Jim's Morning Markets Report--March 3

March 3, 2014 01:09 AM
 

Monday, March 3--Jim Wyckoff's Morning Web Log

NOTE: My friend and fellow market analyst Ken Seehusen produced some of
my report today, as I am out of the office.—Jim

It’s a keen "risk-off" day in the market place Monday, following the
weekend Russian troop invasion of Crimea, which is a peninsula of
Ukraine. Russian jets have also reportedly violated Ukrainian air space.
Gold prices pushed sharply higher Monday, hitting a four-month high, on
the weekend developments in already unstable Ukraine.

To some, the Russian invasion was a surprise event. However, others
could read the handwriting on the wall last week.

Many markets are seeing significant price reactions Monday, following
the weekend Russian troop invasion of Crimea, which is a peninsula of
Ukraine. Russian jets have also reportedly violated Ukrainian air space.
World stock markets are under selling pressure, while the U.S. dollar
index and U.S. Treasuries have rallied. Crude oil and the grain markets
have also pushed sharply higher Monday, as Ukraine and the Black Sea
region are rich in natural resources and the Black Sea is a major export
hub. Military conflict in the region would very likely disrupt shipping
of any commodity coming out of the Black Sea.

The U.S. and other Western nations are gearing up for economic sanctions
to be slapped on Russia. However, it is very unlikely the West would
initiate any military action, despite Russian troops occupying a
sovereign nation. Economic sanctions levied against an already unstable
Russian economy would have major ramifications for Russia and those
world companies that deal with Russia.

Russia’s central bank raised its key interest rate by 1% over the
weekend to try to ward off further weakness of the already slumping
Russian ruble on the world currency markets. It’s not a pleasant notion
to imagine a tattered Russian economy whose military still possesses
major stockpiles of nuclear weapons that rogue nations would pay up
dearly to obtain. Indeed, the Russian situation overall is and likely
will continue to be a bullish underlying factor for safe-haven gold for
at least the near term and probably longer.

The country of Ukraine was already on the verge of financial collapse
and needs funding soon from outside sources. The International Monetary
Fund late last week was moving quickly to provide funding to the
Ukrainian financial system. However, the Russian invasion of Crimea
likely stalled that planning.

In other news overnight China’s manufacturing purchasing managers index
(PMI) fell to an eight-month low in February, showing a reading of 50.2
from 50.5 in January.

U.S. economic data due for release Monday includes personal income and
outlays, the U.S. manufacturing PMI, construction spending, the global
manufacturing PMI, the ISM manufacturing report on business, and
domestic auto sales. Friday is the release of the key U.S. employment
report from the Labor Department.

Wyckoff’s Daily Risk Rating: 8.0 (The Russian aggression and the Ukraine
uncertainty have keen risk aversion in the market place to start the new
trading 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.

The STOCK INDEXES: The March NASDAQ 100 was lower due to profit taking
overnight as it consolidates some of the rally off February's low.
Stochastics and the RSI are overbought and are turning bearish hinting
that a short-term top might be in or is near. Closes below the 20-day
moving average crossing at 3613.43 are needed to confirm that a short-
term top has been posted. If March extends the rally off February's low,
monthly resistance crossing at 3764.65 is the next upside target. First
resistance is last Friday's high crossing at 3722.50. Second resistance
is monthly resistance crossing at 3764.65. First support is the 20-day
moving average crossing at 3613.43. Second support is the reaction low
crossing at 3596.75.

The March S&P 500 was lower due to profit taking overnight as it
consolidates some of the rally off February's low. Stochastics and the
RSI are overbought and are turning bearish hinting that a short-term top
might be in or is near. Closes below the 20-day moving average crossing
at 1814.09 are needed to confirm that a short-term top has been posted.
If March extends last week's breakout above December's high crossing at
1846.50, the door would open into uncharted territory making upside
targets hard to project. First resistance is last Friday's high crossing
at 1866.20. Second resistance is unknown. First support is the 10-day
moving average crossing at 1844.65. Second support is the 20-day moving
average crossing at 1814.09.

