* Latest Market Developments *

One feature in the market place overnight was the slump in crude oil prices to a two-year low of $75.84, basis the December Nymex futures contract. Combined with the appreciating value of the U.S. dollar, these two key “outside markets” have been a major influence on other markets the past few weeks—and especially a negative force for the raw commodity sector.

The other feature overnight was Japan’s Nikkei stock index hitting a seven-year high Tuesday. The Nikkei has rallied over 7% since last Friday, in the aftermath of a new batch of monetary stimulus from the Bank of Japan. The Japanese yen has slumped against its world rivals following the BOJ move on Friday.

European stock markets were under selling pressure Tuesday following news the European Commission reported it expects European Union gross domestic product to rise by just 0.8% in 2014. That’s down from the 1.2% growth-rate forecast the agency issued in the spring. The Commission cited the Russia-Ukraine tensions as a major contributor to the slowing EU growth the past few months.

In other overnight news, the OECD reported that inflation in the world’s major economies declined for the fourth straight month, at 1.7% in September from 1.8% in August, on an annual basis.

There are two big economic data points this week: the monthly meeting of the European Central Bank on Thursday and the U.S. employment situation report on Friday. Recent dour economic data coming out of the EU, and Japan’s fresh monetary stimulus last week, suggest the European Central Bank will move to enact more monetary stimulus sooner rather than later.

U.S. economic data due for release Tuesday include the weekly Goldman Sachs and Johnson Redbook retail sales reports, the trade deficit report, the ISM New York business survey, manufacturers’ shipments and inventories, and the IBD/TIPP economic optimism index. U.S. mid-term elections also take place on Tuesday.

Wyckoff’s Daily Risk Rating: 5.0 (Geopolitical risks have been moved to the back burner of the market place…for now.)

(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 slightly lower in early trading and seeing mild profit taking after hitting a record high last Friday. 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 neutral early today. Today, shorter-term technical resistance comes in at the record high of 2,016.75 and then at 2,025.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at 2,000.00 and then at Friday’s low of 1,986.75. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.5

Nasdaq index futures: Prices are slightly lower in early trading and seeing profit taking after hitting a 14-year high Monday. 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 neutral early today. Shorter-term technical resistance is seen at Monday’s high of 4,174.50 and then at 4,200.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 4,125.00 and then at 4,100.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.5

Dow futures: Prices are slightly lower in early U.S. trading on profit taking after hitting a record high Monday. Buy stops likely reside just above technical resistance at the record high of 17,335 and then at 17,400. Sell stops likely reside just below technical support at 17,250 and then at 17,200. Shorter-term moving averages are bullish early today, as the 4-day moving average is above 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: 4.5

U.S. TREASURY BONDS AND NOTES

December U.S. T-Bonds: Prices are higher early today, on more short covering. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are neutral to bullish early today. Shorter-term technical resistance is seen at 142 even and then at last week’s high of 142 9/32. Buy stops likely reside just above those levels. Shorter-term support lies at 141 16/32 and then at 141 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0 December U.S. T-Notes: Prices are higher in early trading. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term resistance lies at Monday’s high of 126.20.0 and then at 126.24.5. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 126.07.0 and then at Monday’s low of 125.30.5. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0

U.S. DOLLAR INDEX

The December U.S. dollar index is weaker in early trading, on profit taking after hitting a four-year high Monday. Bulls still have the solid overall near-term technical advantage. Slow stochastics for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at the overnight high of 87.385 and then at the contract high of 87.540. Shorter-term support is seen at Monday’s low of 87.125 and then at 87.000. Wyckoff’s Intra Day Market Rating: 4.5

NYMEX CRUDE OIL

December Nymex crude oil prices are sharply lower and hit a two-year low early today. Bears remain in strong near-term technical control. Look for buy stops to reside just above technical resistance at $77.00 and then at $78.00. Look for sell stops just below technical support at the overnight low of $75.84 and then at $75.00. Wyckoff’s Intra-Day Market Rating: 3.0

GRAINS

Grain futures markets were weaker in overnight trading on corrective pullbacks from recent gains and amid the bearish outside market forces of a strong U.S. dollar and slumping crude oil prices. Recent good harvest progress in the U.S. Corn Belt the past few days is also a negative for corn and soybeans. The grain market bulls do still have fledgling price uptrends in place, but need to show more power soon to keep them alive.