Risk Appetite Returns to Marketplace at Mid-Week

Risk Appetite Returns to Marketplace at Mid-Week

Wednesday, October 3–Jim Wyckoff’s Morning Markets Report

OVERNIGHT DEVELOPMENTS

World stock markets were mostly higher overnight. U.S.
stock indexes are pointed toward firmer openings when the
New York day session begins. Chinese markets are closed
until Friday for a public holiday.

Worldwide attention, especially in Europe, is on the new
anti-establishment Italian government’s plans to deal with
Italy’s financial and economic problems. Reports overnight
said Italy is backing down from its hardline stance with
the European Union over the matter. The Euro currency today
stabilized on the news, after being under selling pressure
earlier this week.

In other overnight news, U.S. Federal Reserve Bank of
Chicago President Charles Evans said in a speech in London
the U.S. economy is humming right along and that the Fed
will likely have to put the brakes on the economic growth
by continuing to gradually raise interest rates. He added
such Fed policy moves are historically normal during
stronger economic expansion periods.

U.S. retail giant Amazon has significantly raised its
minimum wage for its workers to $15 an hour. While this
move seems benign right now, it’s just one more small clue
of rising price inflation that could very well become
problematic at some point—and just maybe sooner than even
economists expect. Fed Chairman Jerome Powell reiterated on
Tuesday that price inflation is not a problem. Problematic
inflation is generally bullish for hard assets like raw
commodities and bearish for paper assets like stocks and
bonds.

The key outside markets today find the U.S. dollar index
near steady after hitting a 2.5-month high on Tuesday.
Meantime, November Nymex crude oil prices are also near
steady after hitting a four-year high Tuesday. Prices are
trading just above $75.00 a barrel.

U.S. economic data due for release Wednesday includes the
weekly MBA mortgage applications survey, the ADP national
employment report, the U.S. services PMI, the global
services PMI, the ISM non-manufacturing report on business
and the weekly DOE liquid energy stocks report.

–Jim

U.S. STOCK INDEXES

December S&P 500 e-mini futures: Prices are firmer in early
U.S. trading and not far below this week’s contract and
record highs. The bulls have the solid overall near-term
technical advantage. The shorter-term moving averages (4-,
9- and 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. Short-term oscillators (RSI, slow
stochastics) are neutral to bullish early today. Today,
shorter-term technical resistance comes in at the contract
high of 2,947.00 and then at 2,960.00. Buy stops likely
reside just above those levels. Downside support for active
traders today is located at this week’s low of 2,917.50 and
then at last week’s low of 2,907.50. Sell stops are likely
located just below those levels. Wyckoff’s Intra-day Market
Rating: 6.0

December Nasdaq index December futures: Prices are higher
and not far below this week’s contract and record high.
Bulls have the solid overall near-term technical advantage.
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 contract
high of 7,728.75 and then at 7,750.00. Buy stops likely
reside just above those levels. On the downside, short-term
support is seen at this week’s low of 7,630.25 and then at
7,600.00. Sell stops are likely located just below those
levels. Wyckoff’s Intra-Day Market Rating: 6.0.

U.S. TREASURY BONDS AND NOTES

December U.S. T-Bonds: Prices are lower in early U.S.
trading today. Bears have the overall near-term technical
advantage as a five-week-old downtrend is in place on the
daily chart. However, trading has turned choppy. Shorter-
term moving averages (4- 9- 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. Oscillators (RSI, slow
stochastics) are neutral to bearish early today. Shorter-
term technical resistance is seen at the overnight high of
140 16/32 and then at this week’s high of 140 23/32. Buy
stops likely reside just above those levels. Shorter-term
support lies at this week’s low of 139 23/32 and then at the
September low of 139 17/32. Sell stops likely reside just
below those levels. Wyckoff’s Intra-Day Market Rating: 4.0

December U.S. T-Notes: Prices are lower in early U.S.
trading. Bears have the overall near-term technical
advantage. Prices are in a five-week-old downtrend on the
daily bar chart. Shorter-term moving averages (4- 9- 18-
day) are neutral early today. The 4-day moving average is
above the 9-day. The 9-day is below the 18-day moving
average. Oscillators (RSI, slow stochastics) are neutral
early today. Shorter-term resistance lies at this week’s
high of 118.29.5 and then at last week’s high of 119.00.0.
Buy stops likely reside just above those levels. Shorter-
term technical support lies at this week’s low of 118.16.5
and then at the September low of 118.11.0. Sell stops
likely reside just below those levels. Wyckoff’s Intra-Day
Market Rating: 4.0

U.S. DOLLAR INDEX

The December U.S. dollar index is slightly down on profit
taking after hitting a six-week high on Tuesday. Bulls have
good upside momentum and fresh technical power. The shorter-
term moving averages for the dollar index are bullish early
today, as the 4-day is above the 9-day and 18-day. The 9-day
is above the 18-day moving average. Short-term oscillators
for the dollar index are neutral early today. The dollar
index finds shorter-term technical resistance at this week’s
high of 95.390 and then at 95.750. Shorter-term support is
seen at the overnight low of 94.885 and then at this week’s
low of 94.605. Wyckoff’s Intra Day Market Rating: 5.0

NYMEX CRUDE OIL

November Nymex crude oil prices are near steady and near
this week’s contract high and four-year high. The bulls have
the solid overall near-term technical advantage. The
shorter-term moving averages are bullish early today as the
4-day is above the 9-day and 18-day. The 9-day is above the
18-day moving average. Short-term oscillators (RSI and slow
stochastics) are neutral early today. Look for buy stops to
reside just above technical resistance at the contract high
of $75.91 and then at $77.00. Look for sell stops just below
technical support at $75.00 and then at $74.00. Wyckoff’s
Intra-Day Market Rating: 5.0

GRAINS

Grain futures prices were firmer overnight. Heavy rains
expected over the U.S. Corn Belt in the coming days will
delay corn and soybean harvest, and that’s friendly for
those market prices. Grain market bulls got some more
bullish news with the new U.S.-Mexico-Canada trade agreement
reached earlier this week. Market bottoms look to be in
place for all three major grain markets.

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.

Jim Wyckoff