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Jim Wyckoff's Morning Report: Anxiety Meets US Market Place

02 October 2013
Jim Wyckoff Commentary -  TheCropSite

GLOBAL - The market place is greeting the partial U.S. government shutdown with some mild anxiety but certainly not panic. Asian and European stock markets overnight focused on other matters.

There are mixed ideas in the market place regarding how long the U.S. lawmakers will let the government remain closed.

If the situation drags on for several days, anxiety in the markets will increase. In mid-October the U.S. government will hit its borrowing limit.

If that more important matter cannot be agreed upon by U.S. lawmakers in a timely manner, then it could be a much bigger event for the market place than the current budget impasse. Fresh U.S. budget news coming out of Washington Wednesday could be market-sensitive.

Most U.S. government reports have been postponed due to the government furloughs, including Friday’s monthly employment report. Non-government U.S. economic reports will be issued as scheduled.

Here is one school of thought on the U.S. government shutdown: Any extended shutdown will shave points off of U.S. gross domestic product growth.

That could, in turn, prompt the Federal Reserve to delay any intended “tapering” of its monthly bond-buying program, also known as quantitative easing. This theory should have been bullish for the raw commodity sector Tuesday.

Maybe that scenario will have a delayed bullish price effect on the raw commodity markets. Or, the other side of the coin is that any slower U.S. GDP growth would also be a drag on other world economies’ growth prospects, and also mean less demand for raw commodities.

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. The latest German government bond auction Wednesday saw 10-year bund yields drop sharply, as demand for safe-haven German debt increased due to the U.S. government shutdown and the Italian government meltdown.

Traders will also closely scrutinize Wednesday’s European Central Bank meeting results and press conference by ECB president Mario Draghi.

There has been some speculation in the market place that the ECB could soon launch another round of monetary stimulus measures.

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 Wednesday includes the weekly MBA mortgage applications survey, the ADP national employment report, and the ISM New York report on business.--Jim

U.S. Dollar Index

The December U.S. dollar index is slightly higher early today on tepid short covering after hitting an eight-month low on Tuesday. Bears remain in overall near-term technical command.

Slow stochastics for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at Tuesday’s high of 80.410 and then at this week’s high of 80.490.

Shorter-term support is seen at the overnight low of 80.165 and then at this week’s low of 79.955. Wyckoff's Intra Day Market Rating: 5.0

NYMEX Crude Oil

November Nymex crude oil prices are near steady early today after hitting a seven-week low Tuesday.

Bears still have downside near-term technical momentum. In November Nymex crude, look for buy stops to reside just above resistance at this week’s high of $102.76 and then at $103.00. Look for
sell stops just below technical support at the overnight low of $101.43 and then at this week’s low of $101.05. Wyckoff's Intra-Day Market Rating: 5.0

Grains

Markets were mixed overnight. There is just not much bullish news in the grain markets at present. Corn and soybeans are still feeling the bearish effects of Monday’s bearish USDA data.

The “risk-off” mentality in the market place this week is also a bearish underlying factor for the grains.

And U.S. harvest progress in soybeans are corn is progressing rapidly this week, which is also bearish.

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

Corn and soybean bears are in near-term technical command. With much of USDA now closed, there will be a lack of fresh fundamental news for grain traders to digest, and that will likely favor the bearish camp.

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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