Wednesday, October 9–Jim Wyckoff’s Morning Web Log
* LATEST MARKET DEVELOPMENTS *
The big news overnight is President Obama said he plans to nominate Federal Reserve Vice Chair Janet Yellen to the top spot of Chairman of the Fed. This news was not surprising but is still a bullish underlying factor for most markets, including the raw commodity sector and the stock market. Asian stock markets rallied overnight, due in part to the Yellen news. Yellen is perceived by the market place to be a dove when it comes to monetary policy. Wednesday afternoon the minutes of the last FOMC meeting are released. Traders will closely examine that report to get a better feel on when the Fed might start to back off on its quantitative easing of U.S. monetary policy. Federal Reserve officials are speaking this week. Traders and investors will be very interested in seeing what these officials say about the U.S. government shutdown’s impact on the U.S. economy. The partial U.S. government shutdown drags on and is in its ninth day with still no serious movement from either Democrats or Republicans. In fact, Tuesday both Republican lawmakers and President Obama appeared to “dig in their heels” on the confrontation. There is a rising unease in the world market place at present, but there is still not yet panic. The date now being pegged is October 17—the date at which some U.S. government officials now say the U.S. will start to default on its credit obligations. It appears the budget impasse and government closure could lead right up to the U.S. debt ceiling limit. There will likely be fresh news on this matter Wednesday, which could move the markets. A German five-year note auction saw yields decline amid strong demand Wednesday, mostly due to the keener uncertainty regarding the U.S. government’s dysfunction on its budget and debt ceiling. The average yield on the German “Bobl” fell to 0.81% from 1.00% fetched a month ago. Reports Tuesday quoted a major brokerage analyst as saying it’s a “slam dunk” that gold prices will fall significantly when the U.S. government finally does get a budget deal and raises the debt ceiling. I’ve gotten emails from traders and have read that other analysts and market watchers feel the very same way. I’ve been involved with trading and market analysis long enough to know that when a trading idea or market forecast seems like a “slam dunk,” beware. There’s an old market maxim: “Markets can and will do anything and everything possible to frustrate the largest number of traders.” Here’s another: “Markets can remain illogical longer than you (the trader) can remain solvent.” Finally, there are guys like Warren Buffet who have been very successful using “contrary opinion” in their trading and investing methods. If you’d like to read more about contrarian thinking and trading, I wrote a feature story on the matter a while back. Just send me an email at jim@jimwyckoff.com and I’ll email you back the story. U.S. economic data due for release Wednesday includes the FOMC minutes, the weekly MBA mortgage applications survey and the weekly DOE liquid energy stocks report. Most U.S. government economic data is not being released due to the U.S. government closure.–Jim
U.S. STOCK INDEXES
S&P 500 futures: Prices are firmer in early U.S. trading and seeing a corrective bounce after hitting a four-week low on Tuesday. The shorter-term moving averages (4-, 9- and 18-day) are 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 early today. Today, shorter-term technical resistance comes in at Tuesday’s high of 1,671.20 and then at this week’s high of 1,678.50. Buy stops likely reside just above those levels. Downside support for active traders today is located at Tuesday’s low of 1,650.70 and then at 1,640.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.5
Nasdaq index futures: Prices are firmer early today on a corrective bounce after hitting a four-week low on Tuesday.The bulls still have the overall near-term technical advantage. 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 neutral early today. Shorter-term technical resistance is located at 3,175.00 and then at 3,200.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at Tuesday’s low of 3,144.25 and then at 3,125.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5.
Dow futures: Prices are firmer early today. Bulls have faded recently as prices hit a three-month low Tuesday. Buy stops likely reside just above technical resistance at 14,800 and then at Tuesday’s high of 14,860. Sell stops likely reside just below technical support at Tuesday’s low of 14,705 and then at 14,650. Shorter-term moving averages are 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 bearish early today. Wyckoff’s Intra-Day Market Rating: 5.5
U.S. TREASURY BONDS AND NOTES
December U.S. T-Bonds: Prices are near steady early today. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is even with 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 25/32 and then at last week’s high of 133 29/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 133 2/32 and then at 132 22/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0 December U.S. T-Notes: Prices are firmer 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 netural to bearish early today. Shorter-term resistance lies at the overnight high of 126.16.0 and then at last week’s high of 126.27.5. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 126.05.0 and then at last week’s low of 125.31.5. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5
U.S. DOLLAR INDEX
The December U.S. dollar index is solidly higher early today on short covering. 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 80.760 and then at 81.000. Shorter-term support is seen at 80.170 and then at 80.000. Wyckoff’s Intra Day Market Rating: 6.0
NYMEX CRUDE OIL
November Nymex crude oil prices are slightly lower early today. Bulls and bears are on a level near-term technical playing field. In November Nymex crude, look for buy stops to reside just above resistance at the overnight high of $103.75 and then at last week’s high of $104.38. Look for sell stops just below technical support at Tuesday’s low of $102.85 and then at $102.00. Wyckoff’s Intra-Day Market Rating: 4.5
GRAINS
Markets were mixed but mostly weaker overnight. Harvest is at full speed in most areas of the Corn Belt. There are also reports of better-than-expected yields for corn and soybeans coming from Iowa and Illinois, which is also bearish. The “risk-off” mentality in the overall market place, due to the U.S. government shutdown, remains a mildly bearish underlying factor for all of the grains. With much of USDA closed, there is a lack of fresh fundamental news for grain traders to digest, and that also favors the bearish camp due to the uncertainty of the matter. All of the above suggests sideways to lower trading conditions in corn and soybeans in the near term. Wheat remains the bright light in the grains, as prices hover near multi-month highs amid good demand for U.S. wheat and a vastly improved technical posture.
