Thursday, May 23–Jim Wyckoff’s Morning Web Log
* LATEST MARKET DEVELOPMENTS *
There are keener “risk-off” trader attitudes in the market place Thursday, which has the gold market seeing good safe-haven demand–something the yellow metal has not experienced in quite some time. The Japanese stock market tumbled overnight and the Japanese yen rallied in the wake of the U.S. stock market losses Wednesday, and on some fresh, weak economic data coming out of China. Japan’s Nikkei stock index fell by 7% Thursday. European stock markets were also sharply lower, which in turn led to follow-through selling in the U.S. stock indexes in pre-market electronic trading Thursday morning. China manufacturing data issued Thursday came in weaker than expected. The preliminary China HSBC manufacturing PMI dropped to a seven-month low of 49.6 in May. A number below 50.0 indicates contraction. The world market place is still digesting Wednesday’s remarks from U.S. Federal Reserve Chairman Ben Bernanke, in which he said it’s possible the Fed could start to back off on its quantitative easing of monetary policy as soon as this summer. Bernanke’s comments and the Fed’s FOMC minutes Wednesday were far from conclusive on the timing of the Fed ending QE. However, the market place read the developments as leaning to the hawkish side and the door being opened just a little wider for the Fed winding down QE sooner rather than later. In the European Union, there was more weak economic data released Thursday. The Markit purchasing managers’ survey for the Euro zone came in at 47.7 in May from 46.9 in April–below the 50.0 threshold, which suggests contraction. There was another dour assessment of the European Union economy from an EU official Thursday. Ewald Nowatny, a member of the European Central Bank’s governing council, said there is no improvement in sight for the EU economy. The EU economy has been in contraction for the past year and a half. The U.S. dollar index is sharply lower Thursday morning, on a corrective technical pullback from recent gains that pushed the greenback to a 9.5-month high this week. U.S. economic data due for release Thursday includes the weekly jobless claims report, the flash manufacturing PMI, the monthly house price index, new residential sales, and the Kansas City Fed manufacturing survey.–Jim
U.S. STOCK INDEXES
S&P 500 futures: Prices are lower early today and seeing follow-through selling from Wednesday’s solid losses. A bearish “key reversal” down on the daily bar chart has occurred in this index, which is one early clue that a market top is in place. The shorter-term moving averages (4-, 9- and 18-day) are still bullish early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is above 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 1,658.60 and then at 1,673.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 1,632.70 and then at 1,625.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.0
Nasdaq index futures: Prices are lower early today and seeing follow-through selling from Wednesday’s pressure. A bearish “key reversal” down on the daily bar chart has occurred in this index, which is one early clue that a market top is in place. The 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 bearish early today. Shorter-term technical resistance is located at 3,000.00 and then at the overnight high of 3,008.50. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 2,961.25 and then at 2,950.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0.
Dow futures: Prices are lower early today and seeing follow-through selling from Wednesday’s losses. A bearish “key reversal” down on the daily bar chart has occurred in this index, which is one early clue that a market top is in place. Buy stops likely reside just above technical resistance at 15,250 and then at 15,300. Sell stops likely reside just below technical support at 15,150 and then at 15,100. Shorter-term moving averages are bullish early today, as the 4-day moving average is above 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 bearish early today. Wyckoff’s Intra-Day Market Rating: 4.0
U.S. TREASURY BONDS AND NOTES
June U.S. T-Bonds: Prices are higher early today on short covering and some safe-haven demand. Prices hit a fresh nine-week low overnight. Bears still have the overall near-term technical advantage. Prices are in a three-week-old downtrend on the daily bar chart. 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 the overnight high of 144 3/32 and then at 144 16/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at 143 even and then at the overnight low of 142 9/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0 June U.S. T-Notes: Prices are firmer early today on short covering and some safe-haven demand. Prices hit a fresh nine-week low overnight. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term resistance lies at the overnight high of 131.23.5 and then at 132.00.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at 131.08.0 and then at 131.00.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
U.S. DOLLAR INDEX
The U.S. dollar index is lower in early U.S. trading, on a technical correction and profit-taking pullback after hitting a fresh 9.5-month high overnight. Bulls still have the overall near-term technical advantage. Slow stochastics for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at 84.220 and then at the overnight high of 84.595. Shorter-term support is seen at the overnight low of 83.845 and then at this week’s low of 83.520. Wyckoff’s Intra Day Market Rating: 4.0
NYMEX CRUDE OIL
Crude oil prices are lower early today. Bulls are fading. In July Nymex crude, look for buy stops to reside just above resistance at $94.00 and then at $95.00. Look for sell stops just below technical support at the overnight low of $92.67 and then at last week’s low of $92.40. Wyckoff’s Intra-Day Market Rating: 4.0
GRAINS
Markets were again narrowly mixed in overnight trading. Corn bulls gained upside technical momentum with Wednesday’s solid gains. Soybean bulls are making a solid move higher and have good upside technical momentum. Soybeans see a tight U.S. cash market, too. What remains the weak sister of the grains complex. Weather in the U.S. Corn Belt is still a main focus for grain traders. Showers and thunderstorms recently, and more in the forecast, are still delaying seeding of corn and soybeans. Traders will closely examine Thursday morning’s weekly USDA export sales report.
