Overnight Recap 12/21/18



European and Asian stock markets were mostly lower overnight, following the solid losses in the U.S. stock market Thursday that drove the indexes to new lows for the year. U.S. stock indexes are pointed toward mixed openings when the New York day session begins. Recently, on big sell off days in the U.S. stock market, trading starts out calmer and then gets more volatile and skittish as the sessions progress. Today could offer the same.

It’s still a very keen risk-off mentality in the world marketplace heading into the weekend and into the Christmas holiday next week. Worries about slowing world economies, slumping crude oil prices, a potential U.S. government shutdown later today, and a U.S. Federal Reserve that many say is out of touch with the markets are all combining to make traders and investors very squeamish. “When in doubt, get out,” is the mantra of many stock market traders at present. On the other hand, U.S. Treasury and gold market bulls are licking their chops amid the stock market meltdown.

Gold and U.S. Treasury prices today have pulled back a bit from their highs this week, on normal downside corrections in price uptrends.

In focus today is the U.S. Congress and President Trump in a stare-down on the federal budget. Trump wants funding for a border wall with Mexico, while the Democrat-controlled U.S. House does not. The U.S. government will see a partial shutdown at midnight tonight if there is no budget agreement reached by that time. This is not the major issue for the markets, but it is “piling on” in an already-shaky situation.

The key outside markets today see the U.S. dollar index higher on a corrective bounce from solid losses Thursday that pushed prices to a four-week low. The greenback has been 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 modestly lower and hit a 17-month low of $45.32 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 third estimate of U.S. GDP report for the third quarter, which is expected to show a rise of 3.5%, year-on-year, which is the same as the second estimate.

Other U.S. economic data due for release Friday includes the durable goods report, the University of Michigan consumer sentiment survey, personal income and outlays and the Kansas City Fed manufacturing survey.

U.S. STOCK INDEXES

March S&P 500 e-mini futures: Prices are slightly lower in early U.S. trading today. Prices Thursday hit a new low for the year. 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 to bearish early today. Today, shorter-term technical resistance comes in at Thursday’s high of 2,518.00 and then at 2,550.00. Buy stops likely reside just above those levels. Downside support for active traders today is located at this week’s low of 2,441.50 and then at 2.425.00. Sell stops are likely located just below those levels.

March Nasdaq index December futures: Prices are lower in early U.S. trading. Prices Thursday hit a new low for the year. 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 Thursday’s high of 6,404.50 and then at 6,500.00. Buy stops likely reside just above those levels. On the downside, short-term support is seen at Thursday’s low of 6,180.00 and then at 6,100.00. Sell stops are likely located just below those levels.

U.S. TREASURY BONDS AND NOTES FUTURES

March U.S. T-Bonds: Prices are near steady in early U.S. trading. Prices Thursday hit a contract high. 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 contract high of 146 even and then at 146 16/32. Buy stops likely reside just above those levels. Shorter-term support lies at the overnight low of 144 11/32 and then at 144 even. 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 still 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 120.28.5 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 higher on a corrective bounce after hitting a four-week low on Thursday. 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 and 18-day. The 9-day is above the 18-day moving average. Short-term oscillators for the dollar index are neutral early today. The dollar index finds shorter-term technical resistance at 96.35 and then at Thursday’s high of 96.515. Shorter-term support is seen at this week’s low of 95.630 and then at 95.385.

NYMEX CRUDE OIL

February Nymex crude oil prices are lower and hit a 17-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 neutral to bearish early today. Look for buy stops to reside just above technical resistance at the overnight high of $46.77 and then at Thursday’s high of 47.51. Look for sell stops just below technical support at $45.00 and then at $44.00.

GRAINS

Grain futures prices were weaker overnight. The grains are being bearishly impacted by the very shaky world stock, financial and currency markets. The grain market bears have the overall near-term technical advantage.