Morning Notes – Thursday January 10, 2019

Directional Bias For The Day:

  • S&P Futures are lower; moving sideways since 8:30 PM on Wednesday
  • Daily and weekly trends are down
  • Odds are for a sideways to down day (from pre-open level) with elevated volatility – watch for break above 2574.25 and break below 2565.25 for clarity
  • Key economic data due:
    • Unemployment Claims (216K vs. 226k est.; 233K prev.) at 8:30 AM

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Tokyo, Mumbai and Seoul closed down; Hong Kong, Sydney and Singapore closed up
  • European markets are mostly lower – Spain and Switzerland are up
  • Currencies:
    Up Down
    • Dollar index
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/INR
  • Commodities:
    Up Down
    • NatGas
    • Gold (Unch.)
    • Platinum
    • Palladium
    • Cocoa
    • Crude Oil
    • Silver
    • Copper
    • Sugar
    • Coffee
    • Cotton
  • Bonds
    • 10-yrs yield is at 2.712%, down from January 9 close of 2.728%;
    • 30-years is at 3.022%, down from 3.024%
    • 2-years yield is at 2.533%, down from 2.521%
    • The 10-Year-&-2-Year spread is at 0.179, up from 0.207

Key Levels:

  • Critical support levels for S&P 500 are 2568.89, 2554.71 and 2546.76
  • Critical resistance levels for S&P 500 are 2595.32, 2600.91 and 2619.04
  • Key levels for eMini futures: break above 2574.50, the high of 11:30 PM on January 9 break below 2565.25, the low of 5:30 AM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (January contract) closed at 2586.25 and the index closed at 2584.96 – a spread of about +1.00 points; futures closed at 2582.50 for the day; the fair value is +3.75
  • Pre-NYSE session open, futures price action is to the downside – at 8:45 AM, S&P 500 futures were down by -13.75; Dow by -91; and NASDAQ by -41.25

Directional Bias Before Open

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

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 relatively green spinning top candle; near the resistance created by October 29, 2018 low of 2603.54 and 50-day EMA
    • 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 crossing below %D over 90;
    • RSI-14 is above 50
    • Sequence of lower highs and lower lows since October 3, 2018
  • 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 sideways since 2:00 PM on January 8; bias since 6:00 PM on December 25 is up; higher highs and higher lows since then
  • RSI-9 declined to below 40 since making a high of 79.17 at 10:00 AM on January 7; moving along 40 since 6:00 PM on January 9
  • At/above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side
30-Minute (e-mini future)
  • Moving sideways to down since 8:00 PM on January 8; above a horizontal channel; the 100% extension target near 2588.00 is achieved
  • RSI-9 is rising since making a low of 33.4 at 3:30 AM; a bullish divergence; just above 40
  • At/below 20-bar EMA, which is at/below EMA10 of EMA50
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways since 0:45 AM after moving down from 3:15 PM on January 9
  • The band was narrow from midnight to 0:45 AM to 2:45 AM; expanded after that; price first moved along the lower band till 3:45 AM and is mostly above the middle point since 4:30 AM;
  • RSI-9 is moving up after a making a low of 28.98, and a bullish divergence, at 3:30 AM; at/above 50
  • Stochastic (9, 1, 3): %K has crossed below %D at 8:15 from above 80 after making a bearish divergence
  • Bias: Down-Side

Previous Session

Major U.S. indices closed higher on Wednesday January 9. Market showed weakness in the later half of the day. The volume was mostly lower  than previous day and also lower than 10-day average. Dow Jones Industrial Average traded in higher volume. Major indices are above 20-day EMA. The indices are facing a resistance at a prior support level created by the lows created in October 2018.

From Briefing.com:

The S&P 500 gained 0.4% on Wednesday, helped by softening trade tensions, easing anxieties over U.S. monetary policy, and rebounding oil prices ($52.20/bbl, +$2.54, +5.1%). The Dow Jones Industrial Average gained 0.4%, the Nasdaq Composite gained 0.9%, and the Russell 2000 gained 0.9%.

[…]

The S&P 500 briefly fell into negative territory (-0.2%) in the early going, but ultimately rebounded before running into some resistance as it approached the 2600 level shortly after the release of the FOMC minutes from the December policy meeting.

[…]

Within the S&P 500, the energy (+1.5%) and information technology (+1.2%) sectors led the broader market higher. Conversely, the defensive-oriented consumer staples (-1.0%), utilities (-0.7%), and real estate (-0.4%) sectors underperformed.

[…]

The U.S. Treasury yield curve steepened a bit on Thursday, undoing the prior session’s flattening. The 2-yr yield decreased four basis points to 2.55%, and the 10-yr yield added one basis point to 2.73%. The U.S. Dollar Index fell 0.8% to 95.13.

  • 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 Cross-Over
Industrials Down SPY (X-Under) SPY Cross-Over
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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