* Latest Market Developments *

As the U.S. day session is set to begin, it has quickly become a keen “risk-off” trading day in the world market place Tuesday. U.S. stock indexes have fallen to solidly lower levels after posting moderate gains overnight.

There were several worrisome developments overnight but the main concern is the Russian ruble has plunged and hit another record low versus the U.S. dollar—despite the Russian central bank on Tuesday implementing an emergency interest rate increase from 10.5%, to 17%. Traders and investors are wondering what Russian president Vladimir Putin will do now. His economy is in shambles from falling oil prices and western sanctions. But he still controls the world’s second or third most powerful military, and he has shown in recent months he will use that military power to attain his objectives.

Crude oil prices overnight sunk to a five year low of below $54.00 a barrel, basis January Nymex futures. In stunning fashion, crude oil prices have lost half of their value since June. That’s a very rare feat in any commodity market. While it’s good news at the gasoline pumps, the market place has been spooked by crude oil’s steep downdraft.

There are also reports that the Taliban terrorists have attached a school in Pakistan and killed over 100 students. This comes after a terrorist in Australia captured world attention Monday by holding hostages in a Sydney café.

In other dour news, China reported its HSBC purchasing managers’ index (PMI) fell to a seven-month low of 49.5 in December from 50.0 in November. A reading below 50.0 suggests contraction in the sector. This news was another bearish element pushing crude oil prices still lower Tuesday.

Meantime, the Markit data firm reported the European Union composite PMI came in at  51.7 in December from 51.1 in November. However, in Germany, the EU’s largest economy, the composite PMI fell to 51.4 in December versus 71.7 in November.

All of the above is prompting safe-haven demand for gold and U.S. Treasuries Tuesday. Surprisingly, the U.S. dollar index is under strong selling pressure Tuesday morning.

Traders and investors are also looking to Tuesdays’ start of the Federal Reserve Open Market Committee (FOMC) meeting to discuss U.S. monetary policy. Many believe the Fed meeting will slightly change statement wording to favor the monetary policy hawks. The FOMC could also further elaborate on a timeline for raising interest rates. The Fed has not raised interest rates in six years.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, new residential construction, the U.S. flash manufacturing PMI.

(Note: Follow me on Twitter–@jimwyckoff–for breaking market news.)

Wyckoff’s Daily Risk Rating: 8.0 (Geopolitical risks are back on the front burner of the market place Tuesday. Traders and investors are spooked, which is making for higher volatility in for safe-haven demand in markets like gold, T-bonds and T-notes.)

(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 March e-mini futures: Prices are solidly lower in early trading and hit a six-week low. Bulls are fading to suggest at least a near-term market top is in place. 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 bearish early today. Today, shorter-term technical resistance comes in at 1,980.00 and then at the overnight high of 1,994.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 1,961.50 and then at 1,950.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.0

Nasdaq index futures: Prices are solidly lower in early trading and hit a six-week low. It looks like a market top is in place as the near-term technical posture deteriorates. 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 bearish early today. Shorter-term technical resistance is seen at 4,150.00 and then at the overnight high of 4,172.25. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 4,113.75 and then at 4,100.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0

Dow futures: Prices are lower in early U.S. trading and hit a six-week low. Bulls have faded badly to suggest a market top is in place. Buy stops likely reside just above technical resistance at 17,125 and then at 17,200. Sell stops likely reside just below technical support at 17,000 and then at 16,950. 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 bearish early today. Wyckoff’s Intra-Day Market Rating: 4.0

U.S. TREASURY BONDS AND NOTES

March U.S. T-Bonds: Prices are sharply higher early today on flight-to-quality buying and hit a contract high overnight. Bulls have the solid overall near-term technical advantage. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term technical resistance is seen at the overnight contract high of 146 19/32 and then at 147 even. Buy stops likely reside just above those levels. Shorter-term support lies at 146 even and then at 145 16/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 7.0 March U.S. T-Notes: Prices are sharply higher in early trading and hit a two-month high overnight, on safe-haven demand. Bulls have the solid overall near-term technical advantage. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term resistance lies at the overnight high of 128.12.5 and then at 128.16.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at 127.24.0 and then at 127.16.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 7.0

U.S. DOLLAR INDEX

The March U.S. dollar index is sharply lower in early trading and hit a two-week low. Bulls still have the overall near-term technical advantage but are fading now. Short-term oscillators for the dollar index are bearish early today. The dollar index finds shorter-term technical resistance at 88.250 and then at 88.500. Shorter-term support is seen at the overnight low of 87.830 and then at 87.750. Wyckoff’s Intra Day Market Rating: 3.0

NYMEX CRUDE OIL

January Nymex crude oil prices are sharply lower in early U.S. trading and hit another five-year low of $53.80 overnight. Bears remain in strong overall near-term technical control amid no early clues of a market bottoming being close at hand. Look for buy stops to reside just above technical resistance at $55.00 and then at the overnight high of $55.85. Look for sell stops just below technical support at the overnight low of $53.80 and then at $53.00. Wyckoff’s Intra-Day Market Rating: 4.0

GRAINS

Grain futures markets were mixed in overnight trading. Corn and soybeans are lower on the geopolitical uncertainty in the market place today. However, wheat is higher as the Russia worries make traders wonder about wheat exports coming out of the Black Sea region. Bulls still have some upside near-term technical momentum heading into the end of the year.