Thursday, June 20–Jim Wyckoff’s Morning Web Log

* LATEST MARKET DEVELOPMENTS *

The market place Thursday morning sees traders and investors in a keen “risk-off” mentality following Wednesday’s U.S. Federal Reserve events.  Asian and European stock markets slumped overnight, while gold and silver prices dropped to 2.5-year lows. U.S. stock indexes are also solidly lower Thursday morning. Importantly, world bond markets are also seeing serious selling pressure Thursday. The U.S. dollar index has rallied sharply after earlier this week hitting a four-month low. While the FOMC statement released Wednesday afternoon said U.S. monetary policy will not see an imminent change and there was no mention about tapering of the Fed’s monthly bond-buying program, Fed Chairman Ben Bernanke at his press conference after the statement was released hinted the Fed in the coming months will back off the accelerator on its monthly bond buying. After further digesting the Fed news the market place now reckons the Fed will indeed start scaling back its monthly bond purchases (tapering) by the end of this year. Some Fed watchers are now saying that by this time next year the Fed’s monthly bond buying could be completely gone. More raw commodity-market-bearish news came from China Thursday, as the HSBC flash PMI dropped to 48.3 in June from 49.2 in May. Any reading below 50.0 suggests contraction. Reports said the China manufacturing data Thursday was the weakest in months. The raw commodity sector is getting hit hard Thursday morning, led by gold hitting a fresh 2.5-year low, on the prospect of the Fed’s tapering. For the past few years the commodity markets have been supported by the devaluation of the U.S. dollar. Now that the Fed appears ready to “take the punch bowl away from the party,” many markets are spooked. More bad news for gold came from overnight reports that said Indian imports of gold will decline by 30% due to recent Indian government taxing measures meant to reduce the country’s trade imbalance. There is civil unrest in Turkey and Brazil this week that traders and investors are still monitoring. If the situations there see an escalation and violence in the streets, the gold market could see some safe-haven demand surface. U.S. economic data due for release Thursday includes the weekly jobless claims report, the U.S. flash manufacturing PMI, existing home sales, leading economic indicators and the Philadelphia Fed business outlook survey.–Jim 

U.S. STOCK INDEXES

S&P 500 futures: Prices are lower early today. Bulls still have the overall near-term technical advantage, but are fading again. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are bearish early today. Today, shorter-term technical resistance comes in at the overnight high of 1,622.60 and then at 1,635.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 1,605.80 and then at the June low of 1,597.00. 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. Bulls have the overall near-term technical advantage, but are fading again. The shorter-term moving averages (4- 9-and 18-day) are neutral early today. The 4-day moving average is above the 9-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 located at the overnight high of 2,956.50 and then at 2,975.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 2,922.50 and then at the June low of 2,897.75. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0.

Dow futures: Prices are lower early today. Buy stops likely reside just above technical resistance at 15,000 and then at 15,047. Sell stops likely reside just below technical support at 14,900 and then at the June low of 14,840. Shorter-term moving averages are bearish early today, as the 4-day moving average is below the 9-day. The 9-day moving average is below the 18-day moving average. Shorter-term oscillators (RSI, slow stochastics) are neutral early today. Wyckoff’s Intra-Day Market Rating: 4.0

U.S. TREASURY BONDS AND NOTES

September U.S. T-Bonds: Prices are solidly lower early today and hit another contract low. Bears have the solid overall near-term technical advantage. Prices are in a seven-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 bearish early today. Shorter-term resistance lies at 137 even and then at the overnight high of 137 23/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight contract low of 135 25/32 and then at 135 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 3.0 September U.S. T-Notes: Prices are solidly lower early today and hit a fresh contract low overnight. Bears have the strong 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 bearish early today. Shorter-term resistance lies at the overnight high of 127.20.0 and then at 128.00.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight contract low of 126.26.5 and then at 126.16.0 Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 3.0

U.S. DOLLAR INDEX

The September U.S. dollar index is sharply higher in early U.S. trading. Prices have made a strong rebound from Wednesday’s four-month low, on safe-haven buying. Slow stochastics for the dollar index are bullish early today. The dollar index finds shorter-term technical resistance at the overnight high of 82.220 and then at 82.355. Shorter-term support is seen at the overnight low of 81.440 and then at 81.000. Wyckoff’s Intra Day Market Rating: 6.5

NYMEX CRUDE OIL

Crude oil prices are solidly lower early today. Bulls are fading quickly after prices Wednesday hit a four-month high. In August Nymex crude, look for buy stops to reside just above resistance at $97.00 and then at $98.00. Look for sell stops just below technical support at the overnight low of $96.05 and then at $95.50. Wyckoff’s Intra-Day Market Rating: 4.0

GRAINS

Markets were lower in overnight trading, pressured by bearish “outside market” forces that include the stronger U.S. dollar index and solidly lower crude oil prices—as well as the risk aversion in the market place Thursday. Still, grain market bulls have gained some upside momentum this week. The critical early-July timeframe for the grain markets is approaching, and that could be prompting short covering and fresh speculative buying interest in the grains. Traders will closely scrutinize Thursday morning’s weekly USDA export sales report.