Wednesday, July 31–Jim Wyckoff’s Morning Web Log
* LATEST MARKET DEVELOPMENTS *
The first day of a bunch of highly anticipated and major economic data is at hand Wednesday, starting with the U.S. gross domestic product reading for the second quarter. The consensus forecast for the GDP figure is up 0.9%. Next comes the Wednesday afternoon U.S. Federal Reserve FOMC meeting statement. Most expect the Fed will leave its monetary policy unchanged and continue to lean well to the dovish side. Many Fed watchers are actually looking ahead to the next FOMC meeting, in September, at which time the central bank could begin its much-anticipated “tapering” of its monthly bond-buying program, also called quantitative easing. On Friday awaits the key U.S. jobs report. The key non-farm payrolls figure is forecast to rise by around 175,000 workers in July. The overall unemployment rate is expected to have declined by 0.1%, to 7.5%. European traders are awaiting the European Central Bank and Bank of England monthly meetings that occur on Thursday. Asian traders and investors are awaiting manufacturing data from China, due out Thursday.The raw commodity bulls got some encouragement coming out of China overnight. Chinese government officials said Wednesday they will maintain a steady economic growth pace despite “highly complicated” conditions at present. The statement came after a meeting of the Chinese politburo. Also on Wednesday the Chinese central bank injected money into its financial system for the first time since February, in a signal of easier monetary policy. In a significant development coming out of the European Union Wednesday, a German government debt auction saw its 30-year bond fetch a yield of 2.47%. That’s a significant rise from Germany’s last 30-year bond auction and the highest yield on the 30-year bond in a year and a half. Such suggests two things: First, European investors are less concerned about the European Union sovereign debt crisis spinning out of control again as their risk appetite has increased. Recent EU economic data has been just a bit more upbeat. Second, the higher German bond yields suggest inflationary pressures are creeping back into the world market place. The rise in German bond yields is a mixed bag for gold. Better investor risk appetite in Europe could pull money away from safe-haven gold. However, the inflationary implications from the rise in German yields are bullish for gold and the raw commodity sector, in general. U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the national ADP employment report, the second-quarter GDP, the employment cost index, the U.S. Treasury’s quarterly refunding announcement, the ISM-Chicago business survey, and the weekly DOE liquid energy stocks report.–Jim
U.S. STOCK INDEXES
S&P 500 futures: Prices are near steady early today. Bulls have the solid overall near-term technical advantage as prices hover not far below the recent record high. The shorter-term moving averages (4-, 9- and 18-day) are neutral early today. The 4-day moving average is below the 9-day. The 9-day is above the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Today, shorter-term technical resistance comes in at last week’s record high of 1,695.50 and then at 1,700.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at this week’s low of 1,677.00 and then at last week’s low of 1,670.50. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.0
Nasdaq index futures: Prices are slightly higher early today. The bulls have the solid overall near-term technical advantage as prices Tuesday hit a 12-year high. The shorter-term moving averages (4- 9-and 18-day) are bullish early today. The 4-day moving average is above the 9-day. The 9-day average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are bullish early today. Shorter-term technical resistance is located at Tuesday’s high of 3,094.75 and then at 3,100.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 3,079.25 and then at this week’s low of 3,056.75. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5.
Dow futures: Prices are slightly lower early today on mild profit taking. Bulls still have the solid near-term technical advantage. Buy stops likely reside just above technical resistance at the record high of 15,545 and then at 15,600. Sell stops likely reside just below technical support at Tuesday’s low of 15,430 and then at 15,400. Shorter-term moving averages are bullish early today, as the 4-day moving average is above the 9-day. The 9-day moving average is above the 18-day moving average. Shorter-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Wyckoff’s Intra-Day Market Rating: 5.0
U.S. TREASURY BONDS AND NOTES
September U.S. T-Bonds: Prices are slightly lower early today. Bears have the solid overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is below the 9-day and 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term resistance lies at the overnight high of 134 1/32 and then at Tuesday’s high of 134 14/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 133 16/32 and then at 133 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5 September U.S. T-Notes: Prices are slightly lower early today. Bears have the overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is below the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are bearish early today. Shorter-term resistance lies at the overnight high of 126.15.5 and then at Tuesday’s high of 126.21.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 126.06.5 and then at 126.03.0 Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5
U.S. DOLLAR INDEX
The September U.S. dollar index is slightly higher in early U.S. trading, on tepid short covering. Bears still have the overall near-term technical advantage. Slow stochastics for the dollar index are bullish early today. The dollar index finds shorter-term technical resistance at the overnight high of 82.035 and then at Tuesday’s high of 82.090. Shorter-term support is seen at the overnight low of 81.775 and then at this week’s low of 81.610. Wyckoff’s Intra Day Market Rating: 5.0
NYMEX CRUDE OIL
Crude oil prices are slightly higher early today on short covering after prices Tuesday hit a three-week low. Bulls still have the slight overall near-term technical advantage but have faded. In September Nymex crude, look for buy stops to reside just above resistance at $104.00 and then at Tuesday’s high of $104.54. Look for sell stops just below technical support at Tuesday’s low of $102.67 and then at $102.00. Wyckoff’s Intra-Day Market Rating: 5.0
GRAINS
Markets were mixed in overnight trading. The grain market bears are still in near-term command. The U.S. Corn Belt weather is non-threatening for the corn and corn and soybean crops and that’s fully bearish. The important worldwide economic events that begin Wednesday and end on Friday could have a significant impact on grain futures prices. So watching the key outside markets the rest of this week—the U.S. dollar index and crude oil–will be extra important for grain traders.
