Thursday, October 17–Jim Wyckoff’s Morning Web Log
* LATEST MARKET DEVELOPMENTS *
The U.S. government is open for business after 16 days of partial closure. The U.S. Congress and President Obama came to a last-minute budget/debt ceiling deal on Wednesday and then passed and signed the legislation late Wednesday night. Now, for the U.S. stock indexes it’s a classic “buy the rumor, sell the fact” scenario (or sell the rumor, buy the fact in the case of gold) that many times plays out in markets. Markets many times factor into their prices expected fundamental news events well before they ever occur. Then markets can see corrective price reversals when the event actually does occur. Thursday’s U.S. stock market trepidation and strength in gold is also partly due to the fact the U.S. government debt ceiling and budget deal is only good for a few months, and this latest fiasco could be repeated early next year. There were reports overnight that a China-based ratings agency downgraded the U.S. government’s credit rating and a few are citing that news as impacting the weaker greenback. I doubt that’s a major market factor, but the Chinese government is a huge buyer of U.S. Treasuries. A few analysts are saying the government shutdown cut a half-percentage point off of U.S. fourth-quarter gross domestic product. It’s also likely that the U.S. government dysfunction on the budget/debt ceiling prompted the Federal Reserve to hold off on any “tapering” of its quantitative easing of U.S. monetary policy. The lack of U.S. economic data the past 2.5 weeks only makes it more difficult for the Fed to get a handle on the U.S. economy’s present health, which in turn makes it less likely Fed officials will alter monetary policy soon. One economist was quoted as saying it will be early next year before the Fed gets a good idea on the performance of the U.S. economy, coming out of the U.S. government shutdown. If that notion is correct, then it can be extrapolated that the Fed won’t be able to consider cutting back on its monthly bond-buying program until late in the first quarter of next year, at the earliest. The U.S. dollar index is sharply lower Thursday morning as currency traders are starting to realize the budget/debt deal reached Wednesday is just a band-aide placed on a gaping wound, and that the Federal Reserve won’t be tapering its monthly bond purchases any time soon. U.S. economic data due for release Thursday includes the weekly jobless claims report. With the U.S. government now open for business, the question on traders’ and investors’ minds is when will the steady flow of government economic reports begin?–Jim
U.S. STOCK INDEXES
S&P 500 futures: Prices are slightly lower in early U.S. trading. The shorter-term moving averages (4-, 9- and 18-day) are neutral early today. The 4-day moving average is above the 9- and 18-day. The 9-day is even with the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are neutral early today. Today, shorter-term technical resistance comes in at this week’s high of 1,716.70 and then at the all-time high of 1,726.50. Buy stops likely reside just above those levels. Downside support for active traders today is located at 1,700.00 and then at Wednesday’s low of 1,691.90. Sell stops are likely located just below those levels. Wyckoff’s Intra-day Market Rating: 5.0
Nasdaq index futures: Prices are near steady early today and hovering not far below this week’s 13-year high. The shorter-term moving averages (4- 9-and 18-day) are neutral early today. The 4-day moving average is above the 9-day and 18-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 located at this week’s high of 3,276.50 and then at 3,300.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 3,256.25 and then at Wednesday’s low of 3,234.75. Sell stops are likely located just below those levels. Wyckoff’s Intra-Day Market Rating: 5.0.
Dow futures: Prices are modestly lower early today. Buy stops likely reside just above technical resistance at 15,250 and then at Wednesday’s high of 15,305. Sell stops likely reside just below technical support at Wednesday’s low of 15,185 and then at 15,150. Shorter-term moving averages are neutral 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 bullish 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 short covering and some safe-haven buying. Bears still have the overall near-term technical advantage but the bulls have gained momentum the past 24 hours. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term resistance lies at the October high of 133 29/32 and then at 134 even. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 132 31/32 and then at 132 16/32. Sell stops likely reside just below those levels. Wyckoff’s Intra-Day Market Rating: 6.0 December U.S. T-Notes: Prices are higher early today as bulls are gaining upside momentum. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term resistance lies at the overnight high of 126.23.5 and then at the October high of 126.27.5. Buy stops likely reside just above those levels. Shorter-term technical support lies at 126.16.0 and then at 126.10.0. 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 early today. Bears remain in overall near-term technical control. Slow stochastics for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at the overnight high of 80.680 and then at the October high of 80.865. Shorter-term support is seen at this week’s low of 80.200 and then at 80.000. Wyckoff’s Intra Day Market Rating: 4.5
NYMEX CRUDE OIL
November Nymex crude oil prices are weaker early today. Bears still have the overall near-term technical advantage. Prices are in a seven-week-old downtrend on the daily bar chart. In November Nymex crude, look for buy stops to reside just above resistance at the overnight high of $102.32 and then at this week’s high of $102.97. Look for sell stops just below technical support at last week’s low of $100.60 and then at $100.00. Wyckoff’s Intra-Day Market Rating: 4.5
GRAINS
Markets were firmer overnight on short covering and on a sharply lower U.S. dollar index. Corn and soybean harvesting is progressing in the U.S. Corn Belt this week, but rains in part of the region have delayed it just a bit. Traders are awaiting fresh fundamental news from USDA as the U.S. government is now open. Technically, the corn bears are in command, soybean bears have the slight chart advantage, and wheat bulls possess the slight near-term technical advantage but are fading.
