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Jim Wyckoff's Morning Report: Markets React to Malaysia Airlines Plane Crash

18 July 2014
Jim Wyckoff Commentary -  TheCropSite

GLOBAL - Geopolitics is back on the front burner of the market place late this week, and with a double-barrel blast.

On Thursday morning a Malaysian airliner was shot down on the Russia-Ukraine border, and on Thursday afternoon Israel started a ground offensive against Hamas on the Gaza strip. World stock markets recoiled on the two major world developments.

However, as world trading moved from Asia, to Europe, to the U.S. Friday the market place settled down a bit. Many market watchers are scratching their heads that the market place has calmed down fairly quickly Friday morning. The U.S. stock indexes and U.S. Treasuries are stable, while safe-haven gold prices are moderately lower. As mentioned in this space earlier this week, I am surprised at the nonchalance of the market place this summer, regarding geopolitical matters that are significant.

The late-week flare-up of geopolitics is very likely not a “one and done” event. As the Malaysian jet shoot-down mystery unravels, it seems plausible that Russian president Vladimir Putin will come under even more scrutiny from the West. The West’s leaders consider Putin a thug but they must respect that Putin is still the one with his finger on the button of the world’s second-largest nuclear arsenal. The world will be watching as the U.S. and its allies figure out what to do with Putin—especially if his regime is implicated in the downing of the Malaysian airliner.

On the Israeli-Hamas front, it appears Israel is taking an extra hard line against its archenemy this time. An incursion of ground troops into Gaza is unsettling to traders and investors, but the bigger worry of the market place is if Iran and other Arab countries become more involved in the conflict. Unrest in one region of the Middle East in recent years has seemed to incite additional unrest in other regions.

All of the above augurs firmly in favor of safe-haven investment assets that include gold, U.S. Treasuries and the U.S. dollar—and against already lofty major world stock indexes. Many market watchers are wondering if this geopolitical unrest will usher in the much-anticipated end to the major bull market run in equities—or at least a significant downside correction that many feel is overdue.

U.S. economic data due for release Friday includes the University of Michigan consumer sentiment survey and leading economic indicators.

Wyckoff’s Daily Risk Rating: 6.0 (While the geopolitical tension in the market place is light at present, I suspect one or more of the simmering hot spots in the world will become a front-burner matter for markets at some point not too far down the road.)

(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 firmer in early trading after hitting a three-week low overnight. The shorter-term moving averages (4-, 9- and 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. Short-term oscillators (RSI, slow stochastics) are neutral early today. Today, shorter-term technical resistance comes in at 1,968.00 and then at the record high of 1,978.25. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 1,942.50 and then at 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 firmer in early trading today. 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 neutral early today. Shorter-term technical resistance is seen at 3,900.00 and then at 3,918.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 3,855.00 and then at the July low of 3,832.00. Sell stops are likely located just below those levels. Wyckoff's Intra-Day Market Rating: 5.5.

Dow futures: Prices are slightly higher in early U.S. trading. Buy stops likely reside just above technical resistance at 17,000 and then at Thursday’s record high of 17,080. Sell stops likely reside just below technical support at 16,900 and then at 16,850. 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 neutral early today. Wyckoff's Intra-Day Market Rating: 5.0

U.S. TREASURY BONDS AND NOTES

September U.S. T-Bonds: Prices are firmer and hit a contract high early today. Bulls have the solid overall near-term technical advantage on safe-haven demand. 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 to bullish early today. Shorter-term resistance lies at the overnight contract high of 138 23/32 and then at 139 even. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 137 30/32 and then at 137 23/32. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 6.0

September U.S. T-Notes: Prices are slightly higher in early trading and hit a six-week high overnight. Bulls have the firm 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 to bullish early today. Shorter-term resistance lies at the overnight high of 125.23.5 and then at the contract high of 126.00.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 125.08.0 and then at 125.00.0. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 6.0

U.S. DOLLAR INDEX

The September U.S. dollar index is near steady in early trading. Bulls have some upside momentum on their side. Slow stochastics for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at this week’s high of 80.665 and then at 80.800. Shorter-term support is seen at 80.500 and then at 80.420. Wyckoff's Intra Day Market Rating: 5.0

NYMEX CRUDE OIL

August Nymex crude oil prices are slightly higher in early U.S. trading and seeing more short covering and bargain hunting after hitting a two-month low on Tuesday. Geopolitics back on the front burner is also bullish for oil. In August Nymex crude, look for buy stops to reside just above resistance at $104.00 and then at $104.50. Look for sell stops just below technical support at $103.00 and then at $102.50. Wyckoff's Intra-Day Market Rating: 5.5

GRAINS

Markets were mostly firmer in overnight trading on short covering. Bears remain in firm technical command. While weather in the U.S. Corn Belt remains good for growing crops, a drier and warmer pattern is developing that will be closely monitored next week. It would have to be an extended pattern of heat and dry weather to goose the grain futures markets. But it is now that time of year when the rainfall spigots can close up in 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.



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