Jim Wyckoff's Morning Report: Extraordinary Day For Trading01 July 2014
GLOBAL - Monday was an extraordinary trading day in the markets. It was the last trading day of the month, of the quarter and of the first half of the year.
That made it an extra important trading day from a technical perspective. It is technically significant when a market price closes out the week, month or quarter at its high or low close for that period. In my 30 years of covering and analyzing markets, I have never seen so many futures markets that closed at their monthly high or low, or monthly and quarterly high or low closes. The significance of this rare occurrence is that many markets are presently trending up or down on a near-term (daily chart) basis, and many of those price trends are very strong.
It’s also unusual to see so many markets that are in solid uptrends or downtrends at the same time. Most of the time in markets, the majority of markets are trending sideways and choppy on a near-term basis. The other observation on the present state of the market place is that the key “outside markets” appear to be having less of an impact on the market place. This also suggests that individual markets appear to be paying more attention to their own supply and demand fundamentals and less attention to what the outside markets are doing. Most traders and investors would agree that’s a good development.
Important economic data from China Tuesday was upbeat and in line with market expectations. The China purchasing managers index (PMI) came in at 51.0 in June from 50.8 in May. The HSBC June PMI came in at 50.7 from 49.4 in May. A number above 50.0 suggests expansion.
Meantime, the European Union’s manufacturing PMI came in at 51.8 in June versus 52.2 in May. The reading was expected by traders and investors to come in at 51.9 in June.
U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the U.S. manufacturing PMI, construction spending, the ISM manufacturing report on business, the IDB/TIPP economic optimism index, the global manufacturing PMI, and domestic auto sales.
It’s a holiday-shortened trading week in the U.S., what with the Independence Day holiday on Friday. The key U.S. jobs report is issued a day early this month, on Thursday. This report is arguably the most important U.S. economic data of the month. Also on Thursday will be the monthly monetary policy meeting of the European Central Bank. It will be an extra important trading day on Thursday.
The civil war in Iraq is still an issue for the market place but it has at least temporarily moved off the front burner. The oil fields in the south of Iraq have not seen their production levels curtailed by the civil war taking place in the north of Iraq. Don’t be surprised to see in the near future this matter move back into the spotlight of the market place and once again significantly impact some market prices.
Wyckoff’s Daily Risk Rating: 6.0 (Civil war in Iraq still has the world market place somewhat concerned but there have been no major new developments recently.)
(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.
U.S. STOCK INDEXES
S&P 500 September e-mini futures: Prices are firmer in early trading. Bulls still have the solid overall near-term technical advantage as prices hover near the recent record high. 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 bullish early today. Today, shorter-term technical resistance comes in at the record high of 1,960.00 and then at 1,970.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at Monday’s low of 1,948.00 and then at last week’s low of 1,936.25. 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 and trading at a 14-year high. Bulls 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. The 9-day average is above the 18-day. Short-term oscillators (RSI, slow stochastics) are bullish early today. Shorter-term technical resistance is seen at 3,865.00 and then at 3,875.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at Monday’s low of 3,832.00 and then at 3,809.75. Sell stops are likely located just below those levels. Wyckoff's Intra-Day Market Rating: 6.5.
Dow futures: Prices are higher in early U.S. trading. Bulls still have the overall near-term technical advantage. Buy stops likely reside just above technical resistance at 16,800 and then at 16,850. Sell stops likely reside just below technical support at Monday’s low of 16,720 and then at 16,700. Shorter-term moving averages are still bearish early today, as the 4-day moving average is below 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 bearish early today. Wyckoff's Intra-Day Market Rating: 5.5
U.S. TREASURY BONDS AND NOTES
September U.S. T-Bonds: Prices are lower early today on profit taking. Bulls still have the overall near-term technical advantage. 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 137 even and then at the overnight high of 137 4/32. Buy stops likely reside just above those levels. Shorter-term technical support lies at 136 13/32 and then at 136 even. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 4.0
September U.S. T-Notes: Prices are lower in early trading, on profit taking. Bulls still have the overall near-term technical advantage. 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 last week’s high of 125.00.0 and then at the overnight high of 125.05.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at 124.24.0 and then at 124.20.0. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 4.0
U.S. DOLLAR INDEX
The September U.S. dollar index is slightly higher in early trading, on a tepid short-covering bounce after hitting a six-week low Monday. Bears have the overall near-term technical advantage. Slow stochastics for the dollar index are bearish early today. The dollar index finds shorter-term technical resistance at 80.000 and then at Monday’s high of 80.125. Shorter-term support is seen at Monday’s low of 79.800 and then at 79.600. Wyckoff's Intra Day Market Rating: 5.0
NYMEX CRUDE OIL
August Nymex crude oil prices are firmer in early U.S. trading. Bulls still have the overall near-term technical advantage. Prices are in a six-month-old uptrend on the daily bar chart. In August Nymex crude, look for buy stops to reside just above resistance at $106.00 and then at $106.50. Look for sell stops just below technical support at the overnight low of $105.43 and then at $105.00. Wyckoff's Intra-Day Market Rating: 5.5
Markets were mostly weaker in overnight trading, on some follow-through selling pressure from Monday’s downside debacle. Monday’s USDA June acreage and supply and demand data were mostly bearish and the grain futures markets were hammered lower, led by soybeans. The strong downside price action Monday puts the bears in firm technical command. Now, trading the rest of this week becomes critical. If grain futures prices can rebound well off their weekly lows by the close of the week on Thursday, it would be a clue that the markets have put in their lows. If grain futures prices close near their weekly lows on Thursday, it would suggest still more price pressure during the month of July. Although it’s now for many in the Corn Belt to imagine—what with the deluge of rainfall in many areas recently--July is the time period when dry and hot weather can start to enter the Corn Belt.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.