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Wyckoff: Markets Mostly Lower Overnight Amid “Risk-off” Trading Atmosphere

24 January 2014
Jim Wyckoff Commentary -  TheCropSite

GLOBAL - For the first time in quite a while, it’s a “risk-off” trading and investing atmosphere in the market place Friday. The feature late this week is the sell-off in the U.S. stock market.

Right now it’s mostly a profit-taking and weak-long liquidation affair, and most traders and investors are not spooked. Nobody knows for sure if major market tops are in place in the U.S. stock indexes. However, one thing is certain: The stock indexes at some point will put it major market tops. And when that happens, other asset classes--which have heretofore suffered during a time when the equities sucked all the air out of the room--will see renewed popularity among investors and traders. I’m mainly referring to hard assets like raw commodities, including gold. My bias is that time is coming sooner rather than later.

One factor cited as prompting the late-week swoon in equities is a report Thursday that suggested China’s manufacturing sector has stopped expanding. China’s flash purchasing managers index (PMI) fell to 49.6 in January from 50.5 in December—the lowest reading in six months. A PMI reading below 50.0 suggests contraction in the manufacturing sector. There are also lingering concerns about a cash crunch in China. The Chinese central bank had to pump liquidity into the financial system ahead of the Lunar New Year holiday, as short-term interest rates were rising rapidly before the intervention.

There is no major U.S. economic data due for release Friday.

Wyckoff’s Daily Risk Rating: 6.5 (While the late-week sell-off in the U.S. stock indexes has not really spooked the market place, it has made for a bit more uncertainty among traders and investors.)

(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 lower in early U.S. trading and hit a fresh five-week low overnight, on profit taking. Bulls are quickly fading. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are bearish early today. Today, shorter-term technical resistance comes in at the overnight high of 1,827.70 and then at 1,840.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 1,808.20 and then at 1,800.00. Sell stops are likely located just below those levels. Wyckoff's Intra-day Market Rating: 4.0

Nasdaq index futures: Prices are lower early today on profit taking after hitting a 14-year high Thursday. Price action today is poised to produce a bearish “key reversal” down on the daily chart, which would be one clue that a market top is in place. The shorter-term moving averages (4- 9-and 18-day) are still bullish early today. The 4-day moving average is above the 9-day. The 9-day average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are bearish early today. Shorter-term technical resistance is located at 3,600.00 and then at the overnight high of 3,621.25. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 3,591.00 and then at this week’s low of 3,577.50. Sell stops are likely located just below those levels. Wyckoff's Intra-Day Market Rating: 4.0.

Dow futures: Prices are lower in early U.S. trading and hit a fresh five-week low overnight. Bulls are fading quickly. Buy stops likely reside just above technical resistance at 16,080 and then at 16,100. Sell stops likely reside just below technical support at 16,000 and then at 15,950. 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: 3.5

U.S. TREASURY BONDS AND NOTES

March U.S. T-Bonds: Prices are higher and hit a fresh 11-week high early today. The bulls have good upside near-term technical momentum. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above the 9-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 133 5/32 and then at 133 16/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at 132 20/32 and then at 132 even. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 6.5

March U.S. T-Notes: Prices are higher and hit a two-month high early today on more short covering. Bulls are gaining upside technical momentum. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are bullish early today. Shorter-term resistance lies at the overnight high of 125.16.0 and then at 125.26.5. Buy stops likely reside just above those levels. Shorter-term technical support lies at 125.00.0 and then at the overnight low of 124.21.5. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 6.5

U.S. DOLLAR INDEX

The March U.S. dollar index is lower early today and hit a three-week low. Bulls are fading quickly. Slow stochastics for the dollar index are bearish early today. The dollar index finds shorter-term technical resistance at the overnight high of 80.640 and then at 80.750. Shorter-term support is seen at the overnight low of 80.220 and then at 80.000. Wyckoff's Intra Day Market Rating: 4.0

NYMEX CRUDE OIL

March Nymex crude oil prices are weaker early today on profit taking from recent strong gains. Bulls have gained upside near-term technical momentum recently. In March Nymex crude, look for buy stops to reside just above resistance at $97.50 and then at this week’s high of $97.84. Look for sell stops just below technical support at Thursday’s low of $96.41 and then at $96.00. Wyckoff's Intra-Day Market Rating: 4.5

GRAINS

Markets were mostly lower overnight amid the “risk-off” trading atmosphere Friday morning. Technically, soybean bulls have faded this week. Corn bulls remain very weak. Wheat bears are also in full technical command. Traders will closely examine this morning’s weekly USDA export sales report. The demand side of the equation for grains will continue to be a major market factor in the grain markets. Grain market bulls are also worried about the seasonal “February Break” phenomenon that seems to pressure the grain futures markets about this time every year.

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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