Friday, October 11–Jim Wyckoff’s Morning Web Log
* LATEST MARKET DEVELOPMENTS *
Asian and European stock markets rallied Friday, following the big gains in U.S. stock indexes Thursday. U.S. stock indexes are slightly higher Friday morning, but are holding those large gains scored Thursday. It’s a “risk-on” trader mentality in the market place to end the trading week.
The U.S. Congress and President Obama appear close to agreeing on a measure to extend the government debt ceiling for six weeks, so the lawmakers can then work out a U.S. government budget deal in that timeframe. Or so that’s their logic. While there is still much disagreement between Republicans and Democrats on the government spending, the markets are encouraged and seeing significantly increased risk appetite due to the likelihood the U.S. government could be back open as soon as Monday. The dearth of U.S. economic data the past week has put a damper on many markets.
The keener risk appetite in the market place late this week is also partly due to bullish markets reaction to the news Wednesday that President Obama nominated Janet Yellen to succeed Ben Bernanke as chairman of the Federal Reserve. She is expected to be easily confirmed by the U.S. Congress. Yellen is perceived by the market place to be a monetary policy “dove.”
U.S. economic data due for release Friday includes the University of Michigan consumer sentiment survey. Most U.S. government economic data is not being released due to the U.S. government closure. The G-20 finance ministers and central bankers are meeting in Washington. There will be pronouncements coming out of that confab that will be monitored by the market place.
Traders and investors are looking ahead to next week, when a batch of fresh economic data from China, the world’s number-two economy, is released.
Separately, I’m seeing a pattern of news and economic data coming out of the European Union that is troubling. EU economic data released the past several weeks, or longer, has been lukewarm at best and worrisomely weak at worst. EU finance officials, the IMF and the European Central Bank have all given signals the past several weeks that suggest while their collective economies are teetering on recovery, they are also teetering on sliding into another major financial crisis. Greece’s unemployment rate reached 27% last month. The ECB is propping up the major European banks, which hold massive amounts of non-performing commercial loans. I suspect a new economic and financial crisis in the European Union would be set off by a lack of trader/investor confidence in European bond markets. I will keep a close eye on bond yields in Span and Italy in the coming weeks, and keep you informed. If those countries’ bond yields start rising it could be an early sign of trouble. It will be those periphery EU countries that have been in economic and financial trouble in the past that will likely lead any serious European Union financial trouble in the future. Such a scenario would likely be significantly bullish for U.S. and German bond markets, gold and the U.S. dollar.–Jim
U.S. STOCK INDEXES
S&P 500 futures: Prices are slightly higher in early U.S. trading. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are neutral bullish early today. Today, shorter-term technical resistance comes in at the overnight high of 1,688.50 and then at 1,705.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 1,673.30 and then at 1,663.00. 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. The shorter-term moving averages (4- 9-and 18-day) are still bearish early today. The 4-day moving average is below the 9-day. The 9-day average is below the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term technical resistance is located at the overnight high of 3,203.25 and then at 3,214.50. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 3,175.75 and then at 3,150.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5.
Dow futures: Prices are slightly higher early today. Buy stops likely reside just above technical resistance at 15,100 and then at 15,150. Sell stops likely reside just below technical support at 15,000 and then at 14,950. Shorter-term moving averages are still 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 neutral to bullish early today. Wyckoff’s Intra-Day Market Rating: 5.5
U.S. TREASURY BONDS AND NOTES
December U.S. T-Bonds: Prices are firmer early today. Bears still have the overall near-term technical advantage. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term resistance lies at the overnight high of 133 3/32 and then at 133 16/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 132 20/32 and then at 132 10/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0 December U.S. T-Notes: Prices are slightly higher early today. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term resistance lies at the overnight high of 126.09.5 and then at 126.16.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 125.30.0 and then at this week’s low of 125.26.5. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0
U.S. DOLLAR INDEX
The December U.S. dollar index is weaker early today on a downside correction from gains seen at mid-week. Bears remain in overall near-term technical command. Slow stochastics for the dollar index are bullish early today. The dollar index finds shorter-term technical resistance at the overnight high of 80.620 and then at this week’s high of 80.865. Shorter-term support is seen at the overnight low of 80.340 and then at 80.000. Wyckoff’s Intra Day Market Rating: 4.0
NYMEX CRUDE OIL
November Nymex crude oil prices are lower early today. Bears have the overall near-term technical advantage. Prices are in a six-week-old downtrend on the daily bar chart. In November Nymex crude, look for buy stops to reside just above resistance at $102.00 and then at $102.50. Look for sell stops just below technical support at $101.00 and then at the August low of $100.80. Wyckoff’s Intra-Day Market Rating: 4.0
GRAINS
Markets were mostly weaker overnight. Harvest is at full speed this week in most areas of the Corn Belt and there are reports of better-than-expected yields for corn and soybeans, which is bearish. With much of USDA still closed, there remains a lack of fresh fundamental news for grain traders to digest, and that also favors the bearish camp. If the government opens next week, ag market traders will have a whole bunch of fresh fundamental news to digest, and that would make for a bit higher price volatility next week.
