Thursday, August 22–Jim Wyckoff’s Morning Web Log

* LATEST MARKET DEVELOPMENTS *

The market place has had some time to digest Wednesday afternoon’s FOMC minutes that revealed no clear consensus from FOMC members on when to start to wind down the Fed’s monthly bond-buying program, also known as quantitative easing. While the minutes were not all that different from the last minutes of the FOMC that were released several weeks ago, the “take-away” the market place garnered from this latest Fed event was that “tapering” of quantitative easing is coming, and likely sooner rather than later. The FOMC minutes reinforced ideas that the long, long road of very easy money from the world’s major central banks will reach an end in the coming months. Such is being deemed bullish for the U.S. dollar, and bearish for world bond markets and periphery currencies. U.S. 10-year note yields hit a two-year high of 2.925% overnight. German and U.K. bond yields also hit multi-year highs overnight. Meantime, Asian currency and financial markets remain strained. The Indian rupee and Turkish lira hit new record lows versus the U.S. dollar Thursday. Indian and Indonesian central bank officials have taken steps to stabilize their currencies, but with only very limited success. There are worries about an “Asian contagion” that has in the past roiled markets worldwide. Rising interest rates in the major world economies have put pressure on the periphery currencies. Chinese manufacturing data Thursday showed improvement from the prior month. The HSBC purchasing managers index rose to 50.1 in August from 47.7 in July. A reading over 50.0 suggests economic growth. China is the world’s second-largest economy, but the leading worldwide importer of many key raw commodities. The China data somewhat assuaged the Asian markets, but the concerns of an Asian contagion outweighed the positive China data. Traders and investors have moved the ongoing Egypt unrest to the back burner for the moment, as there are no major, new developments there. However, any escalation in violence is likely to impact the market place, and could also prompt a rise in demand for safe-haven assets, including gold. News reports that Syria has used chemical weapons against its civilians, with hundreds killed, is a matter that will be closely monitored by the market place, and is yet another geopolitical hotspot that could flare up to become a major markets factor. U.S. economic data due for release Thursday includes the weekly jobless claims report, the U.S. flash manufacturing PMI, the house price index, leading economic indicators, and the Kansas City Fed manufacturing survey.–Jim 

U.S. STOCK INDEXES

S&P 500 futures: Prices are firmer early today after hitting a fresh seven-week low overnight. The bulls have faded. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are neutral to bullish early today. Today, shorter-term technical resistance comes in at this week’s high of 1,656.50 and then at 1,670.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 1,631.70 and then at 1,625.00. 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 after hitting a fresh four-week low overnight. The bulls have the overall near-term technical advantage but have faded. The shorter-term moving averages (4- 9-and 18-day) are bearish early today. The 4-day moving average is below the 9-day and 18-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 this week’s high of 3,100.50 and then at 3,114.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 3,055.50 and then at 3,035.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 6.9.

Dow futures: Prices are higher early today after hitting a six-week low Wednesday. Bulls have faded. Buy stops likely reside just above technical resistance at 14,900 and then at 14,950. Sell stops likely reside just below technical support at Wednesday’s low of 14,845 and then at 14,800. Shorter-term moving averages are bearish early today, as the 4-day moving average is below the 9-day and 18-day. The 9-day moving average is below the 18-day moving average. Shorter-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Wyckoff’s Intra-Day Market Rating: 5.5

U.S. TREASURY BONDS AND NOTES

September U.S. T-Bonds: Prices are lower early today and hit another contract low overnight. Bears have the solid overall near-term technical advantage. There are no early technical clues of a market bottom being close at hand. 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 bearish early today. Shorter-term resistance lies at the overnight high of 130 13/32 and then at 131 even. Buy stops likely reside just above those levels. Shorter-term technical support lies at the contract low of 129 28/32 and then at 129 16/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0 September U.S. T-Notes: Prices are lower early today and hit a fresh contract low overnight. Bears have the solid overall 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 bearish early today. Shorter-term resistance lies at the overnight high of 124.16.5 and then at 124.24.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the contract low of 124.02.5 and then at 124.00.0 Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0

U.S. DOLLAR INDEX

The September U.S. dollar index is solidly higher in early U.S. trading, on more short covering. The bears still have the overall near-term technical advantage, but the bulls have gained some upside momentum. Slow stochastics for the dollar index are bullish early today. The dollar index finds shorter-term technical resistance at the overnight high of 81.760 and then at 82.000. Shorter-term support is seen at the overnight low of 81.410 and then at 81.000. Wyckoff’s Intra Day Market Rating: 6.0

NYMEX CRUDE OIL

October Nymex crude oil prices are firmer early today on a corrective bounce from recent selling pressure. Bulls still have the overall near-term technical advantage but have faded. In October Nymex crude, look for buy stops to reside just above resistance at the overnight high of $104.72 and then at $105.00. Look for sell stops just below technical support at this week’s low of $103.50 and then at $103.00. Wyckoff’s Intra-Day Market Rating: 5.5

GRAINS

Markets were lower in overnight trading. The stronger U.S. dollar index is putting downside price pressure on the entire raw commodity sector Thursday. Trading in the grains has turned choppy this week. Corn and soybean bulls still have some technical momentum on their side. A weather market is playing out in the grains—especially for soybeans. The western U.S. Corn Belt has portions that remain very dry. The Pro Farmer Midwest Crop Tour is in progress. So far, the early results show good crop yield potential, which has been a bit bearish. Grain traders will scrutinize Thursday morning’s USDA weekly export sales data.