* Latest Market Developments *
OVERNIGHT DEVELOPMENTS
There continues to be risk aversion in the market place worldwide that’s evidenced by contract highs this week in U.S. Treasury bond and note futures prices. The recent surge in the U.S. dollar and rebound in gold are also indications of increased demand for safe-haven assets. While stock market traders and investors like to watch the VIX (volatility) index to gauge investor uncertainty in the market place, I believe the better gauge for the entire markets sphere is the U.S. Treasury markets. Right now, the U.S. Treasuries are telling traders and investors to exercise extreme caution—maybe even to the degree that something really upsetting to markets could be just over the horizon.
In overnight news, there was a tame report on inflation coming out of China. China’s overall inflation rate was pegged at 1.6% in September, year-on-year—the lowest rate since 2010. The slowing inflation rate also suggests slowing demand for goods in China, and also synchs up with recent worldwide inflation reports that show very low, and even worrisomely low, inflation levels.
In a signal of the worries about deflation, especially in the European Union, the German government Wednesday sold two-year notes with a near-record low and a negative yield—at minus 0.06 percent. Read this as also indicating extreme investor caution in Europe. European stock markets were under pressure again Wednesday due to the economic woes presently gripping the European Union.
And speaking of deflation, a main feature in the market place recently has been the spike lower in crude oil prices, with Nymex crude dropping to a two-year low of just below $81.00 a barrel Wednesday. This plunge in crude oil could be a watershed moment in the energy world. It appears the major upsurge in U.S. domestic crude oil production in recent years has finally broken the back of the OPEC oil cartel. OPEC is presently in disarray, with its members now just trying to hold on to their market share. I’m confident that crude oil prices will at least temporarily dip into the $70s-per-barrel region in the coming weeks, or sooner. Falling crude oil prices are a good thing for world energy consumers, but not a good thing for raw commodity market bulls, or those worried about world price deflation.
Not surprisingly to many market watchers there is growing talk the U.S. Federal Reserve in the coming months may have to turn back on the money-printing-presses and introduce a fresh round of quantitative easing, given the ill health of world economies that is likely to also restrict U.S. economic growth. Most economists agree there are very few worse conditions that can exist in an economy than serious price deflation.
The U.S. economic data release pace really picks up Wednesday and includes the weekly MBA mortgage applications survey, the producer price index, retail sales, the Empire State manufacturing survey, manufacturing and trade inventory and sales, and the Federal Reserve’s beige book.
In other news, reports Wednesday said there is a referendum scheduled for November 30 in Switzerland. The Swiss will vote on a measure to require 20% of the country’s foreign reserves to be held in gold. The report said if the vote passes, Switzerland will have to buy around 1,500 tons of gold—or about 35% of the annual gold supply.
Wyckoff’s Daily Risk Rating: 7.5 (The market place is focused on the prospect of weakening world economies amid the recent U.S. stock market sell-off. The psychological effects of the Ebola disease are also somewhat impacting the markets. The big rally in U.S. Treasury prices recently has me extra concerned.)
(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 weaker in early trading and hovering near this week’s 4.5-month low. Bears still have downside momentum. There are solid technical clues that at least a near-term market top is now in place. 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 early today. Today, shorter-term technical resistance comes in at the overnight high of 1,883.25 and then at Tuesday’s high of 1,892.75. Buy stops likely reside just above those levels. Downside support for active traders today is located at this week’s low of 1,864.75 and then at 1,850.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 4.0
Nasdaq index futures: Prices are weaker in early trading and hovering near this week’s 3.5-month low. 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 early today. Shorter-term technical resistance is seen at 3,825.00 and then at Tuesday’s high of 3,849.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at this week’s low of 3,793.00 and then at 3,775.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 4.0.
Dow futures: Prices are lower in early U.S. trading and hovering near this week’s six-month low. Buy stops likely reside just above technical resistance at 16,200 and then at 16,255. Sell stops likely reside just below technical support at 16,100 and then at 16,050. 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 early today. Wyckoff’s Intra-Day Market Rating: 4.0
U.S. TREASURY BONDS AND NOTES
December U.S. T-Bonds: Prices are higher early today and hit another contract high overnight. Bulls have the strong 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 143 9/32 and then at 143 16/32. Buy stops likely reside just above those levels. Shorter-term technical support is seen at 143 even and then at the overnight low of 142 13/32. 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 hit another contract high overnight. Bulls have the strong 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 contract high of 127.28.0 and then at 128.00.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at 127.24.0 and then at 127.16.0. 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 slightly higher in early trading. Bulls have the firm 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 86.130 and then at 86.250. Shorter-term support is seen at 85.750 and then at 85.500. Wyckoff’s Intra Day Market Rating: 5.5
NYMEX CRUDE OIL
November Nymex crude oil prices are lower early today and hit another more-than-two-year low overnight. Bears are in strong overall near-term technical control. Look for buy stops to reside just above technical resistance at $82.00 and then at the overnight high of $82.45. Look for sell stops just below technical support at the overnight low of $80.37 and then at $80.00. Wyckoff’s Intra-Day Market Rating: 3.0
GRAINS
Markets were mostly lower in overnight trading. The risk aversion in the market place recently has been a bearish drag on the grain futures markets. However, the grains have shown resilience, including on Tuesday, to suggest that market bottoms are in place, which can also be called “harvest lows.” Heavy rains over parts of the U.S. Corn Belt this week have delayed harvest progress, and that’s also bullish for corn and soybeans. 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 slightly bullish development. Grain market bears remain in overall near-term technical control.
