Thursday, July 11–Jim Wyckoff’s Morning Web Log
* LATEST MARKET DEVELOPMENTS *
Most U.S. markets had closed their day sessions Wednesday afternoon when Federal Reserve Chairman Ben Bernanke in a speech on Fed history said during a question-and-answer session that the U.S. central bank still needs to be very accommodative in its monetary policy for economic growth to continue, and that the Fed will not raise interest rates “for some time” to come. Bernanke’s remarks, along with the FOMC minutes, released Wednesday afternoon, showing a deep split between members on when to start to wind down the Fed’s monthly bond-buying program (quantitative easing) has at least temporarily changed the market place’s notions of when QE will begin to be scaled back. It appears the market place now believes the Fed will start to “taper” its monthly bond buying program later rather than sooner. The past few months have seen “Fed speak” and other Fed data roil the market place, and Wednesday’s Fed events did not disappoint. The U.S. dollar index dropped sharply on the Fed news, while gold and U.S. Treasury bond and notes futures prices shot higher. Other commodity markets also saw buying support on the Fed news. The easy money policies of the Federal Reserve and other major central banks of the world the past few years have been a major bullish factor for the bond and raw commodity markets. Asian and European stock markets rallied on the Fed news. China equities were also boosted on notions that China’s central bank or the Chinese government could soon introduce measures to stimulate domestic growth. In other overnight news, the central banks in Japan, Thailand, Malaysia and South Korea kept their monetary policies unchanged and said there are no inflationary pressures at their latest meetings. However, Indonesia’s central bank raised its key interest rate by 0.5% due to inflationary worries. U.S. economic data due for release Thursday includes the weekly jobless claims report, import and export prices, ISCS chain store sales trends, and the Treasury budget statement.–Jim
U.S. STOCK INDEXES
S&P 500 futures: Prices are higher early today and hit a fresh six-week high. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are bullish early today. Today, shorter-term technical resistance comes in at the overnight high 1,667.30 and then at 1,672.30. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 1,657.80 and then at Wednesday’s low of 1,641.40. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 6.0
Nasdaq index futures: Prices are higher early today and hit a fresh six-week high. The shorter-term moving averages (4- 9-and 18-day) are bullish early today. The 4-day moving average is above the 9-day and 18-day. The 9-day average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are bullish early today. Shorter-term technical resistance is located at the overnight high of 3,030.00 and then at 3,036.75. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 3,011.50 and then at 3,000.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0.
Dow futures: Prices are higher early today and hit a fresh six-week high. Buy stops likely reside just above technical resistance at 15,400 and then at 15,450. Sell stops likely reside just below technical support at 15,325 and then at 15,275. Shorter-term moving averages are bullish early today, as the 4-day moving average is above the 9-day. The 9-day moving average is above the 18-day moving average. Shorter-term oscillators (RSI, slow stochastics) are bullish early today. Wyckoff’s Intra-Day Market Rating: 6.0
U.S. TREASURY BONDS AND NOTES
September U.S. T-Bonds: Prices are sharply higher early today, on short covering in a bear market. Bears still have the solid overall near-term technical advantage. Prices are in a nine-week-old downtrend on the daily bar chart. Shorter-term moving averages (4- 9- 18-day) are still bearish early today. The 4-day moving average is below the 9-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term resistance lies at the overnight high of 134 26/32 and then at 135 even. Buy stops likely reside just above those levels. Shorter-term technical support lies at 134 even and then at the overnight low of 133 20/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0 September U.S. T-Notes: Prices are sharply higher early today, on short covering. Bears still have the solid near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are still bearish early today. The 4-day moving average is below the 9-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term resistance lies at the overnight high of 126.16.0 and then at 126.19.5. Buy stops likely reside just above those levels. Shorter-term technical support lies at 126.00.0 and then at the overnight low of 125.27.0 Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0
U.S. DOLLAR INDEX
The September U.S. dollar index is sharply lower in early U.S. trading and hit a fresh two-week low, on profit taking and on the greenback-bearish Fed speak on Wednesday. Slow stochastics for the dollar index are bearish early today. The dollar index finds shorter-term technical resistance at the overnight high of 83.325 and then at 83.640. Shorter-term support is seen at 83.000 and then at the overnight low of 82.600. Wyckoff’s Intra Day Market Rating: 3.0
NYMEX CRUDE OIL
Crude oil prices are modestly lower early today on profit taking after hitting another fresh 14-month high overnight. Bulls still have good upside near-term technical momentum. In August Nymex crude, look for buy stops to reside just above resistance at $107.00 and then at the overnight high of $107.45. Look for sell stops just below technical support at the overnight low of $105.70 and then at $105.00. Wyckoff’s Intra-Day Market Rating: 5.0
GRAINS
Markets were narrowly mixed in overnight trading as traders await the latest USDA monthly supply and demand report, due out at late morning. Traders will likely quickly digest the USDA data and then focus on weather forecasts for the U.S. Corn Belt. Weather firms are calling for hot conditions and less rain late this week and into next week. That’s a bullish factor that has helped drive prices higher this week. With much of the U.S. corn crop being planted late, the key pollination stage of plant growth will now occur during the late-July timeframe, which is typically the hottest part of the summer. Temperatures above 90 degrees during pollination can stunt yield potential for the corn crop. Weekly USDA export sales data is also out Thursday morning. There has been good demand for U.S. grains from other countries recently.
