Thursday, February 28–Jim Wyckoff’s Morning Web Log

* LATEST MARKET DEVELOPMENTS *

Yesterday is the last trading day of the month, which makes it an extra important day from a technical perspective. The
U.S. government’s likely inability to agree on a taxing and spending plan by the March 1 sequestration deadline is being mostly ignored in the world market place late this week, as the U.S. stock market rallied sharply Wednesday amid a “risk-on” trader and investor mentality. U.S. stock index futures were trading modestly higher Thursday morning on some follow-through buying strength. President Obama will meet with congressional leaders Friday on the budget matters. Traders and investors are becoming somewhat numb to the ongoing squabbling in Washington, D.C. The European Union and its sovereign debt problems have surfaced again this week. The Italian elections failed to show a clear winner as voters ostensibly rebuked present government austerity measures. The head of the Organization for Economic Cooperation and Development (OECD) said Thursday the Italian election gridlock will not significantly impact the EU debt crisis and efforts to stabilize it. There were Italian government debt auctions Tuesday and Wednesday that were deemed successful, even though yields were a bit higher. On Thursday, Spanish and Italian bond yields fell slightly, in another positive sign the EU debt crisis is now stable. The latest episode in the EU debt crisis appears to be calming down just a bit as the week progresses. European Central Bank chief Mario Draghi said Thursday he will continue to “preserve the integrity” of the Euro currency. European stock markets were mostly higher Thursday on better corporate earnings reports coming out of Europe. U.S. economic data due for release Thursday includes the weekly jobless claims report, the fourth-quarter GDP estimate, the ISM Chicago business survey, and the Kansas City Fed manufacturing index.–Jim

U.S. STOCK INDEXES

S&P 500 futures: Prices are firmer early yesterday. The bulls have the overall near-term technical advantage and regained some upside momentum Wednesday. Trading has turned volatile at higher price levels, which is not bullish. The shorter-term moving averages (4-, 9- and 18-day) are still bearish early yesterday. 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 bullish early yesterday. Yesterday, shorter-term technical resistance comes in at this week’s high of 1,524.30 and then at the February high of 1,530.00. Buy stops likely reside just above those levels. Downside support for active traders yesterday is located at 1,500.00 and then at Wednesday’s low of 1,490.20. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.5

Nasdaq index futures: Prices are firmer in early trading. Bulls have the overall near-term technical advantage. The shorter-term moving averages (4- 9-and 18-day) are still bearish early yesterday. 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 bullish early yesterday. Shorter-term technical resistance is located at Wednesday’s high of 2,757.25 and then at this week’s high of 2,764.50. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 2,739.50 and then at 2,725.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5

Dow futures: Prices are firmer yesterday. The bulls have the overall near-term technical advantage and regained upside
momentum Wednesday. However, the higher volatility at higher price levels is a bearish clue of a topping process. Sell stops likely reside just below technical support at 14,000 and then at 13,950. Buy stops likely reside just above
technical resistance at Wednesday’s five-year high of 14,086 and then at 14,100. Shorter-term moving averages are neutral early yesterday, as the 4-day moving average is below the 9-day and 18-day. The 9-day moving average is above the 18-day moving average. Shorter-term oscillators (RSI, slow stochastics) are neutral early yesterday. Wyckoff’s Intra-Day Market Rating: 5.5

U.S. TREASURY BONDS AND NOTES

March U.S. T-Bonds: Prices are higher early yesterday and hovering not far below this week’s five-week high. Bulls have the overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are bullish early yesterday. 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 neutral to bullish early yesterday. Shorter-term resistance lies at 144 16/32 and then at this week’s high of 144 26/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 143 21/32 and then at 143 15/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0

March U.S. T-Notes: Prices are firmer early yesterday and hovering near a two-month high. Bulls have the near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are bullish early yesterday. 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 neutral to bullish early yesterday. Shorter-term resistance lies at this week’s high of 131.27.0 and then at 132.00.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 131.13.5 and then at 131.08.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0

U.S. DOLLAR INDEX

The March U.S. dollar index is firmer early yesterday. The greenback bulls have the near-term technical advantage. Slow stochastics for the dollar index are bearish early yesterday. The dollar index finds shorter-term technical resistance at 82.000 and then at this week’s high of 82.240. Shorter-term support is seen at the overnight low of 81.745 and then at 81.500. Wyckoff’s Intra Day Market Rating: 5.5

NYMEX CRUDE OIL

Crude oil prices are near steady early yesterday. Prices this week hit a two-month low. The recent pause on the daily chart is not bullish. In April Nymex crude, look for buy stops to reside just above resistance at the overnight high of $93.18 and then at $93.50. Look for sell stops just below technical support at this week’s low of $91.92 and then at $91.50. Wyckoff’s Intra-Day Market Rating: 5.0

GRAINS

Markets were mostly higher overnight, on short covering. There have been better moisture patterns in the central U.S. that are working to alleviate the severe soil shortages in the region and that’s bearish for the grain markets. However, there has also been some fresh export demand for U.S. grains recently. I have turned more bearish the grains just recently, based upon recent bearish USDA projections for this year’s crops, the better moisture situation in the U.S. heartland, and the overall technical posture of the raw commodity sector that remains bearish.