INTEREST RATES: March T-bonds were sharply higher overnight renewing the
rally off January's low. Stochastics and the RSI are overbought but
remain neutral to bullish signaling that sideways to higher prices are
possible near-term. If March extends the rally off January's low, last
June's high crossing at 136-18 is the next upside target. Closes below
the 20-day moving average crossing at 133-17 would confirm that a short-
term top has been posted. First resistance is the overnight high
crossing at 135-17. Second resistance is last June's high crossing at
136-18. First support is the 20-day moving average crossing at 133-17.
Second support is the reaction low crossing at 132-12.

ENERGY MARKETS: April Nymex crude oil was sharply higher overnight
renewing the rally off January's low. Stochastics and the RSI are
overbought but remain neutral to bullish signaling that signaling that
sideways to higher prices are possible near-term. If April extends the
rally off January's low, weekly resistance crossing at 112.24 is the
next upside target. Closes below the 20-day moving average crossing at
100.56 would confirm that a short-term top has been posted. First
resistance is the overnight high crossing at 104.65. Second resistance
is weekly resistance crossing at 112.24. First support is the reaction
low crossing at 101.02. Second support is the 20-day moving average
crossing at 100.56.

CURRENCIES: The March Dollar was higher due to short covering overnight
as it consolidates some of last Friday's decline. Stochastics and the
RSI are diverging but are neutral to bearish signaling that sideways to
lower prices are possible near-term. If March extends the decline off
January's high, December's low crossing at 79.50 is the next downside
target. Closes above the 20-day moving average crossing at 80.43 are
needed to confirm that a short-term low has been posted. First
resistance is the 20-day moving average crossing at 80.43. Second
resistance is the reaction high crossing at 80.91. First support is last
Friday's low crossing at 79.70. Second support is December's low
crossing at 79.50.

GRAINS: May corn was sharply higher overnight and spiked above the 25%
retracement level of the 2012-2014-decline crossing at 4.80. The high-
range close sets the stage for a steady to higher opening when the day
session begins trading. Stochastics and the RSI are diverging but
turning neutral to bullish signaling that sideways to higher prices are
possible near-term. If May extends the rally off January's low, the
reaction high crossing at 4.93 3/4 is the next upside target. Closes
below the 20-day moving average crossing at 4.54 1/2 are needed to
confirm that a short-term top has been posted. First resistance is the
25% retracement level of the 2012-2014-decline crossing at 4.80. Second
resistance is the reaction high crossing at 4.93 3/4. First support is
the 20-day moving average crossing at 4.54 1/2. Second support is the
reaction low crossing at 4.43 1/4.

May wheat was sharply higher overnight renewing the rally off January's
low. The high-range close sets the stage for a steady to higher opening
when the day session begins trading. Stochastics and the RSI are
diverging but are turning neutral to bullish signaling that sideways to
higher prices are possible near-term. If May extends the rally off
January's low, the 62% retracement level of the October-January decline
crossing at 6.58 1/4 is the next upside target. Closes below last
Thursday's low crossing at 5.88 1/4 would confirm that a short-term top
has been posted. First resistance is the 50% retracement level of the
October-January decline crossing at 6.38 1/4. Second resistance is the
62% retracement level of the October-January decline crossing at 6.58
1/4. First support is last Thursday's low crossing at 5.88 1/4. Second
support is the reaction low crossing at 5.67 1/4.

May soybeans were higher overnight and poised to extend the rally off
January's low. The high-range close sets the stage for a steady to
higher opening when the day session begins trading. Stochastics and the
RSI are diverging but are turning neutral to bullish signaling that
sideways to higher prices are possible near-term. If May extends this
month's rally, weekly resistance crossing at 14.88 is the next upside
target. Closes below the 20-day moving average crossing at 13.44 3/4
would confirm that a short-term top has been posted. First resistance is
last Thursday's high crossing at 14.45 1/2. Second resistance is weekly
resistance crossing at 14.88. First support is the 10-day moving average
crossing at 13.79. Second support is the 20-day moving average crossing
at 13.44 3/4.

 

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