It’s a “Risk On” Day Wednesday, Following Fiscal Cliff Agreement

* LATEST MARKET DEVELOPMENTS *

Asian, European and U.S. stock markets were cheered overnight by U.S. lawmakers coming to agreement on the fiscal cliff matting that had been overhanging the market place for weeks. U.S. lawmakers had to reach a deal to avoid a series of tax increases and spending cuts that would have automatically gone into effect. The market place Wednesday has taken a “risk-on” attitude that has also benefitted the raw commodity markets, including the precious metals. The U.S. fiscal cliff agreement overshadowed some fresh, dour economic news coming out of the European Union overnight. The Euro zone manufacturing PMI fell to 46.1 in December from 46.2 in November, according to the Markit data company. Any reading below 50.00 shows contraction. Still, Italian and Spanish bond yields declined Wednesday, amid the better overall risk attitudes. In Asia, the Hong Kong stock market hit a fresh 19-month high on some more positive economic news coming out of China. China’s manufacturing sector continues to expand, as its manufacturing PMI increased to 50.6 in December. U.S. economic data due for release Wednesday includes the Goldman Sachs and Johnson Redbook weekly retail sales reports, the U.S. manufacturing PMI, construction spending, the ISM manufacturing report on business, and the global manufacturing PMI.–Jim

U.S. STOCK INDEXES

S&P 500 futures: Prices are sharply higher in early trading today and hit a fresh 2.5-month high on the fiscal cliff agreement. Bulls have quickly gained upside near-term technical momentum. 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 bullish early today. Today, shorter-term technical resistance comes in at the overnight high of 1,448.00 and then at 1,460.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at 1,433.00 and then at 1,425.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 6.5

Nasdaq index futures: Prices are sharply higher early today. Bulls have fresh upside near-term technical momentum. 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 average is below the 18-day. Short-term oscillators (RSI, slow stochastics) are bullish early today. Shorter-term technical resistance is located at the December high of 2,713.75 and then at 2,725.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 2,686.25 and then at 2,675.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating:
6.5

Dow futures: Prices are sharply higher early today. Bulls have quickly gained fresh upside near-term technical momentum. Sell stops likely reside just below technical support at 13,150 and then at 13,100. Buy stops likely reside just above technical resistance at 13,250 and then at the December high of 13,310. 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 early today. Wyckoff’s Intra-Day Market Rating: 6.5

U.S. TREASURY BONDS AND NOTES

March U.S. T-Bonds: Prices are sharply lower early today on pressure from the better risk appetite in the market place. Bears have quickly gained near-term downside technical momentum. Shorter-term moving averages (4- 9- 18-day) are
neutral early today. The 4-day moving average is above the 9-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are bearish early today. Shorter-term resistance lies at the overnight high of 146 10/32 and 146 16/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 145 29/32 and then at the December low of 145 19/32. Sell stops likely reside just below those levels.
Wyckoff’s Intra-Day Market Rating: 3.5

March U.S. T-Notes: Prices are sharply lower early today. Bears have gained downside momentum. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is above the 9-day. The 9-day is below the
18-day moving average. Oscillators (RSI, slow stochastics) are bearish early today. Shorter-term resistance lies at the overnight high of 132.05.0 and then at 132.10.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 131.30.0 and then at the December low of 131.25.5. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 3.5

U.S. DOLLAR INDEX

The March U.S. dollar index is lower in early U.S. trading, as the bears have gained fresh downside near-term technical momentum. Bears also have the overall near-term technical advantage. Slow stochastics for the dollar index are bullish
early today. The dollar index finds shorter-term technical resistance at the overnight high of 79.65 and then at 79.80. Shorter-term support is seen at last week’s low of 79.42 and then at 79.25. Wyckoff’s Intra Day Market Rating: 4.0

NYMEX CRUDE OIL

Crude oil prices are solidly higher early today and hit a fresh 2.5-month high overnight. Bulls have gained good upside technical momentum. In February Nymex crude, look for buy stops to reside just above resistance at $94.00 and then at $95.00. Look for sell stops just below technical support at $92.50 and then at $92.00. Wyckoff’s Intra-Day Market Rating: 6.0

GRAINS

Markets were closed overnight due to the holiday Tuesday. Given the bullish posture of the key “outside markets” early Wednesday–lower U.S. dollar index and higher crude oil prices–look for some upside price action in the grain futures today. While the grain market bulls have faded badly recently, it would not surprise me to see fresh speculative money enter the grain markets on the long side as the new year gets under way.