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Jim Wyckoff's Morning Report: Markets Firmer Overnight

10 June 2014
Jim Wyckoff Commentary -  TheCropSite

GLOBAL - In overnight news, China inflation data showed its consumer price index rose 2.5% year-on-year, compared to a 1.8% rise in April.

The rise was in line with market expectations and was what China’s central bankers wanted to see. A decline in China’s producer price index in May—down 1.4% year-on-year versus down 2.0% in April, also hints China’s central bank has more room to stimulate economic growth without fanning inflationary fires.

An interesting development has occurred in the market place this week, and may be just a bit scary. Italian 10-year government bond yields have fallen below the yields of U.S. 10-year notes. Just a couple years ago Italian bond yields were pushing toward 8% due to worries about the European Union’s financial health and its sovereign debt crisis. Virtually everyone agrees that U.S. government debt is safer than Italian government debt—so there is no flight-to-safety buying in Italian bonds to drive yields lower than U.S. notes. The main reason Italian bonds are yielding less than U.S. notes is because the European Central Bank has pumped so much money (Euros) into the financial system and is discouraging saving due to a negative deposit rate, that even recently shaky Italian bonds are now being snapped up by European investors and banks which are awash in Euros.

Those who have studied economic history harken back to the extreme inflation that ravaged the German economy and its currency in the 1920s and 1930s. While I am not suggesting the Euro is headed for the same fate as the German reichsmark, it’s hard not to imagine inflation becoming problematic for the European Union at some point down the road. The very easy monetary policies of the European Union and even the U.S. Federal Reserve are and have been a worry to many market watchers—many of whom are holding a “hard” asset, gold, as a hedge against the inflation that is likely to flare up at some point, based upon economic history.

U.S. economic data due for release Tuesday includes the weekly Johnson Redbook and Goldman Sachs retail sales reports, the NFIB small business optimism index, the Manpower quarterly U.S. employment outlook survey, and the World Bank global economic prospects report.

Wyckoff’s Daily Risk Rating: 5.0 (The Russia-Ukraine crisis has died down in the eyes of the market place, while the rest of the world is also quiet on the geopolitics front.)

(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 September e-mini futures: Prices are modestly lower in early trading on profit taking after hitting a record high on Monday. Bulls are still 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 1,947.25 and then at 1,950.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at 1,930.25 and then at 1,913.50. Sell stops are likely located just below those levels. Wyckoff's Intra-day Market Rating: 4.5

Nasdaq index futures: Prices are modestly lower early today and seeing profit taking after hitting a 13-year high on Monday. 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 neutral to bearish early today. Shorter-term technical resistance is seen at the overnight high of 3,793.00 and then at Monday’s for-the-move high of 3,803.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at 3,777.00 and then at 3,760.00. Sell stops are likely located just below those levels. Wyckoff's Intra-Day Market Rating: 4.5.

Dow futures: Prices are modestly lower in early U.S. trading and seeing 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 Monday’s high of 16,960 and then at 17,000. Sell stops likely reside just below technical support at 16,855 and then at 16,800. 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 above the 18-day moving average. Shorter-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Wyckoff's Intra-Day Market Rating: 4.5

U.S. TREASURY BONDS AND NOTES

September U.S. T-Bonds: Prices are weaker early today. Bulls still have the overall near-term technical advantage but have faded. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term resistance lies at 135 16/32 and then at the overnight high of 135 21/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at Monday’s low of 134 31/32 and then at last week’s low of 134 15/32. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 4.5

September U.S. T-Notes: Prices are slightly weaker in early trading today. Bulls still have the overall near-term technical advantage, but have faded recently. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are bearish early today. Shorter-term resistance lies at the overnight high of 124.11.5 and then at 124.16.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at last week’s low of 124.01.0 and then at 124.00.0. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 4.5

U.S. DOLLAR INDEX

The September U.S. dollar index is firmer in early trading. Bulls have the slight overall near-term technical advantage. Slow stochastics for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at the overnight high of 80.955 and then at last week’s high of 81.170. Shorter-term support is seen at the overnight low of 80.675 and then at 80.500. Wyckoff's Intra Day Market Rating: 5.5

NYMEX CRUDE OIL

July Nymex crude oil prices are higher and hit a fresh contract high in early U.S. trading. Bulls have the solid overall near-term technical advantage. Prices are in a five-month-old uptrend on the daily bar chart. In July Nymex crude, look for buy stops to reside just above resistance at $105.00 and then at $105.50. Look for sell stops just below technical support at the overnight low of $104.44 and then at $104.00. Wyckoff's Intra-Day Market Rating: 6.0

GRAINS

Markets were mostly firmer in overnight trading, on short covering following recent selling pressure. Weather in the U.S. Corn Belt is now benign for the corn and soybean crops, and that’s bearish for prices. Weekly crop progress reports, released Monday afternoon, were generally bearish and showed corn and soybeans in very good condition, overall. Wheat harvest is also progressing well. Traders will closely examine Wednesday’s USDA monthly supply and demand report. The next major inflection point for the grains could be the U.S. Fourth of July holiday timeframe, which history shows grain prices can reverse trends or accelerate them. Technically, soybean bulls have the near-term advantage, but have faded. Wheat and corn bears have the firm near-term technical edge.

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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