Deflation May be on Doorstep of European Union

* LATEST MARKET DEVELOPMENTS *

Economic news out of China overnight showed its services PMI rose to 52.6 in October from 52.4 the previous month. This continues a string of mostly upbeat economic data coming out of China the past few months. China’s Communist party meets this week, during which time major plans and economic reforms are unveiled by the leaders of the country. The world market place will be closely watching for any proclamations coming from that confab.

In the European Union, the bloc’s producer price index fell at the fastest annual rate in three years, it was reported Tuesday. EU producer prices rose 0.1% in August, month-on-month, but were down 0.9% on the year. Tuesday’s EU inflation numbers, combined with similar figures released last week, are worrisome as they suggest deflationary conditions could be on the horizon for the EU. Tuesday’s data bolsters ideas the European Central Bank could move to ease its monetary policy in an effort to keep the tepid EU economic recovery moving forward. The ECB monthly monetary policy meeting is Thursday. The Euro currency has dropped significantly in value against the U.S. dollar just recently, on beliefs the ECB will soon cut its key interest rate.In other EU news, the 17-nation bloc’s official economistssaid Tuesday the collective economy’s unemployment rate will remain near record highs through 2015. Government austerity and debt reduction will curtail business investment and consumer spending. The economists said 2013 will end with another year of overall economic recession—the third in five years.

Reports Tuesday said consumer demand for physical gold in India was only half of normal heading up to the key Diwali festival. Added Indian government taxes and other import hurdles crimped consumer demand in this major gold-consuming nation.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the IBD/TIPP economic optimism index, and the ISM non-manufacturing report on business.

(New item: Wyckoff’s Daily Risk Rating is now your way to quickly gauge investor risk appetite in the world market place each day. Each day I will 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). Each morning I will look at several markets and scan the world’s news headlines to get a sense of how risk appetite in the market place will shape for the trading day. For example, extreme readings in my Daily Risk Rating would be a very bullish U.S. jobs report that would fully cheer investors—Wyckoff’s Daily Risk Rating would be 1. Conversely, a daily rating of 10 would be an unexpected military confrontation in the Middle East that included combat. Most days Wyckoff’s Daily Risk Rating will be around neutral–between 4 and 6.)

Tuesday’s Wyckoff’s Daily Risk Rating: 6.0 (No major developments overnight, or expected on Tuesday. Economic data later this week will move the scale to more risk aversion, ahead of the data’s release.)–Jim Wyckoff
 
U.S. STOCK INDEXES

S&P 500 futures: Prices are weaker in early U.S. 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 to bearish early today. Today, shorter-term technical resistance comes in at the overnight high of 1,763.80 and then at the record high of 1,773.10. Buy stops likely reside just above those levels. Downside support for active traders today is located at last week’s low of 1,747.50 and then at 1,734.50. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.5

Nasdaq index futures: Prices are lower early today. 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 average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are bearish early today. Shorter-term technical resistance is located at the overnight high of 3,379.25 and then at Monday’s high of 3,387.25. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 3,365.00 and then at last week’s low of 3,357.50. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5

Dow futures: Prices are lower early today. Buy stops likely reside just above technical resistance at Monday’s high of 15,600 and then at the record high of 15,660. Sell stops likely reside just below technical support at 15,500 and then at last week’s low of 15,477. 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 above the 18-day moving average. Shorter-term oscillators (RSI, slow stochastics) are neutral early today. Wyckoff’s Intra-Day Market Rating: 4.5

U.S. TREASURY BONDS AND NOTES

December U.S. T-Bonds: Prices are lower early today. Bulls are fading. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is below the 9-day and 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are bearish early today. Shorter-term resistance lies at 134 even and then at 134 16/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at Monday’s low of 133 20/32 and then at 133 10/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5
 
December U.S. T-Notes: Prices are weaker 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 bearish early today. Shorter-term resistance lies at the overnight high of 127.01.5 and then at 127.09.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at Monday’s low of 126.21.5 and then at 126.16.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5

U.S. DOLLAR INDEX

The December U.S. dollar index is slightly higher early today. It appears a market low is in place. Slow stochastics for the dollar index are bullish early today. The dollar index finds shorter-term technical resistance at the overnight high of 80.760 and then at Monday’s high of 81.025. Shorter-term support is seen at 80.500 and then at 80.320. Wyckoff’s Intra Day Market Rating: 5.0

NYMEX CRUDE OIL

December Nymex crude oil prices are weaker early today and hovering near a four-month low. Bears have the overall near-term technical advantage. Prices are in a nine-week-old downtrend on the daily bar chart. In December Nymex crude, look for buy stops to reside just above resistance at $95.00 and then at $95.50. Look for sell stops just below technical support at $94.00 and then at $93.50. Wyckoff’s Intra-Day Market Rating: 4.0

GRAINS

Markets were steady to firmer overnight. U.S. corn and soybean harvest is well over half-completed and the related cash grain movement and hedge selling are bearish. Traders are looking ahead to Friday’s latest monthly supply and demand report. That report is not expected to be bullish and is likely to show record U.S. corn and soybean production. Technically, the corn bears are still in firm command, while soybeans are slightly bearish on a near-term basis and wheat bears have the near-term technical advantage.