Morning Notes – Tuesday January 8, 2019

Directional Bias For The Day:

  • S&P Futures are higher; moving up since 2:45 PM on Monday
  • Daily and weekly trend is down
  • Odds are for an up day with elevated volatility – watch for break below 2553.75 for change of fortune;
  • No Key economic data due:

Markets Around The World

  • Markets in the East mostly closed higher – Shanghai and Seoul closed down
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • USD/CHF
    • USD/INR
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Gold
    • Silver
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.696%, down from January 7 close of 2.682%;
    • 30-years is at 2.981%, up from 2.978%
    • 2-years yield is at 2.553%, up from 2.541%
    • The 10-Year-&-2-Year spread is at 0.143, up from 0.141

Key Levels:

  • Critical support levels for S&P 500 are 2546.76, 2522.13 and 2509.89
  • Critical resistance levels for S&P 500 are 2566.16, 2585.29 and 2600.91
  • Key levels for eMini futures: break above 2572.00, the high of 7:00 AM and break below 2553.75, the low of 3:00 AM

Pre-Open

  • On Monday, at 4:00 PM, S&P future (January contract) closed at 2550.50 and the index closed at 2549.69 – a spread of about +0.75 points; futures closed at 2550.50 for the day; the fair value is +0.00
  • Pre-NYSE session open, futures price action is to the upside – at 8:30 AM, S&P 500 futures were up by +14.50; Dow up by +165; and NASDAQ by +41.75

Directional Bias Before Open

  • Weekly: Down
  • Daily: Down
  • 120-Min: Side-Up
  • 30-Min: Up
  • 15-Min: 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 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 spinning top green candle with upper shadow slightly longer than lower shadow
    • ABCD pattern emerged on January 4th; the 61.8% extension target near 2551.00 is achieved; the 100% extension target is near 2617.00
    • %K is above %D and above 90;
    • RSI-14 is near 50
    • Sequence of lower highs and lower lows since October 3, 2018
  • At/above 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 up since 6:00 PM on January 3; the bias since 6:00 PM on December 25 is up; higher highs and higher lows since then
  • RSI-9 is above 65 since 8:00 AM on January 8; near 75
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side-Up
30-Minute (e-mini future)
  • Moving up since 9:30 AM on January 7; above a horizontal channel; the 61.8% extension target near 2562.00 is achieved; 100% extension target is near 2588.00
  • RSI-9 is above 40 since 9:00 PM on January 3; generally drifting down since 1:00 PM on January 4 after making a high above 80; made a bearish divergence on January 6 and January 7; just above 65
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting up since 9:15 AM on January 7
  • The band was narrow from 7:45 PM to 3:00 AM; expanding since then with price mostly moving along the upper band
  • RSI-9 is between 40 and 65 since 7:00 AM on January 7; above 65
  • Stochastic (9, 1, 3): %K is crossed above %D from just below 50 at 5:30 AM
  • Bias: Up

Previous Session

Major U.S. indices closed higher on Monday January 7. The volume was lower  than previous day and also lower than 10-day average. Most major indices are breaking above 20-day EMA.

From Briefing.com:

The S&P 500 gained 0.7% on Monday, securing its fourth day of gains in the last five sessions. The Dow Jones Industrial Average gained 0.4%, the Nasdaq Composite gained 1.3%, and the Russell 2000 outperformed with a gain of 1.8%.

The major averages opened the session to some tepid buying interest. The S&P 500 briefly dipped into negative territory (-0.3%), but the pullback didn’t gain any traction as the benchmark index steadily climbed to session highs (+1.4%) by early afternoon.

[…]

Nevertheless, selling didn’t gain much traction, as nine of the 11 S&P 500 sectors finished the session with gains. The consumer discretionary (+2.4%) and energy (+1.3%) sectors outperformed, while the consumer staples (-0.3%) and utilities (-0.7%) groups dragged on the broader market.

Retail was a consistent group that outperformed and helped lift the consumer discretionary sector. The SPDR S&P Retail ETF (XRT 43.56, +1.31) rose 3.1%.

[…]

U.S. Treasuries started the session in positive territory, but spent the bulk of the day in a retreat that coincided with a rally in the stock market. The 2-yr yield rose four basis points to 2.52%, and the 10-yr yield added two basis points to 2.68%. The U.S. Dollar Index fell 0.5% to 95.70, reaching its lowest close since mid-October.

[…]

• The ISM Non-Manufacturing Index slipped to 57.6% in December (Briefing.com consensus 58.8%) from 60.7% in November. The dividing line between expansion and contraction is 50.0%, so the December reading reflects a deceleration in non-manufacturing business activity in the final month of 2018.
o The key takeaway from the report is that it follows form with the ISM Manufacturing Index in showing a slowdown in activity in December. That is in keeping with the market’s perception of economic matters and threatens to bleed into a slowdown in earnings growth.

[…]

  • 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 Cross-Over
Consumer Staples Down XLP SPY (Cross-Under) Below
Energy Down SPY XLE (Cross-Over) Cross-Over
Materials Down XLB XLB Below
Industrials Down SPY (X-Under) SPY Below
Finance Down SPY (X-Under) SPY Below
Technology Down SPY SPY Below
Utility Under Pressure SPY (X-Under) SPY Below
Heath Care Down XLV SPY (Cross-Under) Below
Real Estate Down SPY (X-Under) SPY Below
Telecom Down SPY XTL (Cross-Over) Cross-Over
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