Morning Notes – Friday January 4, 2019

Directional Bias For The Day:

  • S&P Futures are higher; moving higher since 7:30 PM on Thursday;
  • Daily and weekly trend is down
  • Odds are for an up day with choppiness and elevated volatility – watch for break below 2470.75 for change of fortune;
  • Key economic data due:
    • Non-Farm Employment Change (312K vs. 179K; 155K Prev.) at 8:30 AM
    • Average Hourly Earnings (0.4% vs. 0.3% est.; 0.2% prev.) at 8:30 AM
    • Unemployment Rat (3.9% vs. 3.7% est.; 3.7% prev.) at 8:30 AM

Markets Around The World

  • Markets in the East closed mostly up – Tokyo and Sydney closed down
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Cotton
    • Gold
    • Coffee
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.621%, down from January 3 close of 2.625%;
    • 30-years is at 2.947%, down from 2.949%
    • 2-years yield is at 2.459%, up from 2.696%
    • The 10-Year-&-2-Year spread is at 0.162, down from 0.168

Key Levels:

  • Critical support levels for S&P 500 are 2443.96, 2397.94 and 2346.58
  • Critical resistance levels for S&P 500 are 2488.04, 2495.01 and 2519.49
  • Key levels for eMini futures: break above 2486.75, the high of 6:00 AM and break below 2470.75, the low of 8:30 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (January contract) closed at 2448.25 and the index closed at 2447.89 – a spread of about +0.25 points; futures closed at 2447.75 for the day; the fair value is -0.50
  • Pre-NYSE session open, futures price action is to the upside – at 8:30 AM, S&P 500 futures were up by +25.25; Dow by +239; and NASDAQ by +77.25

Directional Bias Before Open

  • Weekly: Down
  • Daily: Down
  • 120-Min: Side
  • 30-Min: Down-Side
  • 15-Min: Side-Up
  • 6-Min: Up

The trend and patterns on various time frames for S&P 500 are:

Monthly
  • Under Pressure
  • October 2018 closed sharply lower; broke below previous four months’ lows; only third down month since October 2016; November was a harami spinning top near the lower end of October
  • Uptrend resumption since Feb 08, 2016 after a pull back of -15.2% – continues; higher highs and higher lows
Weekly:
  • The week ending on December 28 was a green candle with a real body reaching the middle of previous week’s red candle making it a piercing formation
    • Stochastics (9,1, 3) and RSI (14) turned up – %K crossed above %D from near 0; RSI has turned up too from just above 30
    • The index reached below the 50% Fibonacci retracement level – at 2374.98 – from the rally from February 2016 low and reached a low of 2346.58; the 61.8% Fibonacci retracement is near 2251.86
    • During the week of October 22, Stochastics reached the lowest since the week of October 31, 2016; last week RSI reached the lowest since the week on August 15, 2011;
  • Last week was up +69.12 or +2.9% and ATR is 173.69
  • Last week’s pivot point=2450.86, R1=2555.15 R2=2624.55; S1=2381.46, S2=2277.17; No pivot levels were breached;
  • An up week; second in last five weeks and fourth in last ten weeks
  • The break above an ascending triangle in May 2018 is nullified as the price has fallen below its low
  • The break above a down sloping flag on April 24 2017 is also nullified; the 161.8% extension target near 2835.46 was achieved; 100% extension target of a longer flag-pole near 2913.13 is achieved
  • Last swing low, 2532.69, was the low on February 5, 2018 and breached in December 2018
  • Below 10-week EMA and 39-week SMA; below 89-week SMA (first since June 27, 2016)
  • Downtrend
Daily
  • A red real bodied candle that opened near the middle of previous real body and closed below it
    • %K turning down %D from near 70;
    • RSI-9 is turning down 40 from just above
    • Sequence of lower highs and lower lows since October 3 2018
  • Below 20-day EMA , 50-day EMA, below 100-day SMA and 200-day SMA
  • Downtrend
2-Hour (e-mini future)
  • Futures are mostly moving sideways since 4:00 PM on December 27 between 2523.00 and 2438.50; rising since 6:00 PM on Thursday; breaking above a downtrend line form January 2 high
  • RSI-9 declining since 6:00 AM after making a bearish divergence
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side
30-Minute (e-mini future)
  • Moving sideways since 3:30 PM on December 27
  • RSI-9 rising since 2:30 PM on Tuesday and made bullish divergence twice
  • At/below 20-bar EMA, which is at/below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly moving up since 9:30 PM on Wednesday
  • The band was same size since 9:30 PM
  • RSI-9 moving down since 6:30 AM from just above 65; just above 50
  • Stochastic (9, 1, 3): %K is crossed below %D from above 90 after making bearish divergence
  • Bias: Side-Up

Previous Session

Major U.S. indices closed lower on Thursday January 3. The volume was higher than on Wednesday but lower than 10-day average.

Major indices gapped down at the open from previous close and opened near the middle of the real-body of Wednesday and then closed below its low. A break below Thursday’s low will be bearish and a break above its high will continue the bounce that started on December 26.

From Briefing.com:

The S&P 500 dropped 2.5% on Thursday, as a revenue warning from Apple (AAPL 142.19, -15.73, -10.0%) and weak manufacturing data stoked worries about a slowdown in global economic growth. The Dow Jones Industrial Average lost 2.8%, the Nasdaq Composite lost 3.0%, and the Russell 2000 lost 1.8%.

Nine of the 11 S&P 500 sectors finished in the red. The heavily-weighted information technology sector led the retreat with a loss of 5.1%, as Apple dragged on the group with a steep loss of 10.0%, which sent the stock to a level not seen since mid-2017. The industrials (-3.0%) and materials (-2.8%) sectors also underperformed the broader market.

[…]

Fears over growth and corporate earnings had investors flocking to risk-free U.S. Treasuries. Consequently, the 2-yr yield and 10-yr yield fell 11 basis points each, to 2.38% and 2.55%, respectively. The rally in Treasuries took place amid building expectations for a rate cut by the end of the year. The fed funds futures market now sees a 46.1% implied likelihood of a rate cut in December, up sharply from yesterday’s implied probability of just 9.6%. The U.S. Dollar Index lost 0.6% to 96.23.

[…]

• The ISM Manufacturing Index for December decreased to 54.1% (Briefing.com consensus 57.8%) from 59.3% in November.
o The key takeaway from the report is that the December decrease was fueled by a sharp pullback in the New Orders component, which is the same element that lifted the November ISM Manufacturing Index into the neighborhood of its high from 2018.

  • S&P 500 Sectors
Sector Daily Trend (Visual) Relative Strength (Last Month – December) Relative Strength (January) %K vs. %D (January)
Consumer Discretionary Down XLY (X-Over) XLY Below
Consumer Staples Under Pressure XLP SPY (X-Under) Below
Energy Down SPY XLE (X-Over) Cross-Over
Materials Side XLB SPY (X-Under) Below
Industrials Down SPY (X-Under) SPY Below
Finance Down SPY (X-Under) XLF (X-Over) Below
Technology Down SPY SPY Below
Utility Under Pressure SPY (X-Under) XLU Below
Heath Care Under Pressure XLV SPY (X-Under) Below
Real Estate Up SPY (X-Under) SPY Below
Telecom Down SPY SPY Below
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