Opportunistic Trader Overnight Recap 12/20/2018
– FOMC raised the target band for US interest rates by 25bps to 2.25-2.50% range. FED said, expects ‘some’ further gradual increases in fed funds rate would be consistent with sustained economic expansion, strong jobs market, and inflation objective.
– Fed Chair Powell: Forecast modestly lower path for fed funds rate which should keep us toward our mandate goal; now expect 2 rate hikes next year instead of 3 (2 is more than the market was hoping for. Market was hoping it would not mention any further hikes).
– US Senate passes bill funding government agencies through Feb 8, sends measure to House

European stock markets were mostly lower overnight, following the solid losses in the U.S. stock market Wednesday that drove the indexes to new lows for the year. U.S. stock indexes are pointed toward slightly higher openings when the New York day session begins. However, the U.S. stock market is very wobbly and traders are leery of another big drop.

The world marketplace is still digesting the U.S. FOMC interest rate cut on Wednesday afternoon and the comments from Fed Chairman Jerome Powell. Traders and investors deemed the Fed’s new stance as more dovish than previously, but not dovish enough to stave off what many believe is an impending global economic slowdown.

Chinese economic and political officials are holding key meetings late this week, at which major economic initiatives are being discussed and could be announced. China’s economy has been pinched this year by tariffs imposed by the U.S. on China’s imports.

It now appears less likely, but still not out of the question, the U.S. government will shut down Friday, as reports say the Trump administration is likely to come to an agreement with Congress on a budget.

The key outside markets today see the U.S. dollar index solidly lower and hitting a four-week low overnight. The greenback is being hit by the more dovish Federal Reserve and easing tensions in the European Union regarding Italy’s finances, which have supported the Euro currency.

Meantime, Nymex crude oil prices are lower and hit another 15-month low of $45.82 a barrel overnight. There are still no early chart clues the crude oil market is near a bottom, but there is some strong longer-term chart support at the $42 area that may halt the slide.

Traders are awaiting Friday morning’s U.S. GDP report for the third quarter, which is expected to show a rise of 3.5%, year-on-year.

U.S. economic data due for release Thursday includes the weekly jobless claims report, the Philadelphia Fed business survey, and leading economic indicators.

U.S. STOCK INDEXES

March S&P 500 e-mini futures: Prices are slightly firmer in early U.S. trading today, on a corrective bounce after hitting a new low for the year overnight. Bears are in solid technical command and there are no early clues of a market bottom being close at hand. The shorter-term moving averages (4-, 9- and 18-day) are bearish early today. The 4-day moving average is below the 9-day and 18-day. The 9-day is below the 18-day moving average. Short-term oscillators (RSI, slow stochastics) are neutral early today. Today, shorter-term technical resistance comes in at 2,550.00 and then at Wednesday’s high of 2,592.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at the overnight low of 2,476.25 and then at 2.450.00. Sell stops are likely located just below those levels.

March Nasdaq index December futures: Prices are slightly firmer after hitting a new low for the year overnight. Bears are in solid technical control. Shorter-term moving averages (4- 9-and 18-day) are bearish early today. The 4-day moving average is below the 9-day and 18-day. The 9-day average is below the 18-day. Short-term oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term technical resistance is seen at 6,400.00 and then at 6,450.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at the overnight low of 6,287.00 and then at 6,250.00. Sell stops are likely located just below those levels.

U.S. TREASURY BONDS AND NOTES FUTURES

March U.S. T-Bonds: Prices are higher and hit another new contract high overnight. Bulls are in solid near-term technical control. Shorter-term moving averages (4- 9- 18-day) are bullish early today. The 4-day moving average is above the 9-day and 18-day. The 9-day is above the 18-day moving average. Oscillators (RSI, slow stochastics) are neutral early today. Shorter-term technical resistance is seen at the overnight contract high of 145 30/32 and then at 146 even. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 145 2/32 and then at 144 16/32. Sell stops likely reside just below those levels.

March U.S. T-Notes: Prices are slightly lower on a mild pullback after hitting a contract high Wednesday. Bulls have the solid chart advantage. Shorter-term moving averages (4- 9- 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. Oscillators (RSI, slow stochastics) are neutral to bearish early today. Shorter-term resistance lies at the contract high of 121.13.5 and then at 121.20.0. Buy stops likely reside just above those levels. Shorter-term technical support lies at the overnight low of 120.31.5 and then at 120.24.0. Sell stops likely reside just below those levels.

U.S. DOLLAR INDEX

The March U.S. dollar index is solidly lower and hit a four-week low in early U.S. trading. Bulls still have the overall near-term technical advantage but are now fading. The shorter-term moving averages for the dollar index are neutral early today, as the 4-day is below the 9-day. The 9-day is above the 18-day moving average. Short-term oscillators for the dollar index are bearish early today. The dollar index finds shorter-term technical resistance at 96.000 and then at the overnight high of 96.515. Shorter-term support is seen at the overnight low of 95.645 and then at 95.000.

NYMEX CRUDE OIL

February Nymex crude oil prices are solidly lower and hit another 15-month low overnight. Bears are in strong overall near-term technical control. There are still no early clues that a market bottom is close at hand, but there is strong longer-term technical support at the $42.00 area that may stop the bleeding. The shorter-term moving averages are bearish early today as the 4-day is below the 9-day. The 9-day is below the 18-day moving average. Short-term oscillators (RSI and slow stochastics) are bearish early today. Look for buy stops to reside just above technical resistance at the overnight high of $47.51 and then at 48.00. Look for sell stops just below technical support at the overnight low of $45.82 and then at $45.00.

GRAINS

Grain futures prices were firmer overnight on short covering. The grain market bears still have the overall near-term technical advantage. Grain traders are awaiting today’s weekly USDA export sales report, in which U.S. soybean sales to China are expected to be seen.