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Jim Wyckoff's Morning Report: Markets Weaker Overnight

07 January 2014
Jim Wyckoff Commentary -  TheCropSite

GLOBAL - Traders are still buzzing about Monday morning’s “mini flash crash” in gold futures prices that lasted about one minute. The CME Group said an erroneous trade in Comex gold futures was not responsible for the February gold contract dropping sharply--by over $30.00 an ounce at mid-morning Monday.

Reports said very heavy volume at the time of the price drop was recorded in gold futures--4,000 contracts in one second's time. The price of February Comex gold was trading at $1,245.40 an ounce at 10:13 a.m. eastern standard time Monday, and then within one minute fell to a low of $1,212.60. Prices at 10:15 a.m. had rebounded to $1,234.50.

Such events are occurring more frequently in the gold and other financial markets, although they still do not occur often. Still, these inexplicable, sudden price spikes (almost always to the downside) further undermine the confidence of the small trader/investor in the market place—especially futures markets. A trader on the long side of the gold futures market Monday morning, who had protective stop orders in place, could have seen those orders triggered at a much lower price level—only to see gold prices rebound one minute later. The “big boys” in the markets seem to weather these brief market price spikes fairly well, and it’s usually the small investor which seems to be burned.

In overnight news, there was another inflation report from the European Union that showed very low inflationary pressures. Consumer price inflation rose by just 0.8% in December, year on year. The rate in November was up 0.9%. This latest EU inflation report continued a pattern of economic data that puts the bloc of 17 nations precariously close to price deflation—a nasty economic ailment that put a serious crimp in Japan’s economy for two decades. By its very definition deflation is a very bearish phenomenon for raw commodity prices.

The headline risk picks up Wednesday, as the Federal Reserve’s FOMC minutes are out in the afternoon, while the European Central Bank holds its monthly meeting on Thursday and the U.S. employment report is out on Friday. There is also important economic data coming out of China this week—trade figures on Wednesday and inflation figures on Thursday. Volatility and volumes in the market place are likely to pick up starting Wednesday.

U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, and the international trade report.

Wyckoff’s Daily Risk Rating: 5.0 (No major headline risk today, but the heat will be turned up as the week progresses.)

(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 slightly higher 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 below the 9-day. The 9-day is above the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are neutral early today. Today, shorter-term technical resistance comes in at Monday’s high of 1,832.30 and then at 1,840.50. Buy stops likely reside just above those levels. Downside support for active traders today is located at Monday’s low of 1,817.50 and then at 1,810.00. 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 Monday’s high of 3,540.25 and then at 3,550.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 3,516.00 and then at Monday’s low of 3,505.75. Sell stops are likely located just below those levels. Wyckoff's Intra-Day Market Rating: 6.0.

Dow futures: Prices are higher early today. Buy stops likely reside just above technical resistance at 16,450 and then at Monday’s high of 16,470. Sell stops likely reside just below technical support at 16,365 and then at Monday’s low of 16,340. Shorter-term moving averages are still bullish early today, as the 4-day moving average is above the 9-day and 18-day. The 9-day moving average is above the 18-day moving average. Shorter-term oscillators (RSI, slow stochastics) are bearish early today. Wyckoff's Intra-Day Market Rating: 5.5

U.S. TREASURY BONDS AND NOTES

March U.S. T-Bonds: Prices are slightly higher early today on short covering in a bear market. The bears still have the solid overall near-term technical advantage as prices are in a nine-week-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 to bullish early today. Shorter-term resistance lies at Monday’s high of 129 11/32 and then at 129 19/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 128 29/32 and then at 128 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. Prices are in a 10-week-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 bullish early today. Shorter-term resistance lies at the overnight high of 123.20.0 and then at 123.24.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 123.13.0 and then at 123.08.0. 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 weaker early today. The greenback bulls have gained upside momentum recently, but need to show fresh power soon to keep it. Slow stochastics for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at the overnight high of 80.945 and then at Monday’s high of 80.080. Shorter-term support is seen at Monday’s low of 80.690 and then at 80.500. Wyckoff's Intra Day Market Rating: 4.5

NYMEX CRUDE OIL

February Nymex crude oil prices are firmer early today and seeing a corrective, short-covering bounce after dropping sharply and hitting a five-week low on Monday. Bears have the overall near-term technical advantage. In February Nymex crude, look for buy stops to reside just above resistance at Monday’s high of $94.59 and then at $95.00. Look for sell stops just below technical support at the overnight low of $93.54 and then at Monday’s low of $93.20. Wyckoff's Intra-Day Market Rating: 5.5

GRAINS

Markets were weaker overnight, amid a lack of fresh, bullish fundamental news. Technically, corn, soybean and wheat futures bears are in near-term control. Corn and soybean traders will continue to keep an eye on South American weather, which so far has not been significantly worrisome for the crops. An arctic blast in the U.S. does not so far have wheat growers too worried about winter kill. Traders are awaiting Friday morning’s USDA quarterly grain stocks report.

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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