OVERNIGHT DEVELOPMENTS

It’s a “risk-off” day in the market place Friday morning. U.S. stock indexes are under pressure and have hit two-month lows, while other world stock markets are also selling off. U.S. Treasury bond and note futures prices are at contract highs on safe-haven demand. Late this week the focus of the market place has turned to the prospect of weakening world economies that could lead to still more monetary stimulus for the European Union, and could prompt the U.S. Federal Reserve to at least hold off on any plans to raise U.S. interest rates soon. The specter of anemic world economies also carries with it the risk of serious deflationary pressures.

One feature in the market place this week is plunging crude oil prices. Nearby Nymex crude oil futures hit a two-year low of $83.59 a barrel early Friday. While consumers are cheering falling gasoline prices, the raw commodity market bulls are in full retreat as their sector leader crude oil takes a whipping. Combined with the strong U.S. dollar, these two key “outside markets” are major bearish underlying factors that have been working to pressure most raw commodity market prices. Crude oil prices will have to bottom out before most raw commodity markets have a chance to sustain a near-term price uptrend.

The other major market feature this week is the big sell off in the U.S. stock indexes, which saw prices hit two-month lows overnight. If the U.S. stock indexes close at their weekly low closes on Friday, it would be another bearish clue the indexes have topped out, from at least a near-term perspective. A peak in the U.S. stock market would have significant bullish implications for other markets. Money would flow out of the stock market and into other investment asset classes, such as “hard assets” like gold and other raw commodities. It’s also likely the U.S. Treasuries would continue to benefit from an investor exodus from the U.S. stock market.

U.S. economic data due for release Friday includes import and export price indexes, and the monthly Treasury budget statement. A couple of Fed officials speak Friday, and their comments will be parsed by the market place, as usual.

Wyckoff’s Daily Risk Rating: 7.5 (The market place late this week is focused on the prospect of weakening world economies, which is causing keener risk aversion Friday morning, heading into the weekend.)

(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 December e-mini futures: Prices are lower in early trading and hit a two-month low overnight. Bears have quickly regained downside momentum. The shorter-term moving averages (4-, 9- and 18-day) are bearish early today. The 4-day moving average is below the 9-day. The 9-day is below 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 1,928.00 and then at 1,940.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 1,911.25 and then at 1,900.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 3.5

Nasdaq index futures: Prices are lower in early trading today and hit a two-month low overnight. Shorter-term moving averages (4- 9-and 18-day) are 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 bearish early today. Shorter-term technical resistance is seen at 3,950.00 and then at the overnight high of 3,966.75. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 3,924.75 and then at 3,915.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 3.5

Dow futures: Prices are lower in early U.S. trading and hit a two-month low overnight. Buy stops likely reside just above technical resistance at 16,570 and then at 16,600. Sell stops likely reside just below technical support at 16,500 and then at 16,450. Shorter-term moving averages are bearish early today, as the 4-day moving average is below the 9-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: 3.5

U.S. TREASURY BONDS AND NOTES

December U.S. T-Bonds: Prices are higher early today and hovering near Thursday’s contract high. Bulls have the solid overall near-term technical advantage amid safe-haven buying interest. 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 contract high of 141 14/32 and then at 142 even. Buy stops likely reside just above those levels. Shorter-term technical support 141 even and then at the overnight low of 140 20/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 7.0 December U.S. T-Notes: Prices are higher in early trading and hovering near Thursday’s contract high. Bulls have the solid overall near-term technical advantage, amid safe-haven demand. 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 126.25.0 and then at the contract high of 126.28.5. Buy stops likely reside just above those levels. Shorter-term technical support lies at 126.16.0 and then at 126.11.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 7.0

U.S. DOLLAR INDEX

The December U.S. dollar index is higher in early trading. Bulls still have the firm overall near-term technical advantage amid safe-haven demand late this week. Slow stochastics for the dollar index are bearish early today. The dollar index finds shorter-term technical resistance at the overnight high of 85.930 and then at 86.000. Shorter-term support is seen at the overnight low of 85.515 and then at 85.250. Wyckoff’s Intra Day Market Rating: 6.0

NYMEX CRUDE OIL

November Nymex crude oil prices are lower early today and hit a two-year low overnight. Bears are in strong overall near-term technical control. Look for buy stops to reside just above technical resistance at $86.00 and then at $87.00. Look for sell stops just below technical support at $84.00 and then at the overnight low of $83.59. Wyckoff’s Intra-Day Market Rating: 3.0

GRAINS

Markets were lower in overnight trading. The key “outside markets” are bearish for the grains early today—higher U.S. dollar index and lower crude oil prices. The bulls this week had shown some decent strength, but have much more work to do in the near term to suggest market bottoms are in place and price uptrends can be sustained. Traders are awaiting Friday morning’s latest USDA supply and demand report. Focus is starting to shift to the growing season for corn and soybeans in South America. Dry weather in some parts of South American soybean regions is also a modestly bullish development.