Market Diary – Tuesday, May 31, 2016

Directional Bias For The Day:

  • Odds are good for the market to follow through after last week’s big gain and Friday’s late breakout above an ascending triangle
  • Europe may be a drag based upon the economic reports, its stock markets’ performance for the week and because of the uncertainty before the ECB’s rate-decision on Thursday
  • Watch the opening range and first hour of trading for clues
  • Key Economic data – U.S. Core PCE Price Index, Personal Spending, Conference Board Consumer Confidence, and Chicago PMI will have impact
  • Two strong resistance immediately above – April S&P 500 high of 2111.05 and 2116.48, its intraday high reached on November 3, 2015.

2:00 PM – Today Doesn’t Look Like A Follow Up Day

eMini S&P 500 Futures - 6-minuteThe day’s action so far has not looked like a follow up day. Too many events are looming ahead during the week and the market is pausing. On 6-minute chart, eMini S&P 500 futures made a small double bottom pattern between noon and 1:00 PM only to fall back below it after 2:00 PM

The critical level is  2090.06 for S&P 500, which is the low for Friday, May 27, 2016. Next support is near 2087.08, the low on Thursday. A close below these levels will change the tone of the market.

SPX_60_160531_5The 60-minute chart of S&P 500 shows the price finding a resistance at April 28th high. It needs a stronger catalyst to go above the resistance. Today’s economic news from Europe and US was not strong enough.

11:30 AM – Symmetrical Triangle Broken To The Down Side

First half hour the NYSE session was a negative bar which broke below 9:00 AM 30-minute bar and formed a bearish engulfing candlestick. The next half-hour recovered almost all the lost ground making the first-hour of the bar to be a doji candlestick representing indecision on the part of the market. Price broke through the low of first-hour within next 15-minute. The 14-period RSI on 30-minute chart gave a divergence warning.

eMini S&P 500 - 6-Minute eMini S&P 500 - 30-minute eMini S&P 500 - 60-minute

10:00 AM – Chicago PMI and Consumer Confidence Disappoints

  • Chicago PMI reading came at 49.3, worse than expectation of 50.8 and below 50-level, which indicates contraction
  • The Conference Board’s Consumer Confidence was also below the forecast of 96.1
  • This muddies the water a bot after the upbeat PCE Price Index and Personal Spending

U.S. CB Consumer Confidence - April 20-16 U.S. Chicago PMI - April 2016

9:00 AM – A Symmetric Triangle Emerging on 6-minute chart

  • On 30-minute chart, S&P 500 futures are trading below a downtrend line from the high made at 1:30 AM on 05-30-16
  • On 6-minute chart, price is retracing after hitting the upper bound of a symmetrical triangle
  • A break above or below the symmetrical triangle will tell us which way the market will go.
  • Recently, many times prices have had false breakout from such chart patterns before breaking out toward the actual direction

eMini S&P 500 Futures - 6-Minute eMini S&P 500 Futures - 30-minute

8:30 AM – Economic Data:

  • U.S. Core PCE Price Index came in line at +0.2% month-over-month
  • U.S. Personal Spending m/m at +1.0% was hotter than expected +0.7%

Here are the graphs for these two:
U.S. Core PCE Price Index - May 2016U.S. Personal Spending - May 2016

The data supports the rate-hike intention that the Fed has telegraphed. Post-economics data release at 8:30 AM, the S&P 500 futures did not change much giving credence to the idea that market i staking into account a Fed-rate hike in next few months.

Before NYSE Session Open

Asian Session

The Asian bourses were mixed. Most were open on Monday when the U.S. market were closed due to Memorial Day holiday.

  • Chinese stocks plunged 10% within one minute, “Chinese stock-index futures plunged by the daily limit before snapping back in less than a minute, the second sudden swing to rattle traders this month.”
  • Shanghai Composite gained +3.5% with biggest one day gain since March. This could be a turning point.
  • Hang Seng followed through on its breakout from a bullish formation last week
  • Nikkei 225 gained +0.98% on Tuesday, a large gain, after the gap up day on Monday
  • Australian S&P/ASX declined by -0.54%; Monday was harami-doji candlestick pattern and Friday’s high broke throughthe highest high since August 2015, but the close was in the bottom half of the range. Tuesday decline may mark a short term retracement
  • After big gains on last three trading days of past week, Indian Sensex took a breather on Monday by forming a spinning-top candlestick pattern at the top. Tuesday was bearish engulfing indicating that the index might be ripe for a retracement
  • South Korea had bullish engulfing candlestick day; Monday was harami candlestick. Tuesday’s gain brings Kospi closer to an inverse head-&-shoulder pattern.

European Session

In pre-US session, European stock markets are generally down. The economic report on Monday and Tuesday indicated that the inflation is not getting any closer ECB’s stated goal.

  • DAX is down -0.25%, carving out a bearish engulfing candlestick pattern after a small range day on Monday
  • STOXX-600 is down -0.25%; CAC-40 down by -0.27%, FTSE-100 by -0.15%, Italian FTSE MIB by -0.65%, Spanish IBEX-35 by -0.44% and Swiss SMI-SWX by -0.60%


  • US Dollar index is up +0.12 to 95.62; it is facing a resistance at a down trend line on daily timeframe; Monday, DX #F declined and a close below 95.50 would call for some more retracement
  • USD/JPY is up by 0.050 to 111.194 (means Yen is down against USD)
  • Other major currencies are up with respect to US dollar
  • Emerging market currencies are generally down against the dollar for the day so far


  • WTI Crude is up slightly to 49.55 and is trading in a narrow range after Friday’s close
  • Gold and Silver continue their slow march down in a downtrend
  • Copper is marginally down and, like crude, is trading in a narrow range after Friday’s close


  • Treasury yields are up, after the gap up open for the day

Last Week:

All major U.S. indices had one the biggest up-weeks of the year and are breaking out of bullish patterns.

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
 Daily Level Break
Level Break
Pivot 2096.06 2094.67
R1 2102.06 61% 2101.33 56%
R2 2105.06 43% 2105.42 31%
R1 2111.06 44% 2112.08 22%
S1 2093.06 35% 2090.58 34%
S2 2087.06 35% 2083.92 28%
S3 2084.06 24% 2079.83 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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