Monday, June 24–Jim Wyckoff’s Morning Web Log

Note: I am out of the office this morning. My friend and fellow analyst/trader Ken Seehusen produced some of my morning report. Ken’s style is a bit different than mine, but I think you’ll also benefit from Ken’s work.—Jim

Overnight Developments

There is still some risk aversion in the market place to start the new trading week. Asian and European stock markets were lower Monday. There are worries about China’s economic health and a potential credit crunch in the world’s second largest economy. A major Chinese newspaper reported during the weekend that China’s monetary authorities will not take action to ease the tight credit situation at present. There are also lingering effects of last week’s perceived hawkish developments coming from the U.S. Federal Reserve’s latest Open Market Committee meeting.

The U.S. dollar index is higher Monday morning on some perceived safe-haven buying interest. Gold is under pressure and prices are hovering near last week’s 2.5-year low. So far, the yellow metal has seen very limited safe-haven investment demand due to the risk aversion in the market place, and instead has acted like a raw commodity risk asset.

Meantime, U.S. Treasury bond and note yields continue to rise, with the 10-year note reaching 2.63% Monday, which is a two-year high. The Euro currency was stable on some better economic data coming out of Germany. However, the other currencies like the Canadian dollar and Australian dollar were under pressure. Emerging market currencies continued under pressure amid the keener “risk-off” trader attitudes in the worldwide market place.

Nymex crude oil prices are slightly lower Monday on the China economic growth concerns. The crude oil bears have downside technical momentum.

U.S. economic data due for release Monday includes the Chicago Fed national activity index and the Texas manufacturing outlook survey.

The September NASDAQ 100 was lower overnight as it extends the decline off May’s high. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near-term. If September extends the aforementioned decline, the 38% retracement level of the November-May rally crossing at 2838.86 is the next downside target. Closes above the 20-day moving average crossing at 2950.93 would confirm that a short-term low has been posted. First resistance is the 10-day moving average crossing at 2926.85. Second resistance is the 20-day moving average crossing at 2950.93. First support is the 38% retracement level of the November-May rally crossing at 2838.86. Second support is the 50% retracement level of the November-May rally crossing at 2774.87.

The September S&P 500 was lower overnight as it extends the decline off May’s high. Stochastics and the RSI are bearish signaling that sideway to lower prices are possible near-term. If September extends this month’s decline, the 38% retracement level of the November-May rally crossing at 1545.59 is the next downside target. Closes above the 20-day moving average crossing at 1621.02 are needed to confirm that a short-term low has been posted. First resistance is the 20-day moving average crossing at 1621.02. Second resistance is last Wednesday’s high crossing at 1648.70. First support is the overnight low crossing at 1570.20. Second support is the 38% retracement level of the November-May rally crossing at 1545.59.

September T-bonds were lower overnight as they extend the decline off May’s high. Stochastics and the RSI are oversold but remain bearish signaling that additional weakness is possible near-term. If September extends the decline off May’s high, weekly support crossing at 130-24 is the next downside target. Closes above the 20-day moving average crossing at 139-05 are needed to confirm that a short-term low has been posted. First resistance is the 10-day moving average crossing at 138-02. Second resistance is the 20-day moving average crossing at 139-05. First support is the overnight low crossing at 133-19. Second support is weekly support crossing at 130-24.

August Nymex crude oil was slightly lower overnight as it extends this month ’s rally. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near-term. If August extends this month’s rally, June’s low crossing at 91.50 is the next downside target. Closes above the 10-day moving average crossing at 96.43 would confirm that a short-term low has been posted. First resistance is the 20-day moving average crossing at 95.36. Second resistance is the 10-day moving average crossing at 96.43. First support is the 50% retracement level of the April-June rally crossing at 92.77. Second support is June’s low crossing at 91.50.

The September Dollar was higher overnight as it extends the rally off the 75% retracement level of the February-May rally crossing at 80.81.Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near-term. If September extends last week’s rally, the reaction high crossing at 83.26 is the next upside target. Closes below the 10-day moving average crossing at 81.50 would confirm that a short-term top has been posted. First resistance is the reaction high crossing at 83.26. Second resistance is the reaction high crossing at 84.73. First support is the 10-day moving average crossing at 81.50. Second support is the 75% retracement level of the February-May rally crossing at 80.81.

GRAINS

July corn was lower overnight as it extends last Friday’s decline. Stochastics and the RSI are overbought and have turned bearish signaling that sideways to lower prices are possible near-term. Closes below the 20-day moving average crossing at 6.61 1/4 would confirm that a short-term top has been posted while opening the door for additional weakness near-term. If July renews the rally off April’s low, the 38% retracement level of the August-April decline crossing at 6.91 1/2 is the next upside target. First resistance is last Wednesday’s high crossing at 6.83 1/2. Second resistance is the 38% retracement level of the August-April decline crossing at 6.91 1/2. First support is the 20-day moving average crossing at 6.61 1/4. Second support is the reaction low crossing at 6.40 1/2.

July wheat was lower due to profit taking overnight as it consolidates some of last week’s rally. The low-range close sets the stage for a steady to lower opening when the day session begins trading. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices are possible near-term. If July extends last week’s rally, June’s high crossing at 7.14 1/2 is the next upside target. If July renews the decline off June’s high, April’s low crossing at 6.64 3/4 is the next downside target. July wheat needs to close above 7.40 1/2 or below 6.64 3/4 to confirm a breakout of this spring’s trading range and point the direction of the next trending move. First resistance is the reaction high crossing at 7.14 1/2. Second resistance is the reaction high crossing at 7.27 3/4. First support is May’s low crossing at 6.74. Second support is April’s low crossing at 6.64 3/4.

July soybeans were lower overnight as it extends the decline off June’s high. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near-term. If July extends this month’s decline, the reaction low crossing at 14.71 1/4 is the next downside target. Closes above the 20-day moving average crossing at 15.15 1/2 would temper the near-term bearish outlook. First resistance is the 20-day moving average crossing at 15.15 1/2. Second resistance is June’s high crossing at 15.58 3/4. First support is the overnight low crossing at 14.85 1/2. Second support is the reaction low crossing at 14.71 1/4.