Morning Notes – Monday January 7, 2019

Directional Bias For The Day:

  • S&P Futures are higher to little changed; moving lower since 7:30 PM on Sunday high of 2551.75, which was 20.50 pointes above Friday’s close
  • Daily and weekly trend is down
  • Odds are for a sideways to down up day with choppiness and elevated volatility – watch for break above 2535.50 for change of fortune;
  • Key economic data due:
    • ISM Non-Manufacturing PMI (57.6 vs. 59.6 est.; 60.7 prev.) at 10:00 AM

Markets Around The World

  • Markets in the East higher
  • European markets are mostly down -Spain and Italy are up
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • USD/INR
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • Gold
    • Silver
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
    • NatGas
    • Copper
  • Bonds
    • 10-yrs yield is at 2.643%, down from January 4 close of 2.659%;
    • 30-years is at 2.950%, down from 2.974%
    • 2-years yield is at 2.471%, down from 2.491%
    • The 10-Year-&-2-Year spread is at 0.172, up from 0.168

Key Levels:

  • Critical support levels for S&P 500 are 2522.13, 2509.89 and 2488.33
  • Critical resistance levels for S&P 500 are 2538.07, 2558.80 and 2565.27
  • Key levels for eMini futures: break above 2534.50, the high of 8:00 AM and break below 2523.25, the low of 6:00 AM

Pre-Open

  • On Friday, at 4:00 PM, S&P future (January contract) closed at 2532.75 and the index closed at 2531.94 – a spread of about +0.75 points; futures closed at 2531.25 for the day; the fair value is +1.50
  • Pre-NYSE session open, futures price action is little changed – at 9:15 AM, S&P 500 futures were up by +2.25; Dow up by +67; and NASDAQ down by -0.75

Directional Bias Before Open

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

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 January 4 was a green candle with open above previous weeks’ close and the lower shadow reaching nearly the middle of its real body; the three-week morning star pattern is emerging
    • Stochastics (9,1, 3) and RSI (14) moving up – %K is above %D; RSI is moving above 40
    • 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 +46.20 or +1.9% and ATR is 94.11
  • Last week’s pivot point=2504.66, R1=2565.35, R2=2598.77; S1=2471.24, S2=2410.55; 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 large green candle that opened below previous day’s close but then moved above four-day’s high which was acting as  resistance; no lower shadow and very small upper shadow
    • potential ABCD pattern; the 61.8% extension target is near 2551.00 and the 100% extension target is near 2617.00
    • %K is above %D and above 90;
    • RSI-14 is above 40
    • Sequence of lower highs and lower lows since October 3, 2018
  • At/below 20-day EMA; below 50-day EMA, below 100-day SMA and 200-day SMA
  • Downtrend
2-Hour (e-mini future)
  • Futures are mostly moving sideways since 12:00 PM on January 4
  • RSI-9 declining since 6:00 PM on Sunday after making a bearish divergence from above 90; just above 60
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side
30-Minute (e-mini future)
  • Moving sideways since 12:00 PM on January 4 after breaking above a horizontal channel; 61.8^ extension target is near 2562.00 and 100% extension target is near 2588.00
  • RSI-9 is declining since 1:030 PM on Friday; mad a bearish divergence
  • At/below 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is mostly moving sideways to down since 7:30 PM on Sunday
  • The band was narrow from 1:15 AM to 3:30 AM; expanded till 7:45 AM and again started to narrow since
  • RSI-9 moving down 7:45 AM from 50
  • Stochastic (9, 1, 3): %K is crossed below %D from above 80 at 8:00 AM
  • Bias: Up-Side

Previous Session

Major U.S. indices closed sharply higher on Friday January 4 following a very good non-farm payroll report for December. The volume was lower  than that on Thursday and also lower than 10-day average. The major indices broke above the higher or congestion zone near the end of December and forming ABCD type of pattern.

For the week, the major indices closed higher and potentially making 3-week morning star pattern. The volume was mixed and only Russell 2000 and Dow Jones Transportation Average traded in higher volume than previous week. All but two – Utilities and Real Estate – S&P sectors were up for the week.

From Briefing.com:

Wall Street kicked off the first week of 2019 on a higher note, as robust jobs data and soothing commentary from Fed Chair Jerome Powell helped press pause on global growth concerns.

The S&P 500 gained 1.9%, the Dow Jones Industrial Average gained 1.6%, the Nasdaq Composite gained 2.3%, and the Russell 2000 gained 3.2%.

Headline payroll growth in the Employment Situation Report for December was comfortably ahead of estimates while average hourly earnings (+0.4%) increased more than expected, lifting the year-over-year growth rate to 3.2%.

[..]

U.S. Treasuries underwent wild swings this week amid the fragility in investor sentiment. At the end of the week, the 2-yr yield declined four basis points to 2.48%, and the 10-yr yield declined eight basis points to 2.66%. The U.S. Dollar Index lost 0.2% to 96.17. WTI crude rose 6.0% to $48.03/bbl.

[…]

  • 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 Cross-Over
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