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Jim Wyckoff's Morning Report: Markets Lower Overnight

16 December 2013

GLOBAL - Traders and investors are anxiously awaiting Wednesday afternoon’s conclusion of the U.S. Federal Reserve’s Open Market Committee (FOMC) meeting.

Recent upbeat U.S. economic data and last week’s U.S. government budget deal suggest the Fed will move up its timeline for implementing a tapering of its monthly bond-buying program, also called quantitative easing—possibly as early as this week. A growing number of market watchers think the Fed will indeed announce a tapering this week.

Many traders and analysts reckon the actual announcement of the Fed tapering will cause high volatility in markets. While market prices could gyrate a bit in the immediate aftermath of the announcement, I don’t think markets will experience unsettling high volatility. Reason: Traders and investors have had many weeks to digest and factor into market prices the near certainty that the Fed will taper at next week’s meeting, or early next year.

In overnight news, European stocks and the Euro currency were lifted by upbeat manufacturing data coming out of the European Union. Preliminary EU manufacturing data rose at the fastest pace in over two years in December. The Markit PMI reading for December is 52.7 versus 51.5 in November. A reading above 50.0 suggests growth in manufacturing.

Meantime, stock markets in Asia were mostly weaker following slightly downbeat economic data coming out of China. The preliminary HSBC China PMI came in at 50.5 in December from 50.8 in November.

And in Japan, the key Tankan economic survey showed manufacturers having their best outlook in six years.

U.S. economic data due for release Monday includes the productivity and costs report, the Empire State manufacturing survey, Treasury international capital data, the U.S. flash manufacturing PMI, and industrial production and capacity utilization.

Wyckoff’s Daily Risk Rating: 6.0 (Wednesday afternoon’s FOMC meeting results ratchets up the risk in the market place ahead of that development.)

(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

U.S. STOCK INDEXES

S&P 500 futures: Prices are firmer in early U.S. trading but did hit a five-week low overnight. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are neutral to bullish early today. Today, shorter-term technical resistance comes in at 1,783.00 and then at 1,800.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 1,755.00 and then at 1,750.00. Sell stops are likely located just below those levels. Wyckoff's Intra-day Market Rating: 5.5

Nasdaq index futures: Prices are higher early today. The shorter-term moving averages (4- 9-and 18-day) are neutral early today. The 4-day moving average is below the 9-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 located at 3,480.00 and then at 3,500.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 3,450.00 and then at the overnight low of 3,429.50. Sell stops are likely located just below those levels. Wyckoff's Intra-Day Market Rating: 6.0.

Dow futures: Prices are higher early today. But bulls have faded recently. Buy stops likely reside just above technical resistance at 15,800 and then at 15,850. Sell stops likely reside just below technical support at 15,700 and then at last week’s low of 15,665. 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 bearish early today. Wyckoff's Intra-Day Market Rating: 6.0

U.S. TREASURY BONDS AND NOTES

March U.S. T-Bonds: Prices are firmer early today on short covering. The bears still have the overall near-term technical advantage as prices are in a two-month-old downtrend on the daily bar chart. Shorter-term moving averages (4- 9- 18-day) are neutral early today. The 4-day moving average is above the 9-day. The 9-day is below the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term resistance lies at the overnight high of 130 5/32 and then at last week’s high of 130 11/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 129 20/32 and then at 129 16/32. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 5.5

March U.S. T-Notes: Prices are slightly higher early today on 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 early today. Shorter-term resistance lies at the overnight high of 124.16.0 and then at 124.24.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 124.07.5 and then at last week’s low of 124.03.5. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 5.5

U.S. DOLLAR INDEX

The March U.S. dollar index is lower early today. The greenback bears have the overall near-term technical advantage. Prices are in a five-week-old downtrend on the daily bar chart. Slow stochastics for the dollar index are bullish early today. The dollar index finds shorter-term technical resistance at the overnight high of 80.370 and then at last week’s high of 80.570. Shorter-term support is seen at 80.00 and then at last week’s low of 79.875. Wyckoff's Intra Day Market Rating: 4.0

NYMEX CRUDE OIL

January Nymex crude oil prices are firmer early today. Bulls have the slight overall near-term technical advantage. In January Nymex crude, look for buy stops to reside just above resistance at Friday’s high of $97.62 and then at $98.00. Look for sell stops just below technical support at the overnight low of $96.21 and then at $96.00. Wyckoff's Intra-Day Market Rating: 5.5

GRAINS

Markets were lower overnight. Grain markets are suffering from a lack of fresh, bullish fundamental news. Technically, corn and wheat futures bears are still in full control. Soybean bulls have the near-term technical advantage. My bias is that corn and wheat prices do not have much more downside potential given their mature bear market status. My bias is also that soybean prices do not have much more upside potential, mainly because corn and wheat prices have been beaten down.

TheCropSite News Desk



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