Wednesday, June 26–Jim Wyckoff’s Morning Web Log

* LATEST MARKET DEVELOPMENTS *

Gold prices sank to a nearly three-year low in overnight trading. The yellow metal has seen weak-handed long liquidation and technical short-selling due to several factors, including ideas the U.S. economy is getting strong enough that the Federal Reserve will begin to scale back its monetary stimulus program. A strong batch of U.S. economic data on Tuesday further bolstered those notions. A cash crunch in China just recently has also worked to reduce demand for physical gold in that nation. Also, major gold consumer India is also seeing slack demand for physical gold after the Indian government slapped additional duties on the import of gold in order to reduce its trade deficit. Other raw commodity markets are also seeing selling pressure due to the likelihood of the U.S. Fed “tapering” its monthly bond-buying program in the coming months, and because of worries about China’s economy. Asian stock markets were mixed overnight as the credit crunch in China appeared to ease just a bit Wednesday following reports Tuesday that the People’s Bank of China said the liquidity tightness was only temporary and would be dealt with effectively. European stocks were mostly higher on a much better consumer sentiment report from Germany. European Central Bank President Mario Draghi said Wednesday the ECB will keep its monetary policy accommodative for the foreseeable future. Draghi’s statement echoed other major central bank officials who earlier this week made more dovish remarks. There is some speculation in the market place that Fed Chairman Ben Bernanke believes the market place misinterpreted the results of last week’s FOMC meeting as too hawkish. There’s an old market adage that says a market is the most bearish at the very bottom in price–just before the market starts to turn up. The market place’s general attitude toward gold is presently the most bearish I’ve seen it in a very, very long time. There’s also an old market adage that rings very true: The majority of traders are wrong most of the time. As the majority of the market place appears to be very bearish the gold market, it can be argued from a market psychology perspective that the bottom must be close at hand for the gold market.–Jim
 
U.S. STOCK INDEXES

S&P 500 futures: Prices are firmer early today, on more of a corrective bounce from recent selling pressure that saw prices Monday hit a two-month low. Bears still have some near-term momentum on their side. The 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 is below the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are bullish early today. Today, shorter-term technical resistance comes in at 1,600.00 and then at 1,610.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 1,573.30 and then at this week’s low of 1,553.80. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.5

Nasdaq index futures: Prices are higher early today on a corrective bounce from Monday’s move to a two-month low.Bulls have lost their overall near-term technical advantage. The 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 to bullish early today. Shorter-term technical resistance is located at the overnight high of 2,876.75 and then at 2,885.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 2,845.75 and then at this week’s low of 2,817.75. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5.

Dow futures: Prices are firmer early today on a technical bounce after prices Monday fell to a two-month low. Bulls have lost their overall near-term technical advantage. Buy stops likely reside just above technical resistance at 14,800 and then at 14,850. Sell stops likely reside just below technical support at 14,690 and then at 14,655. 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: 5.5

U.S. TREASURY BONDS AND NOTES

September U.S. T-Bonds: Prices are near steady early today, supported by short covering in a bear market. Prices Monday hit a contract low. Bears still have the solid overall near-term technical advantage. Prices are in a two-month-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 neutral early today. Shorter-term resistance lies at the overnight high of 134 23/32 and then at 135 even. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 133 20/32 and then at the contract low of 133 4/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0
 
September U.S. T-Notes: Prices are slightly firmer early today on tepid short covering after hitting a contract low on Monday. Bears still 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 neutral to bullish early today. Shorter-term resistance lies at the overnight high of 126.02.5 and then at this week’s high of 126.17.5. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 125.10.5 and then at the contract low of 125.00.5 Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0

U.S. DOLLAR INDEX

The September U.S. dollar index is higher in early U.S. trading and hit a fresh three-week high overnight. Slow stochastics for the dollar index are bullish early today. The dollar index finds shorter-term technical resistance at the overnight high of 83.125 and then at 83.260. Shorter-term support is seen at the overnight low of 82.735 and then at this week’s low of 82.440. Wyckoff’s Intra Day Market Rating: 6.0

NYMEX CRUDE OIL

Crude oil prices are near steady early today. Trading has been choppy recently. Bulls and bears are on an overall level near-term technical playing field. In August Nymex crude, look for buy stops to reside just above resistance at this week’s high of $96.09 and then at $97.00. Look for sell stops just below technical support at $95.00 and then at the overnight low of $94.27. Wyckoff’s Intra-Day Market Rating: 5.0

GRAINS

Markets were mixed in overnight trading. The grain market bulls have faded recently amid the generally more bearish attitudes in the raw commodity sector at present, following last week’s Federal Reserve FOMC meeting. Weather in the U.S. Corn Belt remains benign at present. However, many areas in the central Corn Belt remain too wet, which has prevented planting of corn and soybeans. The critical early-July timeframe for the grain markets is approaching, and that could prompt short covering and fresh speculative buying interest in the grains in the coming days. There is a USDA supply and demand report out Friday morning, which will also update planted acres figures for corn and soybeans. This USDA report will be one of the more important ones of the year.