Jim Wyckoff's Morning Report: Markets Mixed Overnight

Wed, 29 Jan 2014

GLOBAL - The major overnight news comes from Turkey, as its central bank raised its key lending rate sharply, up to 12%, to try to stave off the deflating Turkish lira.

It remains to be seen if the move by Turkey’s central bank will calm the still-anxious emerging currency markets. India’s central bank also raised its interest rates this week. So far Wednesday morning, the move by Turkey’s central bank has somewhat calmed the emerging markets. But that sentiment could change quickly.

World stock and financial markets have stabilized at mid-week amid the worries about some non-major world currencies being stressed. Recent weaker Chinese economic data and concern about the U.S. Federal Reserve reeling in its very easy monetary policy are credited with pressuring several secondary world currencies in recent trading sessions. The main fear is the potential for a lack of financial market liquidity in the emerging nations, if the world’s major central banks start to turn off their easy-money spigots that have allowed the world markets to be awash in cash the past five years.

The big economic data point for this week comes Wednesday afternoon when the Federal Reserve’s Open Market Committee (FOMC) statement on its monetary policy is released. There is a general belief, albeit not a clear consensus, that the Fed will do another $10 billion tapering of its monthly bond-buying program, also called quantitative easing. A CNBC survey of 45 economists released Tuesday saw the vast majority expecting the Fed to continue to taper its monetary policy. At this week’s FOMC meeting Fed Chairman Ben Bernanke also hands over to Janet Yellen the reins of the U.S. central bank.

For the raw commodity market bulls, including the precious metals bulls, their fate still lies with the health of the U.S. and world stock markets. If the heretofore high-flying world stock indexes continue to show weakness, as has been the case just recently, then money flows will move from equities to the “hard assets” that include raw commodities.

The Chinese Lunar New Year holiday is approaching later this week, whereby the world’s largest nation and second-largest economy mostly shuts down for several days. Most Asian markets could see subdued trading action during the Chinese holiday.

U.S. economic data due for release Wednesday includes the MBA mortgage applications survey, the weekly DOE energy stocks report and the FOMC statement.

Wyckoff’s Daily Risk Rating: 7.0 (The markets could show an immediate, significant reaction to the afternoon release of the FOMC statement.)

(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 futures: Prices are near steady in early U.S. trading. Bulls have faded recently. The shorter-term moving averages (4-, 9- and 18-day) are bearish early today. The 4-day moving average is below the 9-day. The 9-day is below the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are neutral to bullish early today. Today, shorter-term technical resistance comes in at the overnight high of 1,801.30 and then at 1,810.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 1,784.00 and then at Tuesday’s low of 1,775.00. Sell stops are likely located just below those levels. Wyckoff's Intra-day Market Rating: 5.0

Nasdaq index futures: Prices are firmer early today on short covering. Bears still have some downside momentum on their side. The shorter-term moving averages (4- 9-and 18-day) are neutral early today. The 4-day moving average is below 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 located at the overnight high of 3,529.00 and then at this week’s high of 3,545.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 3,498.00 and then at 3,475.00. Sell stops are likely located just below those levels. Wyckoff's Intra-Day Market Rating: 5.5.

Dow futures: Prices are slightly lower in early U.S. trading. Bulls have faded to suggest a major market top is in place. Buy stops likely reside just above technical resistance at Tuesday’s high of 15,880 and then at 15,900. Sell stops likely reside just below technical support at Tuesday’s low of 15,800 and then at 15,750. Shorter-term moving averages are bearish early today, as the 4-day moving average is below the 9-day. The 9-day moving average is below the 18-day moving average. Shorter-term oscillators (RSI, slow stochastics) are neutral early today. Wyckoff's Intra-Day Market Rating: 4.5

U.S. TREASURY BONDS AND NOTES

March U.S. T-Bonds: Prices are weaker early today on more profit taking and chart consolidation after hitting a three-month high on Monday. The bulls still have some upside near-term technical momentum. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above 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 Tuesday’s high of 132 22/32 and then at 133 even. Buy stops likely reside just above those levels. Shorter-term technical support lies at 132 even and then at 131 20/32. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 4.5

March U.S. T-Notes: Prices are weaker on more profit taking and chart consolidation. Bulls still have some upside technical momentum. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above the 9-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today.

Shorter-term resistance lies at Tuesday’s high of 125.04.0 and then at this week’s high of 125.09.5. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 124.23.0 and then at the 124.16.0. Sell stops likely reside just below those levels. Wyckoff's Intra-Day Market Rating: 4.5

U.S. DOLLAR INDEX

The March U.S. dollar index is firmer early today on more short covering. Slow stochastics for the dollar index are bullish early today. The dollar index finds shorter-term technical resistance at Tuesday’s high of 80.845 and then at 81.000. Shorter-term support is seen at the overnight low of 80.595 and then at this week’s low of 80.390. Wyckoff's Intra Day Market Rating: 5.5

NYMEX CRUDE OIL

March Nymex crude oil prices are near steady early today. Bulls still have upside near-term technical momentum. In March Nymex crude, look for buy stops to reside just above resistance at last week’s high of $97.84 and then at $98.00. Look for sell stops just below technical support at the overnight low of $96.78 and then at $96.00. Wyckoff's Intra-Day Market Rating: 5.0

GRAINS

Markets were narrowly mixed overnight. There is not much new in the grains this week. U.S. corn, soybeans and wheat all need shots of fresh world export demand. Technically, soybean bulls and bears are on a level playing field. Corn and wheat market bears are in full command. The demand side of the equation for grains will continue to be a major market factor in the grain markets. South American corn and soybean growing weather is deemed mostly favorable and so far a non-issue for the markets. Grains could get some fresh speculative funds flowing in, if the U.S. stock indexes continue to trend lower.