREASURY BONDS AND NOTES
March U.S. T-Bonds: Prices are solidly higher in early U.S. trading, on short covering and safe-haven demand. Monday’s big and bullish “key reversal” up on the daily bar chart—after prices had hit a contract low—is a technical clue that a market bottom is now in place. Bears still have the overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are still bearish early today. The 4-day moving average is below the 9-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term technical resistance is seen at the overnight high of 147 23/32 and then at 148 even. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight 145 28/32 and then at 145 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
March U.S. T-Notes: Prices are solidly higher in early U.S. trading, on short covering and safe-haven demand. Monday’s big and bullish “key reversal” up on the daily bar chart—after prices had hit a contract low—is a technical clue that a market bottom is now in place. Bears still have the overall near-term technical advantage. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term resistance lies at 122.10.0 and then at the overnight high of 122.19.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at 121.24.0 and then at the overnight low of 121.16.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.5
U.S. DOLLAR INDEX
The March U.S. dollar index is near steady in early U.S. trading. Bears still have the firm overall near-term technical advantage, although the recent selling pressure has stabilized. The shorter-term moving averages for the dollar index are neutral as the 4-day is above the 9-day. The 9-day is below the 18-day moving average. Short-term oscillators for the dollar index are neutral to bullish early today. The dollar index finds shorter-term technical resistance at the overnight high of 89.600 and then at 90.000. Shorter-term support is seen at the overnight low of 89.235 and then at 89.000. Wyckoff’s Intra Day Market Rating: 5.0
NYMEX CRUDE OIL
March Nymex crude oil prices are modestly lower and hit a two-week low in early U.S. trading. Bulls still have the overall near-term technical advantage, but have faded a bit recently. Look for buy stops to reside just above technical resistance at $64.00 and then at $64.50. Look for sell stops just below technical support at the overnight low of $63.29 and then at $63.00. Wyckoff’s Intra-Day Market Rating: 4.5
GRAINS
Grain futures were narrowly mixed overnight. Grain market traders are leery amid the global stock markets’ meltdown. That means less buying interest in the grains. Still, the long bear market in the grains appears to have ended.