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Jim Wyckoff's Morning Report: US Shutdown Leaves Implications

18 October 2013
Jim Wyckoff Commentary -  TheCropSite

GLOBAL - Now that the U.S. government is reopened and U.S. lawmakers have put off for a few months the budget and debt ceiling debacle that had captured the market place’s attention for two weeks, traders are looking at the implications of the matter, including the likelihood the whole mess will again be played out in the first quarter of 2014.

The gold and U.S. Treasury markets are seeing safe-haven demand in the wake of this week’s events in Washington, D.C. Also, most of the market place has concluded the U.S. Federal Reserve will have to hold off on any changes in its monetary policy until it can get a good read on the U.S. economy’s health. With U.S. economic data being postponed for nearly three weeks it appears likely that the Fed won’t have a good gauge on the U.S. economy’s health until at least the middle of the first quarter of 2014. This scenario is a bullish underlying factor for the U.S. stock indexes and raw commodity markets, as any “tapering” of the Fed’s quantitative easing has been put on hold. In overnight news, China’s gross domestic product grew at a 7.8% annual rate in the third quarter, which was in line with market expectations and up from the growth rates seen in the world’s second-largest economy in the first and second quarters of this year. This news is a bullish underlying factor for the raw commodity sector.

Asian and European stocks were lifted on the China news and on the late rally on Wall Street Thursday. The U.S. dollar index is lower again Friday morning and hit a 10.5-month low overnight.

Currency traders have realized the U.S. budget/debt deal reached Wednesday is just a temporary band- aide placed on a festering wound. The European Union and its financial problems have been on the back burner of the market place for a while now, mainly because of the U.S. debt/budget fiasco. However, the EU’s problems have not disappeared. It was reported overnight that non-performing bank loans in Spain rose to a new high of 12% in August.

There is no major U.S. economic data due for release Friday, due to the recent U.S. government shutdown. Government agencies are scrambling to get reports put together now that the government is reopened. Traders and investors will soon get a steady flow of government economic reports.

US Dollar Index

The December U.S. dollar index is weaker early today and hit a fresh 10.5-month low overnight. Bears remain in firm overall near-term technical control. Slow stochastics for the dollar index are bearish early today. The dollar index finds shorter-term technical resistance at the overnight high of 79.820 and then at 80.000. Shorter-term support is seen at the overnight low of 79.550 and then at 79.250. Wyckoff's Intra Day Market Rating: 4.5

NYMEX Crude Oil

November Nymex crude oil prices are firmer early today on 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 $102.50. Look for sell stops just below technical support at $101.00 and then at the overnight low of $100.52. Wyckoff's Intra-Day Market Rating: 4.5

Grains

Markets were higher overnight on more short covering and on a lower U.S. dollar index. Corn and soybean harvesting is progressing in the U.S. Corn Belt this week, which is limiting the upside due to bearish seasonals. Traders are starting to get some fresh fundamental news from USDA as the U.S. government has reopened. Technically, the corn bears are 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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