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Jim Wyckoff's Morning Report: Rate of Consumer Price Inflation Up

03 June 2014
Jim Wyckoff Commentary -  TheCropSite

GLOBAL - In overnight news the rate of consumer price inflation in the European Union was up 0.5%, year-on-year, in May. That was the lowest reading in four years.

A figure of up 0.7% was expected by the market place. The European Central Bank wants a 2.0% annual inflation figure and this latest inflation report is still more evidence that deflation could become a problem for the EU. Unemployment in the EU was also reported Tuesday, coming in at 11.7% in April from 11.8% in March. Thursday’s monthly monetary policy meeting of the ECB is widely believed to see the bank announcing further monetary policy stimulus measures. Recent weak European Union economic data and fears of deflation setting in for the EU are solid reasons for the ECB to make a move next week. Such would be another bearish below to the Euro currency.

The gold market is closely watching the Thursday ECB meeting results, which could be a mixed bag for gold. Printing more Euros is likely to further deflate the common currency, which in turn would likely be bearish for the Euro. The U.S. dollar would likely also benefit from any drop in the Euro currency, which in turn would be bearish for gold. However, stimulative monetary measures from the world’s major central banks have in recent years been bullish for raw commodities, including the precious metals. My bias is that if the Euro does see selling pressure and the dollar index rises following the ECB meeting, such would send gold prices lower. But it could be that the markets have already factored into their price structures an ECB stimulus move and there could be little reaction to such a move. It’s also my bias that gold is going to need a fresh geopolitical flare-up or significantly downbeat U.S. economic news to bring the yellow metal out of its present price slump.

The big U.S. data point of the week is Friday’s Labor Department employment situation report for May. The early forecast is for non-farm payrolls to have increased 215,000 in the report.

U.S. economic data due for release Tuesday includes the weekly Johnson Redbook and Goldman Sachs retail sales reports, the ISM New York report on business, manufacturers’ shipments and inventories, the IBD/TIPP economic optimism index, the global manufacturing PMI, and domestic auto sales.

Wyckoff’s Daily Risk Rating: 5.5 (The Russia-Ukraine crisis has not escalated and the rest of the world is quieter regarding geopolitics.)

(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.

US STOCK INDEXES

S&P 500 September e-mini futures: Prices are slightly lower in early trading and hovering near Monday’s record high. Bulls are in solid overall near-term technical control. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Today, shorter-term technical resistance comes in at the record high of 1,916.75 and then at 1,925.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at 1,900.00 and then at 1,889.00. Sell stops are likely located just below those levels. Wyckoff's Intra-day Market Rating: 4.5

Nasdaq index futures: Prices are weaker early today on profit taking and are hovering near a three-month high. Bulls still have the solid overall near-term technical advantage. Shorter-term moving averages (4- 9-and 18-day) are bullish early today. The 4-day moving average is above the 9-day and 18-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 seen at the overnight high of 3,727.00 and then at the March high of 3,740.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at Monday’s low of 3,710.00 and then at 3,700.00. Sell stops are likely located just below those levels. Wyckoff's Intra-Day Market Rating: 4.5.

Dow futures: Prices are weaker in early U.S. trading on profit taking after hitting a record high Monday. Bulls still have the solid overall near-term technical advantage. Buy stops likely reside just above technical resistance at 16,722 and then at the record high of 16,745. Sell stops likely reside just below technical support at Monday’s low of 16,675 and then at 16,640. Shorter-term moving averages are bullish early today, as the 4-day moving average is above the 9-day and 18-day. The 9-day moving average is below the 18-day moving average. Shorter-term oscillators (RSI, slow stochastics) are neutral to bullish early today. Wyckoff's Intra-Day Market Rating: 4.5

US TREASURY BONDS AND NOTES

September U.S. T-Bonds: Prices are lower again early today on more profit taking. Bulls still have the overall near-term technical advantage but are now fading. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are bearish early today. Shorter-term resistance lies at 136 even and then at the overnight high of 136 19/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 135 20/32 and then at 135 13/32. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 4.0

September U.S. T-Notes: Prices are lower on more profit taking. Bulls still have the overall near-term technical advantage but are now fading. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are bearish early today. Shorter-term resistance lies at 124.26.0 and then at the overnight high of 125.00.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 124.17.5 and then at 124.12.0. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 4.0

US DOLLAR INDEX

The September U.S. dollar index is slightly lower in early trading, on mild profit taking but still hovering near a two-month high. Slow stochastics for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at Monday’s high of 80.830 and then at 81.000. Shorter-term support is seen at Monday’s low of 80.565 and then at 80.480. Wyckoff's Intra Day Market Rating: 5.0

NYMEX CRUDE OIL

July Nymex crude oil prices are near steady in early U.S. trading. Bulls still have the overall near-term technical advantage but are fading a bit. In July Nymex crude, look for buy stops to reside just above resistance at $103.00 and then at Monday’s high of $103.35. Look for sell stops just below technical support at $102.00 and then at $101.50. Wyckoff's Intra-Day Market Rating: 5.0

GRAINS

Markets were lower in overnight trading. Weekly crop progress reports out Monday afternoon showed the U.S. corn and soybean crops in very good condition, with plenty of soil moisture for most areas. The U.S. corn and soybean crops are mostly planted now, so rainy weather is bearish instead of bullish. It’s my bias that June will be a mostly bearish month for the grains—unless the rain in the Corn Belt diminishes and the temperatures rise, which is not a big stretch. Technically, soybean bulls have the solid near-term advantage. Wheat and corn bears have the near-term technical edge. Focus in the grains will remain in weather patterns in the U.S. midsection.

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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