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Jim Wyckoff: Stalled Budget Plan Forces US Government Shutdown

01 October 2013
Jim Wyckoff Commentary -  TheCropSite

GLOBAL - The US government is now partially shutting down as the October 1 deadline for a government budget plan was not met by US lawmakers.

The market place is greeting the news with mild risk aversion so far Tuesday. However, if this latest U.S. government debacle drags on, many markets will become more skittish. Presently, most of the market place expects the U.S. government shutdown to be short-lived.

In mid-October the U.S. government will hit its borrowing limit. If that matter cannot be agreed upon by U.S. lawmakers in a timely manner, it could be a much bigger event for the market place than the current budget impasse.

Fresh budget news coming out of Washington Tuesday could be market-sensitive. The other factor causing some risk aversion in the market place early this week is turmoil in the Italian government regarding a scandal involving former prime minister Berlusconi. Many Italian government officials have resigned.

Gold is seeing some safe-haven buying interest due to the U.S. budget and spending debacle. The U.S. dollar index and crude oil prices are weaker on the lack of progress on the U.S. budget. In other overnight news, the Markit purchasing managers index (PMI) for the European Union fell to 51.1 in September from 51.4 in August.

A reading above 50.0 suggests economic growth. The EU PMI shows the bloc’s economic recovery is still fragile. 

It was also reported Tuesday the overall unemployment rate in the EU was 12% in August—the same as in July.

China is observing the Golden Week holiday and market activity in the world’s second-largest economy will be quiet the rest of the week. U.S. economic data due for release Tuesday includes the weekly Goldman Sachs and Johnson Redbook retail sales reports, the U.S. manufacturing PMI, construction spending, the ISM manufacturing report on business, the global manufacturing PMI and domestic auto industry sales.--Jim

U.S. Dollar Index

The December U.S. dollar index is lower early today and hit a fresh eight-month low overnight. Bears remain in overall near-term technical command. Slow stochastics for the dollar index are bearish early today.

The dollar index finds shorter-term technical resistance at the overnight high of 80.410 and then at Monday’s high of 80.490. Shorter-term support is seen at the overnight low of 79.955 and then at 79.750. Wyckoff's Intra Day Market Rating: 4.0

NYMEX Crude Oil

November Nymex crude oil prices are near steady early today after hitting a seven-week low Monday. Bears have downside near-term technical momentum. In November Nymex crude, look for buy stops to reside just above resistance at $103.00 and then at $104.00. Look for sell stops just below technical support at the overnight low of $101.84 and then at Monday’s low of $101.05. Wyckoff's Intra-Day Market Rating: 5.0


Markets were mostly weaker overnight. Corn and soybeans are still feeling the bearish effects of Monday’s bearish USDA quarterly grain stocks report.

The “risk-off” mentality in the market place this week is also a bearish underlying factor for the grains. U.S. harvest progress in soybeans are corn will likely progress rapidly this week, and that’s also bearish.

Wheat bulls are making a good upside progress. There are technical clues the wheat markets have put in major lows.

TheCattleSite 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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