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Jim Wyckoff's Morning Report: Markets Lower Overnight Wednesday

22 August 2013
Jim Wyckoff Commentary -  TheCropSite

GLOBAL - The market place has had some time to digest Wednesday afternoon’s FOMC minutes that revealed no clear consensus from FOMC members on when to start to wind down the Fed’s monthly bond-buying program, also known as quantitative easing.

While the minutes were not all that different from the last minutes of the FOMC that were released several weeks ago, the “take-away” the market place garnered from this latest Fed event was that “tapering” of quantitative easing is coming, and likely sooner rather than later.

The FOMC minutes reinforced ideas that the long, long road of very easy money from the world’s major central banks will reach an end in the coming months. Such is being deemed bullish for the U.S. dollar, and bearish for world bond markets and periphery currencies. U.S. 10-year note yields hit a two-year high of 2.925% overnight.

German and U.K. bond yields also hit multi-year highs overnight. Meantime, Asian currency and financial markets remain strained. The Indian rupee and Turkish lira hit new record lows versus the U.S. dollar Thursday.

Indian and Indonesian central bank officials have taken steps to stabilize their currencies, but with only very limited success. There are worries about an “Asian contagion” that has in the past roiled markets worldwide.

Rising interest rates in the major world economies have put pressure on the periphery currencies. Chinese manufacturing data Thursday showed improvement from the prior month.

The HSBC purchasing managers index rose to 50.1 in August from 47.7 in July. A reading over 50.0 suggests economic growth. China is the world’s second-largest economy, but the leading worldwide importer of many key raw commodities.

The China data somewhat assuaged the Asian markets, but the concerns of an Asian contagion outweighed the positive China data.

Traders and investors have moved the ongoing Egypt unrest to the back burner for the moment, as there are no major, new developments there.

However, any escalation in violence is likely to impact the market place, and could also prompt a rise in demand for safe-haven assets, including gold. News reports that Syria has used chemical weapons against its civilians, with hundreds killed, is a matter that will be closely monitored by the market place, and is yet another geopolitical hotspot that could flare up to become a major markets factor.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the U.S. flash manufacturing PMI, the house price index, leading economic indicators, and the Kansas City Fed manufacturing survey.--Jim

U.S. Dollar Index

The September U.S. dollar index is solidly higher in early U.S. trading, on more short covering. The bears still have the overall near-term technical advantage, but the bulls have gained some upside momentum.

Slow stochastics for the dollar index are bullish early today. The dollar index finds shorter-term technical resistance at the overnight high of 81.760 and then at 82.000. Shorter-term support is seen at the overnight low of 81.410 and then at 81.000. Wyckoff's Intra Day Market Rating: 6.0

NYMEX Crude

October Nymex crude oil prices are firmer early today on a corrective bounce from recent selling pressure.

Bulls still have the overall near-term technical advantage but have faded. In October Nymex crude, look for buy stops to reside just above resistance at the overnight high of $104.72 and then at $105.00. Look for sell stops just below technical support at this week’s low of $103.50 and then at $103.00. Wyckoff's Intra-Day Market Rating: 5.5

Grains

Markets were lower in overnight trading. The stronger U.S. dollar index is putting downside price pressure on the entire raw commodity sector Thursday.

Trading in the grains has turned choppy this week. Corn and soybean bulls still have some technical momentum on their side. A weather market is playing out in the grains—especially for soybeans.

The western U.S. Corn Belt has portions that remain very dry. The Pro Farmer Midwest Crop Tour is in progress.

So far, the early results show good crop yield potential, which has been a bit bearish. Grain traders will scrutinize Thursday morning’s USDA weekly 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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