A Bit More Risk Appetite in Market Place Friday

* Latest Market Developments *

The market place is more at ease Friday morning, following the keener risk aversion that occurred Thursday due to renewed worries about the health of the European Union’s financial system—specifically a major bank in Portugal that is in trouble. European bond market yields are lower on Friday, compared to Thursday, which suggests that, at least for now, trader and investor worries have eased regarding the EU. It would not be surprising to see this matter back on the front burner of the market place next week. The key will be to watch European bond yields. If they start to rise, that spells trouble.

The major U.S. stock indexes hit a speed bump and sold off this week, partly due to the risk aversion seen Thursday. It’s my bias that this very mature bull market run in the equities has just about run its course and that the stock indexes will peak soon, and may have already done so. Veteran market watchers know that when the vast majority of market participants get overly bullish or bearish, a price trend change is likely on the horizon. Presently, it seems there are too many stock market bulls talking up their positions.

Another important development this week is the steep downturn in the Goldman Sachs Commodity Index (GSCI).  The GSCI is a basket of raw commodity futures prices rolled into one index price. Indeed, the raw commodity sector has taken a bit hit just recently—led by big bear markets in the grains and cotton futures, and by declining crude oil and natural gas futures prices.

U.S. economic data due for release Friday is light and includes the monthly Treasury budget statement.

Wyckoff’s Daily Risk Rating: 6.0 (The Portugal bank problems and other potential geopolitical flashpoints are not on the minds of traders and investors on this day.)

(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 slightly higher in early trading. The shorter-term moving averages (4-, 9- and 18-day) are neutral early today. The 4-day moving average is below the 9-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 Thursday’s high of 1,968.25 and then at the record high of 1,978.25. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 1,956.50 and then at this week’s low of 1,945.25. 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. Shorter-term moving averages (4- 9-and 18-day) are neutral early today. The 4-day moving average is below the 9-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 the overnight high of 3,889.00 and then at 3,900.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 3,872.25 and then at 3,850.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5

Dow futures: Prices are firmer in early U.S. trading. Buy stops likely reside just above technical resistance at 16,900 and then at 16,950. Sell stops likely reside just below technical support at 16,842 and then at 16,800. Shorter-term moving averages are still 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 bearish early today. Wyckoff’s Intra-Day Market Rating: 5.5

U.S. TREASURY BONDS AND NOTES

September U.S. T-Bonds: Prices are firmer early today. Bulls are having a very good week and have the firm 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 and 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term resistance lies at the overnight high of 137 11/32 and then at this week’s high of 137 23/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 136 30/32 and then at Thursday’s low of 136 21/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5 September U.S. T-Notes: Prices are near steady in early trading. Bulls have the firm 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 and 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term resistance lies at the overnight high of 125.08.5 and then at this week’s high of 125.15.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at 125.00.0 and then at Thursday’s low of 124.29.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5

U.S. DOLLAR INDEX

The September U.S. dollar index is slightly lower in early trading. Slow stochastics for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at the overnight high of 80.220 and then at this week’s high of 80.405. Shorter-term support is seen at the overnight low of 80.070 and then at 80.000. Wyckoff’s Intra Day Market Rating: 4.5

NYMEX CRUDE OIL

August Nymex crude oil prices are lower in early U.S. trading. Bulls have faded to suggest a near-term market top is in place. In August Nymex crude, look for buy stops to reside just above resistance at $103.00 and then at $103.50. Look for sell stops just below technical support at $102.00 and then at this week’s low of $101.55. Wyckoff’s Intra-Day Market Rating: 4.5

GRAINS

Markets were steady to firmer in overnight trading on a tepid short-covering bounce from recent strong selling pressure. Bears are still in firm technical command. Weather in the Corn Belt remains nearly ideal for growing crops. Extended weather forecasts presently still see no excessively dry or hot weather on the horizon. Traders are looking ahead to Friday’s USDA supply and demand report. My bias is that the grains are close to market bottoms, at least for the near term.