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Jim Wyckoff's Morning Report: Markets Weaker Overnight

16 May 2014
Jim Wyckoff Commentary -  TheCropSite

GLOBAL - The talk of the market place—but not yet pervasive in the general business media--late this week has been the rally in the U.S. Treasury market prices.

T-Bond and T-Note futures prices are at multi-month highs (yields at multi-month lows). There’s an ages-old debate on which group—bond traders or stock market traders--is “right” about the direction of the U.S. economy and the major world economies. At present, the stock market traders, with two major indexes hitting record highs this week, apparently reckon the U.S. economy is on a path of significant recovery.

Meantime, U.S. Treasury bond and note prices have rallied sharply this week, which suggests something is amiss either in the U.S. economy or regarding other major world economies, or geopolitical fears. I’m siding with the bond market traders. Something is askew in the market place at present—and the bond market senses it. The reason the U.S. Treasury markets are rallying is “flight to quality” buying due to some fear. That’s got to be the reason because Treasury yields well below 3% presently don’t match up with what the stock market has been offering on return on investment. The recent sharp reversal up in the U.S. dollar index and reversal down in the Euro currency are also indicative of changes afoot in the structure of the markets.

It’s my bias that in the coming weeks, or sooner, it will become clearer just why the U.S. Treasury market prices are presently and inexplicably rallying.

As far as the gold market goes regarding the matter mentioned above, the yellow metal should at least see limited selling pressure, if not outright buying support, due to the keener uncertainty in the market place at present that should prompt safe-haven demand. But that’s not a certainty when looking at daily price action for gold. During the peak of the European Union sovereign debt crisis, gold on some days would be selling off when most market watchers figured it should be rallying, and on other days would be rallying when most thought it would be selling off. Stay tuned.

U.S. economic data due for release Friday includes new residential construction and the University of Michigan consumer sentiment survey.

Wyckoff’s Daily Risk Rating: 7.0 (The Russia-Ukraine tensions are still elevated and U.S. Treasuries are rallying on safe-haven buying.)

(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 June e-mini futures: Prices are slightly lower on more profit taking after prices hit a record high Tuesday. Bulls are still in near-term technical control. 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 is above the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are bearish early today. Today, shorter-term technical resistance comes in the overnight high of 1,868.50 and then at 1,880.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at this week’s low of 1,859.00 and then at the May low of 1,854.00. Sell stops are likely located just below those levels. Wyckoff's Intra-day Market Rating: 4.5

Nasdaq index futures: Prices are lower early today on more profit taking. The bulls are fading. 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 even with the 18-day. Short-term oscillators (RSI, slow stochastics) are bearish early today. Shorter-term technical resistance is seen at the overnight high of 3,567.00 and then at 3,580.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at this week’s low of 3,539.00 and then at 3,525.00. Sell stops are likely located just below those levels. Wyckoff's Intra-Day Market Rating: 4.0.

Dow futures: Prices are slightly lower in early U.S. trading on mild profit taking after hitting a record high Tuesday. Bulls faded Thursday. Buy stops likely reside just above technical resistance at 16,450 and then at 16,500. Sell stops likely reside just below technical support at 16,400 and then at Thursday’s low of 16,365. Shorter-term moving averages are bullish early today, as the 4-day moving average is above the 9-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: 4.5

U.S. TREASURY BONDS AND NOTES

June U.S. T-Bonds: Prices are slightly higher early today after hitting a contract high Thursday. Bulls have the solid overall near-term technical advantage. 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 138 even and then at the contract high of 138 4/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 137 15/32 and then at 137 even. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 6.0

June U.S. T-Notes: Prices are near steady after hitting a nearly six-month high Thursday. Bulls have the solid overall near-term technical advantage. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term resistance lies at the overnight high of 126.00.5 and then at Thursday’s high of 126.05.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 125.25.5 and then at 125.20.0. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 5.5

U.S. DOLLAR INDEX

The June U.S. dollar index is slightly higher in early trading. Prices Thursday hit a six-week high. Bulls still have upside momentum to suggest prices can continue to trend higher in the near term. Slow stochastics for the dollar index are bearish early today. The dollar index finds shorter-term technical resistance at the overnight high of 80.170 and then at 80.285. Shorter-term support is seen at 79.985 and then at this week’s low of 79.840. Wyckoff's Intra Day Market Rating: 5.0

NYMEX CRUDE OIL

June Nymex crude oil prices are firmer in early U.S. trading. Bulls have some upside momentum. In June Nymex crude, look for buy stops to reside just above resistance at the overnight high of $102.04 and then at this week’s high of $102.65. Look for sell stops just below technical support at Thursday’s low of $101.27 and then at $101.00. Wyckoff's Intra-Day Market Rating: 5.5

GRAINS

Markets were mixed but mostly weaker in overnight trading. The corn and wheat markets have melted down this week, to suggest market tops are in place. Soybeans have been resilient, but I cannot see the grains moving in divergent paths. Thus, I suspect soybeans could succumb to selling pressure in the near term. Weather in the U.S. Corn Belt remains a major market factor. So far this spring the weather in the Corn Belt has favored the bulls.

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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