Trader Focus is on Weak World Economic Growth

*OVERNIGHT DEVELOPMENTS*

European and Asian stock markets sold off Wednesday, following the lead of sharp losses in the U.S. stock indexes Tuesday. There are increasing concerns about anemic world economic growth. The International Monetary Fund on Tuesday lowered its 2015 world economic growth estimate from 4.0% to 3.8%. The IMF said the European Union would be the main drag on world economic growth. On Wednesday, the Organization for Economic Cooperation and Development corroborated the IMF reports by saying world economic growth will remain only modest in the coming months, while EU economic growth has ground to a halt. These concerns are causing risk aversion in the market place that is bearish for equities and bullish for safe-haven assets, including U.S. Treasuries, the U.S. dollar and gold.

A European Central Bank official Wednesday laid out more specifics on the recently announced ECB plans to implement quantitative easing of its monetary policy. The official added that the present very low inflation rate in the EU is very worrisome.

There was a mildly downbeat report coming out of China Wednesday. The HSBC China services purchasing managers’ index (PMI) fell to 53.5 in September versus 54.1 in August. A reading above 50.0 suggests expansion. China is just now coming back from a week-long holiday.

The highlight of the U.S. data week is Wednesday afternoon’s FOMC minutes. As usual traders will parse the wording of the report for clues on just when the Fed might start to raise U.S. interest rates.

Other U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the weekly DOE liquid energy stocks report. There are also more World Bank and IMF reports being released today.

Wyckoff’s Daily Risk Rating: 6.0 (The market place this week is paying little attention to world geopolitical hotspots, and is instead focusing more on the Ebola disease that is spreading.)

(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 higher in early trading, on a corrective bounce following sharp losses Tuesday that saw the index hit a two-month low close. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Today, shorter-term technical resistance comes in at 1,940.00 and then at 1,950.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the Tuesday’s low of 1,924.25 and then at the October low of 1,918.25. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.0

Nasdaq index futures: Prices are near steady in early trading today, following sharp losses that saw prices hit a two-month low close on Tuesday. Shorter-term moving averages (4- 9-and 18-day) are still 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 3,975.00 and then at Tuesday’s high of 4,005.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at Tuesday’s low of 3,950.00 and then at the October low of 3,925.00. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0

Dow futures: Prices are slightly higher in early U.S. trading, on a corrective bounce after closing at a two-month low close on Tuesday. Buy stops likely reside just above technical resistance at 16,700 and then at 16,750. Sell stops likely reside just below technical support at Tuesday’s low of 16,630 and then at 16,600. 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: 5.0

U.S. TREASURY BONDS AND NOTES

December U.S. T-Bonds: Prices are slightly lower early today after hitting a contract high overnight. 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 overnight contract high of 140 29/32 and then at 141 even. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 140 10/32 and then at 140 even. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0 December U.S. T-Notes: Prices are near steady in early trading and hit a six-week high overnight. 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 126.06.0 and then at the contract high of 126.12.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 125.26.0 and then at 125.20.0. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0

U.S. DOLLAR INDEX

The December U.S. dollar index is firmer in early trading, on safe-haven demand for the greenback. Prices are not far below last week’s contract and four-year high. Bulls still have the solid overall near-term technical advantage. Slow stochastics for the dollar index are bearish early today. The dollar index finds shorter-term technical resistance at the overnight high of 86.030 and then at Tuesday’s high of 86.225. Shorter-term support is seen at Tuesday’s low of 85.645 and then at 85.545. Wyckoff’s Intra Day Market Rating: 6.0

NYMEX CRUDE OIL

November Nymex crude oil prices are lower early today and hit a 15-month low overnight. Bears are in firm overall near-term technical control. Look for buy stops to reside just above technical resistance at the overnight high of $88.63 and then at $89.00. Look for sell stops just below technical support at the overnight low of $87.39 and then at $87.00. Wyckoff’s Intra-Day Market Rating: 4.0

GRAINS

Markets were mostly higher in overnight trading. The bulls this week have shown some decent strength, but have more work to do in the near term to suggest market bottoms are in place. Short covering and bargain hunting have been featured this week. Recent rains have halted harvest work in some of the Corn Belt and that’s also a bit friendly. 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. Traders are awaiting Friday’s latest USDA supply and demand report.