Thursday, October 31–Jim Wyckoff’s Morning Web Log

* LATEST MARKET DEVELOPMENTS *

After digesting Wednesday’s statement from the U.S. Federal Reserve’s Open Market Committee, many traders and investors have now become more uncertain regarding the timing of the Fed starting to wind down its massive quantitative easing program that has been in place for several years. The FOMC statement on Wednesday said the U.S. economy has made improvements in recent months. This somewhat more “hawkish” tone of the Fed has led to fresh speculation in the market place that the “tapering” of the Fed’s monthly bond-buying program could some sooner—possibly as soon as the December FOMC meeting. However, this view is certainly not pervasive in the market place. The latest FOMC statement that did throw a bit more uncertainty in the market place now makes upcoming U.S. economic data even more critical, as the Fed and markets try to get a better reading on the U.S. economy’s present trajectory. In the European Union overnight, it was reported that the inflation rate for the bloc came in at a four-year low in October, at an annual rate of 0.7%. That rate is well below the European Central Bank’s target rate of just under 2%. The low inflationary pressures also give the ECB room to continue its very easy money policies, if EU economic growth continues to languish.Thursday is an extra important trading day, from a technical perspective. It’s the last trading day of the month. It’s technically significant when, on the last trading day of the month, a market closes at or very near its monthly high or low for that month. U.S. economic data due for release Thursday includes the weekly jobless claims report, the ISM Chicago business survey and the weekly DOE energy stocks report. Overnight reports said demand for physical gold in India is slack, despite the festival season approaching. The Diwali festival of lights is on Sunday. The reports said demand for gold in India this year will be down 10% to 15% from last year, due to higher tax rates on gold imports, and the weakness of the Indian currency.–Jim 

U.S. STOCK INDEXES

S&P 500 futures: Prices are weaker in early U.S. trading, on profit taking after hitting a record high on Wednesday. The shorter-term moving averages (4-, 9- and 18-day) are bullish early today. The 4-day moving average is above the 9- 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 Wednesday’s record high of 1,773.10 and then at 1,785.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at this week’s low of 1,752.00 and then at 1,734.50. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.5

Nasdaq index futures: Prices are lower early today on profit taking after hitting a 13-year high Wednesday. 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 Wednesday’s high of 3,401.75 and then at 3,415.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 3,368.75 and then at this week’s low of 3,360.75. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5.

Dow futures: Prices are weaker early today on profit taking after hitting a record high Wednesday. Buy stops likely reside just above technical resistance at Wednesday’s record high of 15,660 and then at 15,700. Sell stops likely reside just below technical support at 15,400 and then at this week’s low of 15,475. 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 neutral to bearish early today. Wyckoff’s Intra-Day Market Rating: 4.5

U.S. TREASURY BONDS AND NOTES

December U.S. T-Bonds: Prices are near steady early today. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term resistance lies at the overnight high of 135 8/32 and then at the October high of 135 24/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at this week’s low of 134 19/32 and then at 134 10/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0 December U.S. T-Notes: Prices are firmer early today. Shorter-term moving averages (4- 9- 18-day) are 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. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term resistance lies at this week’s high of 128.02.0 and then at 128.08.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 127.12.0 and then at this week’s low of 127.09.5. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5

U.S. DOLLAR INDEX

The December U.S. dollar index is higher early today on more short covering. While bears remain in overall near-term technical control, the bulls are making a move. A bullish weekly high close on Friday would begin to suggest a market low is in place. Slow stochastics for the dollar index are bullish early today. The dollar index finds shorter-term technical resistance at 80.250 and then at 80.500. Shorter-term support is seen at 80.000 and then at the overnight low of 79.740. Wyckoff’s Intra Day Market Rating: 6.0

NYMEX CRUDE OIL

December Nymex crude oil prices are slightly lower early today. Bears have the overall near-term technical advantage. Prices are in a two-month-old downtrend on the daily bar chart. In December Nymex crude, look for buy stops to reside just above resistance at the overnight high of $96.99 and then at $97.50. Look for sell stops just below technical support at the overnight low of $96.35 and then at the October low of $95.95. Wyckoff’s Intra-Day Market Rating: 4.5

GRAINS

Markets were firmer overnight on more short covering following recent selling pressure. Traders are awaiting weekly export sales data today, as well as some other USDA data that was held up due to the government shutdown. There has been very good U.S. harvest progress and that has been bearish for corn and soybeans. That weakness in corn and soybeans has spilled over into the wheat market. Rains in parts of the Corn Belt have delayed harvesting, but it’s not a major market factor. Technically, the corn bears are in firm command, while soybean and wheat bears now have the slight near-term technical advantage.