Wednesday, October 2–Jim Wyckoff’s Morning Web Log
* LATEST MARKET DEVELOPMENTS *
The market place is greeting the partial U.S. government shutdown with some mild anxiety but certainly not panic. Asian and European stock markets overnight focused on other matters. There are mixed ideas in the market place regarding how long the U.S. lawmakers will let the government remain closed. If the situation drags on for several days, anxiety in the markets will increase. In mid-October the U.S. government will hit its borrowing limit. If that more important matter cannot be agreed upon by U.S. lawmakers in a timely manner, then it could be a much bigger event for the market place than the current budget impasse. Fresh U.S. budget news coming out of Washington Wednesday could be market-sensitive. Most U.S. government reports have been postponed due to the government furloughs, including Friday’s monthly employment report. Non-government U.S. economic reports will be issued as scheduled. Here is one school of thought on the U.S. government shutdown: Any extended shutdown will shave points off of U.S. gross domestic product growth. That could, in turn, prompt the Federal Reserve to delay any intended “tapering” of its monthly bond-buying program, also known as quantitative easing. This theory should have been bullish for the raw commodity sector Tuesday. Maybe that scenario will have a delayed bullish price effect on the raw commodity markets. Or, the other side of the coin is that any slower U.S. GDP growth would also be a drag on other world economies’ growth prospects, and also mean less demand for raw commodities. The other factor causing some risk aversion in the market place early this week is turmoil in the Italian government regarding a scandal involving former prime minister Berlusconi. Many Italian government officials have resigned. The latest German government bond auction Wednesday saw 10-year bund yields drop sharply, as demand for safe-haven German debt increased due to the U.S. government shutdown and the Italian government meltdown. Traders will also closely scrutinize Wednesday’s European Central Bank meeting results and press conference by ECB president Mario Draghi. There has been some speculation in the market place that the ECB could soon launch another round of monetary stimulus measures. China is observing the Golden Week holiday and market activity in the world’s second-largest economy will be quiet the rest of the week. U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, and the ISM New York report on business.–Jim
U.S. STOCK INDEXES
S&P 500 futures: Prices are lower early today. 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 bearish early today. Today, shorter-term technical resistance comes in at this week’s high of 1,692.00 and then at 1,705.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at this week’s low of 1,667.00 and then at 1,660.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.0
Nasdaq index futures: Prices are lower early today but hovering not far below Wednesday’s 13-year high. The bulls still have the solid overall near-term technical advantage. The shorter-term moving averages (4- 9-and 18-day) are bullish early today. The 4-day moving average is above the 9-day. The 9-day average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term technical resistance is located at Tuesday’s high of 3,251.25 and then at 3,275.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 3,223.50 and then at Tuesday’s low of 3,213.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0.
Dow futures: Prices are lower early today. Bulls have faded. Buy stops likely reside just above technical resistance at 15,100 and then at 15,140. Sell stops likely reside just below technical support at 15,000 and then at 14,950. 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 early today. Wyckoff’s Intra-Day Market Rating: 4.0
U.S. TREASURY BONDS AND NOTES
December U.S. T-Bonds: Prices are firmer early today. The bulls still have some upside near-term technical momentum. 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 early today. Shorter-term resistance lies at the overnight high of 133 16/32 and then at this week’s high of 133 25/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at 133 even and then at this week’s low of 132 22/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.5 December U.S. T-Notes: Prices are firmer early today. The bulls still have some upside technical momentum. 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 early today. Shorter-term resistance lies at the overnight high of 126.10.0 and then at Tuesday’s high of 126.14.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 125.30.5 and then at 125.25.0 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 slightly higher early today on tepid short covering after hitting an eight-month low on Tuesday. Bears remain in overall near-term technical command. Slow stochastics for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at Tuesday’s high of 80.410 and then at this week’s high of 80.490. Shorter-term support is seen at the overnight low of 80.165 and then at this week’s low of 79.955. Wyckoff’s Intra Day Market Rating: 5.0
NYMEX CRUDE OIL
November Nymex crude oil prices are near steady early today after hitting a seven-week low Tuesday. Bears still have downside near-term technical momentum. In November Nymex crude, look for buy stops to reside just above resistance at this week’s high of $102.76 and then at $103.00. Look for sell stops just below technical support at the overnight low of $101.43 and then at this week’s low of $101.05. Wyckoff’s Intra-Day Market Rating: 5.0
GRAINS
Markets were mixed overnight. There is just not much bullish news in the grain markets at present. Corn and soybeans are still feeling the bearish effects of Monday’s bearish USDA data. The “risk-off” mentality in the market place this week is also a bearish underlying factor for the grains. And U.S. harvest progress in soybeans are corn is progressing rapidly this week, which is also bearish. Wheat bulls have made upside progress. There are technical clues the wheat markets have put in major lows. Corn and soybean bears are in near-term technical command. With much of USDA now closed, there will be a lack of fresh fundamental news for grain traders to digest, and that will likely favor the bearish camp.
