Market Diary – Friday, May 27, 2016

Directional Bias For The Day:

  • Odds are high for the market to stay in a trading range
  • A breakout to the upside is possible if futures break above 2094.00 (S&P futures)
  • A break down is less likely but if futures drop below 2084.00 then all bets are off
  • Watch the opening range and first hour of trading for clues
  • Preliminary GDP q/q may have some impact. It comes out at 8:30 AM. The forecast is for 0.8%; last reading was 0.5%

1:30 PM: Yellen Comments Tanks The Futures

DX_30_160526_1Fed Chai Yellen commented that improvements in the U.S. economy warrant another rate increase in the coming month.

In answering a question by professor Gregory Mankiw, she said, “It’s appropriate — and I’ve said this in the past — for the Fed to gradually and cautiously increase our overnight interest rate over time. Probably in the coming months such a move would be appropriate.”

ES_30_160526_1This was one the event that we were expecting would impact the market  and it did.

The Dollar index jumped breaking above a resistance level on 4-hour chart.

The eMini S&P futures, which were breaking out of an ascending triangle on 30-minute chart, dropped and fell back into the pattern.

Today being Friday before a long weekend, we do not expect much to happen and since the lower bound of the ascending triangle has not broken, yet, then perhaps another pattern will emerge. We will keep a look out for it.

Also, historically, the market has shown lack-luster Friday before the Memorial Day weekend. According to Stock Trader’s Almanac, since1980, S&P 500 has gained an average of 0.001% on Friday before Memorial Day and Dow has lost -0.06%.

Before NYSE Session Open

8:30 AM: Another directionless Day Seems To Be On The Horizon

eMin S&P Futures - 6-minuteThe U.S. Preliminary GDP reading came at 0.8% as forecasted. It did not impact the market. The S&P futures are not much changed in pre-open trading.

The 6-minute chart is showing a rectangle trading box near the top. It shows one smaller trading range within a slightly larger trading range.

eMin S7P Futures - 30-minuteEarlier we noticed the formation of a symmetrical triangle on the 30-minute chart by the end of NYSE session on Thursday. Since then it has evolved into an ascending triangle. The price still has not broken out above it, though it usually has a bullish intent. Still, chart patterns fail at time and when a bullish ascending triangle fails then the down ward moves are generally quite sharp.

Asian Session

The Asian bourses were mixed. Some took the lead from U.S. markets and stayed in a trading range. Some, on the other hand, are singing to their own tune.

  • Shanghai Composite was range bound in a narrow range, shedding -0.5% during the day; Heng Seng gained +0.37% and is breaking out from a bullish formation
  • Nikkei 225 had an inside day or a Harami candlestick pattern
  • Australian S&P/ASX gained +0.33% but closed at the mid-point of the day’s range
  • Indian Sensex had another gap-up day and gained +1.09% following Thursday’s +1.88% and Wednesday’s +2.28% gains
  • South Korea had a bullish candlestick day, something that it was supposed to have yesterday, which was a down day

European Session

In pre-US session, European stock markets are mixed.

  • DAX is up 0.+17+ – just drifting up;
  • STOXX-600 is range bound with slight gain
  • CAC-40 is range bound with slight loss; So are British FTSE-100 and Italian FTSE MIB
  • Spanish IBEX-35 is up +0.36% after opening down for the day
  • Swiss SMI-SWX gapped up and is up +0.70% for the day


  • US Dollar index is up +1.53 to 95.315
  • USD/JPY is down by 0.111 to 109.639 (means Yen is up against USD)
  • Other major currencies are down with respect to US dollar
  • Emerging market currencies are also down for the day so far


  • WTI Crude is down -0.38 to 49.10. On Daily timeframe it is in a uptrend but is declining since making a high 50.21 at 8:00 AM on Thursday
  • Gold and Silver are marginally down in a downtrend
  • Copper is breaking out of a bullish flag on daily timeframe. On 30-minute chart it is carving out a handle of a cup-&-handle pattern. A break above 2.1225 would be bullish


  • Treasury yields are slightly up so far for the day but they are range bound on the daily timeframe with a slight upward bias.
  • On daily timeframe, 10-Years Treasury yield is making a symmetrical triangle at the lows, whereas, 30-year yield is making an ascending triangle


All major U.S. indices were in holding pattern after the breakout from bullish patterns a day before.

Pivot Levels:

S&P 500 closed above 10-D EMA; 10-EMA is above 20-D EMA; 20-D EMA is trending above 50-D EMA since March 9, 2016.


S&P 500 Cash eMini Futures
Level Break
Level Break
Pivot 2090.49 2088.00
R1 2093.91 61% 2093.50 56%
R2 2097.71 42% 2097.25 31%
R1 2101.13 45% 2102.75 23%
S1 2086.69 35% 2084.25 35%
S2 2083.27 35% 2078.75 28%
S3 2079.47 24% 2075.00 23%

Note: The probability of a level breaking is shown above is for the current condition when 1) the price is above 10-D EMA; 2) 10-D EMA is above 20-D EMA; and 3) 20-D EMA is above 50-D EMA. R2 break probability comes in picture only when R1 is broken. So are the probabilities calculated for R3, S2 and S3

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