Tuesday, January 7--Jim Wyckoff's Morning Web Log
* LATEST MARKET DEVELOPMENTS *
Traders are still buzzing about Monday morning’s "mini flash
crash" in gold futures prices that lasted about one minute.
The CME Group said an erroneous trade in Comex gold futures
was not responsible for the February gold contract dropping
sharply--by over $30.00 an ounce at mid-morning Monday.
Reports said very heavy volume at the time of the price drop
was recorded in gold futures--4,000 contracts in one
second's time. The price of February Comex gold was trading
at $1,245.40 an ounce at 10:13 a.m. eastern standard time
Monday, and then within one minute fell to a low of
$1,212.60. Prices at 10:15 a.m. had rebounded to $1,234.50.
Such events are occurring more frequently in the gold and
other financial markets, although they still do not occur
often. Still, these inexplicable, sudden price spikes
(almost always to the downside) further undermine the
confidence of the small trader/investor in the market place—
especially futures markets. A trader on the long side of the
gold futures market Monday morning, who had protective stop
orders in place, could have seen those orders triggered at a
much lower price level—only to see gold prices rebound one
minute later. The "big boys" in the markets seem to weather
these brief market price spikes fairly well, and it’s
usually the small investor which seems to be burned.
In overnight news, there was another inflation report from
the European Union that showed very low inflationary
pressures. Consumer price inflation rose by just 0.8% in
December, year on year. The rate in November was up 0.9%.
This latest EU inflation report continued a pattern of
economic data that puts the bloc of 17 nations precariously
close to price deflation—a nasty economic ailment that put a
serious crimp in Japan’s economy for two decades. By its
very definition deflation is a very bearish phenomenon for
raw commodity prices.
The headline risk picks up Wednesday, as the Federal
Reserve’s FOMC minutes are out in the afternoon, while the
European Central Bank holds its monthly meeting on Thursday
and the U.S. employment report is out on Friday. There is
also important economic data coming out of China this week—
trade figures on Wednesday and inflation figures on
Thursday. Volatility and volumes in the market place are
likely to pick up starting Wednesday.
U.S. economic data due for release Tuesday includes the
weekly Goldman Sachs and Johnson Redbook retail sales
reports, and the international trade report.
Wyckoff’s Daily Risk Rating: 5.0 (No major headline risk
today, but the heat will be turned up as the week
(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.
U.S. STOCK INDEXES
S&P 500 futures: Prices are slightly higher in early U.S.
trading. The shorter-term moving averages (4-, 9- and 18-
day) are neutral early today. The 4-day moving average is
below the 9-day. The 9-day is above the 18-day moving
average. Short-term oscillators (RSI, slow stochastics) are
neutral early today. Today, shorter-term technical
resistance comes in at Monday’s high of 1,832.30 and then at
1,840.50. Buy stops likely reside just above those levels.
Downside support for active traders today is located at
Monday’s low of 1,817.50 and then at 1,810.00. Sell stops
are likely located just below those levels. Wyckoff's Intra-
day Market Rating: 5.5
Nasdaq index futures: Prices are higher early today. The
shorter-term moving averages (4- 9-and 18-day) are neutral
early today. The 4-day moving average is below the 9-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 Monday’s
high of 3,540.25 and then at 3,550.00. Buy stops likely
reside just above those levels. On the downside, short-term
support is seen at the overnight low of 3,516.00 and then at
Monday’s low of 3,505.75. Sell stops are likely located just
below those levels. Wyckoff's Intra-Day Market Rating: 6.0.
Dow futures: Prices are higher early today. Buy stops likely
reside just above technical resistance at 16,450 and then at
Monday’s high of 16,470. Sell stops likely reside just below
technical support at 16,365 and then at Monday’s low of
16,340. Shorter-term moving averages are still bullish early
today, as the 4-day moving average is above the 9-day and
18-day. The 9-day moving average is above the 18-day moving
average. Shorter-term oscillators (RSI, slow stochastics)
are bearish early today. Wyckoff's Intra-Day Market Rating:
U.S. TREASURY BONDS AND NOTES
March U.S. T-Bonds: Prices are slightly higher early today
on short covering in a bear market. The bears still have the
solid overall near-term technical advantage as prices are in
a nine-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 to bullish early today. Shorter-
term resistance lies at Monday’s high of 129 11/32 and then
at 129 19/32. Buy stops likely reside just above those
levels. Shorter-term technical support lies at the overnight
low of 128 29/32 and then at 128 16/32. Sell stops likely
reside just below those levels. Wyckoff's Intra-Day Market
March U.S. T-Notes: Prices are slightly higher early today.
Prices are in a 10-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 bullish early
today. Shorter-term resistance lies at the overnight high
of 123.20.0 and then at 123.24.0. Buy stops likely reside
just above those levels. Shorter-term technical support
lies at the overnight low of 123.13.0 and then at 123.08.0.
Sell stops likely reside just below those levels. Wyckoff's
Intra-Day Market Rating: 5.5
U.S. DOLLAR INDEX
The March U.S. dollar index is weaker early today. The
greenback bulls have gained upside momentum recently, but
need to show fresh power soon to keep it. Slow stochastics
for the dollar index are neutral early today. The dollar
index finds shorter-term technical resistance at the
overnight high of 80.945 and then at Monday’s high of
80.080. Shorter-term support is seen at Monday’s low of
80.690 and then at 80.500. Wyckoff's Intra Day Market
NYMEX CRUDE OIL
February Nymex crude oil prices are firmer early today and
seeing a corrective, short-covering bounce after dropping
sharply and hitting a five-week low on Monday. Bears have
the overall near-term technical advantage. In February Nymex
crude, look for buy stops to reside just above resistance at
Monday’s high of $94.59 and then at $95.00. Look for sell
stops just below technical support at the overnight low of
$93.54 and then at Monday’s low of $93.20. Wyckoff's Intra-
Day Market Rating: 5.5
Markets were weaker overnight, amid a lack of fresh, bullish
fundamental news. Technically, corn, soybean and wheat
futures bears are in near-term control. Corn and soybean
traders will continue to keep an eye on South American
weather, which so far has not been significantly worrisome
for the crops. An arctic blast in the U.S. does not so far
have wheat growers too worried about winter kill. Traders
are awaiting Friday morning’s USDA quarterly grain stocks