* Latest Market Developments *
(Follow me on Twitter: @jimwyckoff)
It’s a “risk-on” day in the market place Wednesday, following U.S. mid-term elections that solidly favored the Republican party. The majority of traders and investors reckon the Republicans, which will control the House of Representatives and the Senate, will be better for U.S. economic growth and businesses. The U.S. dollar index is higher hit a four-year high overnight, U.S. stock indexes are higher and at or near record or multi-year highs, and gold prices slumped to a 4.5-year low overnight.
The narrative in the market place in recent weeks has been the stronger U.S. dollar and sharply lower crude oil prices. Nymex crude oil prices this week have hit a three-year low.
In other overnight news, the HSBC China services purchasing managers’ index (PMI) came in at 52.9 in October and was deemed disappointing. And in the European Union, the Markit composite PMI was reported at 52.1 in October from 52.0 in September. European traders deemed the PMI number as downbeat. A PMI reading above 50.0 suggests expansion. Also, the EU’s retail sales fell 1.3% in September from August—the largest monthly decline in over two years. To underscore the worry about the European Union’s economy and financial system, a five-year German bond auction Wednesday fetched a record-low average yield of just 0.12%.
There are two big economic data points this week: the monthly meeting of the European Central Bank on Thursday and the U.S. employment situation report on Friday. Recent dour economic data coming out of the EU, and Japan’s fresh monetary stimulus last week, suggest the European Central Bank will move to enact more monetary stimulus sooner rather than later.
U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, the U.S. services PMI, the global services PMI, the ISM non-manufacturing report on business, and the weekly DOE liquid energy stocks report.
Wyckoff’s Daily Risk Rating: 4.0 (Geopolitical risks have been moved to the back burner of the market place…for now.)
(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 December e-mini futures: Prices are firmer in early trading and hovering close to this week’s record 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 and 18-day. The 9-day is above the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are neutral early today. Today, shorter-term technical resistance comes in at the record high of 2,019.25 and then at 2,025.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at 2,000.00 and then at 1,986.75. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 6.0
Nasdaq index futures: Prices are higher in early trading and are near this week’s 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 and 18-day. The 9-day average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is seen at this week’s high of 4,174.50 and then at 4,200.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 4,150.00 and then at 4,125.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
Dow futures: Prices are higher in early U.S. trading and hit a record high overnight. Buy stops likely reside just above technical resistance at 17,400 and then at 17,450. Sell stops likely reside just below technical support at 17,300 and then at 17,250. 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 below the 18-day moving average. Shorter-term oscillators (RSI, slow stochastics) are neutral early today. Wyckoff’s Intra-Day Market Rating: 6.0
U.S. TREASURY BONDS AND NOTES
December U.S. T-Bonds: Prices are modestly lower early today. Shorter-term moving averages (4- 9- 18-day) are still 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. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is seen at the overnight high of 141 16/32 and then at this week’s high of 141 28/32. Buy stops likely reside just above those levels. Shorter-term support lies at 140 24/32 and then at this week’s low of 140 14/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5 December U.S. T-Notes: Prices are weaker in early trading. Shorter-term moving averages (4- 9- 18-day) are still 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. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term resistance lies at the overnight high of 126.13.5 and then at this week’s high of 126.20.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at this week’s low of 125.30.5 and then at 124.24.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0
U.S. DOLLAR INDEX
The December U.S. dollar index is sharply higher in early trading and hit a contract and four-year high overnight. Bulls have the strong overall near-term technical advantage. Slow stochastics for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at the overnight contract high of 87.720 and then at 88.000. Shorter-term support is seen at 87.500 and then at 87.250. Wyckoff’s Intra Day Market Rating: 7.0
NYMEX CRUDE OIL
December Nymex crude oil prices are slightly lower and hovering near Tuesday’s three-year low. Bears remain in strong near-term technical control. Look for buy stops to reside just above technical resistance at $77.50 and then at $78.00. Look for sell stops just below technical support at the overnight low of $76.46 and then at Tuesday’s low of $75.84. Wyckoff’s Intra-Day Market Rating: 4.0
GRAINS
Grain futures markets were lower in overnight trading on corrective pullbacks from recent gains and amid the bearish outside market forces of a strong U.S. dollar and slumping crude oil prices. The grain market bulls are now fading and need to show fresh power soon to keep their fledgling price uptrends in place. Recent good harvest progress in the U.S. Corn Belt the past few days is also a negative for corn and soybeans.
