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Jim Wyckoff's Morning Report: Will Interest Rates Rise Sooner than Expected?

Jim Wyckoff's Morning Report: Will Interest Rates Rise Sooner than Expected?

21 August 2014
Jim Wyckoff Commentary -  TheCropSite

GLOBAL - The market place is still digesting Wednesday afternoon’s FOMC minutes report.

The Fed officials’ wording that the U.S. labor situation continues to improve fell into the camp of monetary policy hawks, as it hinted the U.S. central bank could move to raise interest rates a bit sooner than many had expected. The FOMC minutes pressured U.S. Treasury and gold prices, but the U.S. stock indexes ignored the data as the Nasdaq index set a 14-year high Wednesday, while the S&P 500 futures hit a record high.

Focus now turns to the annual Kansas City Federal Reserve meeting in Jackson Hole, Wyoming, that begins on Thursday. The confab of world central bankers has in the past yielded important U.S. monetary policy speeches and clues to the direction of monetary policy. Fed Chair Janet Yellen and ECB President Mario Draghi are scheduled to speak on Friday in Jackson Hole.

In overnight news, the HSBC China preliminary manufacturing purchasing managers index (PMI) fell to 50.3 in August versus 51.7 in July. The August reading was a three-month low for the figure, and the market place deemed the report downbeat. The China data is an underlying bearish factor for the raw commodity sector. China is the world’s largest importer of raw commodities.

The European Union’s August composite PMI was also a miss for the market place, as it came in at 52.8 versus expectations for a reading of 53.4. Still, European and Asian stock markets chose to focus more on the bull market run in U.S. equities, and less on their downbeat economic data.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the U.S. flash manufacturing PMI, leading economic indicators, existing home sales, and the Philadelphia Fed business survey.

Wyckoff’s Daily Risk Rating: 6.0 (The market place is only somewhat focused on the still-simmering geopolitical matters: the Russia-Ukraine crisis, Iraq and the Gaza strip.)

(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 slightly higher in early trading and hit a record high overnight. The 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 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 overnight record high of 1,987.75 and then at 2,000.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 1,980.75 and then at Tuesday’s low of 1,973.00. Sell stops are likely located just below those levels. Wyckoff's Intra-day Market Rating: 6.0

Nasdaq index futures: Prices are firmer in early trading today and hit another 14-year high overnight. Bulls are in solid technical command. 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 early today. Shorter-term technical resistance is seen at the overnight high of 4,046.00 and then at 4,075.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 4,038.00 and then at 4,025.00. Sell stops are likely located just below those levels. Wyckoff's Intra-Day Market Rating: 6.0.

Dow futures: Prices are firmer in early U.S. trading and hit a four-week high overnight. Bulls have good upside near-term technical momentum. Buy stops likely reside just above technical resistance at 17,050 and then at the record high of 17,080. Sell stops likely reside just below technical support at 16,950 and then at 16,900. 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 bullish early today. Wyckoff's Intra-Day Market Rating: 6.0

U.S. TREASURY BONDS AND NOTES

December U.S. T-Bonds: Prices are weaker early today, on more profit taking and on the hawkish FOMC minutes. Bulls still have the overall near-term technical advantage, but are now fading a bit. Shorter-term moving averages (4- 9- 18-day) are still 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 bearish early today. Shorter-term resistance lies at the overnight high of 138 10/32 and then at Wednesday’s high of 138 19/32. 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 16/32. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 4.5

December U.S. T-Notes: Prices are slightly lower in early trading. Bulls still have the overall near-term technical advantage but are now fading a bit. 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 the overnight high of 125.09.0 and then at 125.16.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at this week’s low of 125.05.0 and then at 125.00.0. 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 slightly higher in early trading and hit another 11-month high overnight. Bulls have the solid overall near-term technical advantage. Slow stochastics for the dollar index are bullish early today. The dollar index finds shorter-term technical resistance at the overnight high of 82.420 and then at 82.50.0. Shorter-term support is seen at the overnight low of 82.225 and then at 82.000. Wyckoff's Intra Day Market Rating: 5.5

NYMEX CRUDE OIL

October Nymex crude oil prices are lower in early U.S. trading and hit another 6.5-month low overnight. Bears have the firm overall near-term technical advantage as prices are in a steep two-month-old downtrend on the daily bar chart. Look for buy stops to reside just above resistance at $93.00 and then at the overnight high of $93.69. Look for sell stops just below technical support at the overnight low of $92.50 and then at $92.00. Wyckoff's Intra-Day Market Rating: 4.0

GRAINS

Markets were firmer in overnight trading, on short covering. Bears remain in full technical command of the grains and fundamentals are also bearish. This week’s annual Pro Farmer annual Midwest crop tour shows results pointing to what most already expected: huge U.S. soybean and corn crops. It’s still my bias that the seasonal harvest lows in corn and soybean markets will come early this year, and wheat will be a follower. Traders will closely examine today’s weekly USDA export sales data.

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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