Geopolitics a Worry for Market Place Heading into Weekend

* LATEST MARKET DEVELOPMENTS *

The civil war in Iraq remains a major market factor and continues to prompt risk aversion among traders and investors. The risk aversion is scattered however. While the S&P 500 stock index hit a new record high on Thursday (risk on), gold prices rose by nearly $50 an ounce (risk off). It’s doubtful this disparity will continue and may be resolved early next week. The U.S. is sending 300 special ops forces to Iraq, and has not ruled out the use of air power against the rebels. Meantime, reports said Russian troops are massing on its border with Ukraine again. Maybe Russian president Putin reckons he can consolidate his recent land grab during another geopolitical crisis, so as to take some of the negative attention away from him.

Crude oil prices have rallied sharply recently on worries about Iraqi crude oil exports being reduced, and on concerns the violence in Iraq could spread to other Arab nations. The U.S. dollar index hit a four-week low Thursday in the wake of dovishly construed U.S. monetary policy comments from Fed Chair Janet Yellen on Wednesday. These two key “outside markets” are in a near-term bullish posture for the precious metals and other raw commodity markets.

U.S. economic data due for release Friday includes the Chicago Fed national activity index, the U.S. flash manufacturing purchasing managers index, and existing home sales.

Wyckoff’s Daily Risk Rating: 7.0 (Violence and civil war in Iraq has the world market place concerned heading into an uncertain weekend.)

(Wyckoff’s Daily Risk Rating is your way to quickly gauge investor risk appetite in the world market place each day. Each day I assess the “risk-on” or “risk-off” trader mentality in the market place with a numerical reading of 1 to 10, with 1 being least risk-averse (most risk-on) and 10 being the most risk-averse (risk-off), and 5 being neutral.

–Jim Wyckoff

U.S. STOCK INDEXES

S&P 500 September e-mini futures: Prices are near steady in early trading and hovering near the record high scored Thursday. Bulls have the solid overall near-term technical advantage. 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 is above 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 the record high of 1,952.25 and then at 1,960.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at 1,940.00 and then at 1,929.25. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.5

Nasdaq index futures: Prices are slightly higher early today. Bulls have the overall near-term technical advantage as prices hover near a 14-year high. 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 neutral to bullish early today. Shorter-term technical resistance is seen at last week’s high of 3,805.00 and then at 3,825.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 3,775.00 and then at 3,762.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5

Dow futures: Prices are near steady in early U.S. trading. Bulls still have the overall near-term technical advantage. Buy stops likely reside just above technical resistance at Wednesday’s high of 16,835 and then at 16,900. Sell stops likely reside just below technical support at 16,800 and then at 16,750. Shorter-term moving averages are neutral early today, as the 4-day moving average is below 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 early today. Wyckoff’s Intra-Day Market Rating: 5.0

U.S. TREASURY BONDS AND NOTES

September U.S. T-Bonds: Prices are lower early today on profit taking. Bulls still have the 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 135 11/32 and then at 136 even. Buy stops likely reside just above those levels. Shorter-term technical support lies at this week’s low of 134 25/32 and then at the June low of 134 15/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5 September U.S. T-Notes: Prices are weaker in early trading. Bulls have the 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 early today. Shorter-term resistance lies at the overnight high of 124.14.5 and then at this week’s high of 124.23.5. Buy stops likely reside just above those levels. Shorter-term technical support lies at Thursday’s low of 124.04.0 and then at 124.00.0. 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 firmer in early trading, on short covering from recent selling pressure. Slow stochastics for the dollar index are bearish early today. The dollar index finds shorter-term technical resistance at 80.600 and then at 80.800. Shorter-term support is seen at this week’s low of 80.240 and then at 80.000. Wyckoff’s Intra Day Market Rating: 5.5

NYMEX CRUDE OIL

July Nymex crude oil prices are near steady and hovering not far below the recent contract high in early U.S. trading. A bull flag pattern has formed on the daily bar chart. Bulls have the solid overall near-term technical advantage. Prices are in a five-month-old uptrend on the daily bar chart. In July Nymex crude, look for buy stops to reside just above resistance at $107.00 and then at the contract high of $107.68. Look for sell stops just below technical support at the $106.00 and then at this week’s low of $105.32. Wyckoff’s Intra-Day Market Rating: 5.5

GRAINS

Markets were mildly lower in overnight trading. Grain market bears are still in control, overall. The very good growing weather in the U.S. Corn Belt and more of the same in the extended forecast has the grain market bears very comfortable at present. The extended outlooks now take the market place up to the U.S. Independence holiday period, at which time can be pivotal for grain futures prices. Remember that gain markets can “turn on a dime” when summertime weather forecasts change.