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Jim Wyckoff's Morning Report: US Agreement Needed as Treasury Deadline Approaches

16 October 2013
Jim Wyckoff Commentary -  TheCropSite

GLOBAL - The U.S. government remains partially closed on day 16. The U.S. Congress and President Obama are bumping right up against the Thursday deadline for which the U.S. Treasury says it will begin to run out of cash to pay its bills.

The sticking point appears to be the House of Representatives’ conservative Republicans who refuse to work with the Senate. Meetings between U.S. lawmakers will be ongoing Wednesday, to try to get a last-minute agreement on the U.S. budget and debt ceiling that would reopen the U.S. government. The present sense of the market place is that a U.S. budget/debt deal will still be reached before the Thursday deadline. 

Such is pretty much what the market place had expected all along—a last-minute compromise. However, traders and investors worldwide are becoming more anxious as Thursday approaches and still no deal. If no deal is reached by U.S. lawmakers by the end of Wednesday, or if negotiations between congressional leaders break down, serious strains in the markets would very quickly surface, including keen safe-haven demand for gold. That scenario appeared unlikely Tuesday, but on Wednesday morning anxiety in the market place is on the rise. It could be a volatile day in the markets on Wednesday and/or Thursday. The Fitch ratings agency late Tuesday placed U.S. debt on watch and warned it could downgrade the U.S. credit rating if no agreement on the budget and debt ceiling is reached soon. In another sign of keener risk aversion worldwide, the German government auctioned a two-year treasury note Wednesday and there was very strong demand for it—the strongest demand in over two years. German debt is considered a safe-haven asset by European investors. European and Asian markets were on hold Wednesday, amid the U.S. budget/debt impasse and the looming Thursday U.S. debt ceiling deadline. U.S. economic data due for release Wednesday includes the weekly MBA mortgage applications survey, the NAHB housing market index, Treasury international capital data, and the Fed’s beige book.

US Dollar Index

The December U.S. dollar index is weaker early today. Bears remain in overall near-term technical control. Slow stochastics for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at the overnight high of 80.680 and then at the October high of 80.865. Shorter-term support is seen at this week’s low of 80.200 and then at 80.000. Wyckoff's Intra Day Market Rating: 4.5

NYMEX Crude Oil

November Nymex crude oil prices are slightly higher early today on tepid short covering. Bears still have the overall near-term technical advantage. Prices are in a seven-week-old downtrend on the daily bar chart. In November Nymex crude, look for buy stops to reside just above resistance at $102.00 and then at this week’s high of $102.52. Look for sell stops just below technical support at last week’s low of $100.60 and then at $100.00. Wyckoff's Intra-Day Market Rating: 5.0

Grains

Markets were firmer overnight on short covering. Corn and soybean harvesting is progressing in the U.S. Corn Belt this week, but rains in part of the region have delayed it. With much of USDA still closed, remains a serious lack of fresh fundamental news for grain traders. Technically, the corn bears are still in command, soybean bears have the slight chart advantage, and wheat bulls possess the slight near-term technical advantage.

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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