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Jim Wyckoff's Morning Report: US Government Reopens

17 October 2013
Jim Wyckoff Commentary -  TheCropSite

GLOBAL - 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?

US 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.

TheCropSite News Desk

IMPORTANT NOTE: I am not a futures broker and do not manage any trading accounts other than my own personal account. It is my goal to point out to you potential trading opportunities. However, it is up to you to: (1) decide when and if you want to initiate any traders and (2) determine the size of any trades you may initiate. Any trades I discuss are hypothetical in nature.

Here is what the Commodity Futures Trading Commission (CFTC) has said about futures trading (and I agree 100%): 1. Trading commodity futures and options is not for everyone. IT IS A VOLATILE, COMPLEX AND RISKY BUSINESS. Before you invest any money in futures or options contracts, you should consider your financial experience, goals and financial resources, and know how much you can afford to lose above and beyond your initial payment to a broker. You should understand commodity futures and options contracts and your obligations in entering into those contracts. You should understand your exposure to risk and other aspects of trading by thoroughly reviewing the risk disclosure documents your broker is required to give you.



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