Morning Notes – Friday January 11, 2019

Directional Bias For The Day:

  • S&P Futures are lower; moving down since 4:30 AM
  • Daily and weekly trends are down
  • Odds are for a down day with elevated volatility – watch for break above 2590.75 for change of fortune
  • Key economic data due:
    • CPI ( -0.1% vs. -0.1% est.; 0.0% prev.) at 8:30 AM
    • Core CPI ( 0.2% vs. 0.2% est.; 0.2% prev.) at 8:30 AM

Markets Around The World

  • Markets in the East closed mostly higher – Sydney and Mumbai Seoul closed down;
  • European markets are mostly lower – Switzerland is up
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • USD/INR
    • EUR/USD
    • USD/JPY
    • USD/CHF
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Copper
    • Palladium
    • Sugar
    • Cotton
    • Crude Oil
    • Silver
    • Platinum
    • Coffee
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.697%, down from January 10 close of 2.731%;
    • 30-years is at 3.033%, down from 3.051%
    • 2-years yield is at 2.537%, down from 2.578%
    • The 10-Year-&-2-Year spread is at 0.160, up from 0.153

Key Levels:

  • Critical support levels for S&P 500 are 2581.66, 2573.51 and 2568.89
  • Critical resistance levels for S&P 500 are 2597.82, 2600.91 and 2619.04
  • Key levels for eMini futures: break above 2590.75, the high of 7:30 AM and break below 2582.50, the low of 8:30 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (January contract) closed at 2596.75 and the index closed at 2596.84 – a spread of about +0.00 points; futures closed at 2594.00 for the day; the fair value is +2.75
  • Pre-NYSE session open, futures price action is to the downside – at 8:45 AM, S&P 500 futures were down by -7.75; Dow by -60; and NASDAQ by -25.25

Directional Bias Before Open

  • Weekly: Down
  • Daily: Down
  • 120-Min: Side-Up
  • 30-Min: Side
  • 15-Min: Side-Down
  • 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 bullish engulfing candle with small lower and smaller upper shadows; 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 crossed above %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 to up 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 rose from below 40 at 2:00 PAM on January 10 to above 65 by 2:00 PM; declined to just below 50
  • At/above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side-Up
30-Minute (e-mini future)
  • Moving sideways since 8:00 PM on January 8; forming a cup-with-handle pattern since 1:00 PM on January 9; break above 2597.75 will complete the pattern and break below 2573 will nullify it
  • RSI-9 is declining since making a high of 69.66 at 12:30 PM on January 10; a bearish divergence at 3:30 PM; below 40
  • At/below EMA10 of EMA50 which is below 20-bar EMA
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways to down since 4:00 PM on January 10
  • The band narrowed from 9:15 PM to 3:15 AM; expanding since with price moving along the lower band
  • RSI-9 is mostly moving down since 11:00 AM on Thursday and made few bearish divergences
  • Stochastic (9, 1, 3): %K is crisscrossing %D near 20
  • Bias: Side-Down

Previous Session

Major U.S. indices closed higher on Thursday January 10. Market started the day down but the turned around closed higher. The volume was mixed and mostly lower than the 10-day average. Dow Jones Industrial Average, Dow Jones Transportation Average and S&P 500 traded in higher volume. Major indices are above 20-day EMA and are nearing a resistance at a prior support level created by the lows created in October 2018.

From Briefing.com:

The S&P 500 gained 0.5% on Thursday, extending its winning streak to five straight sessions. The Dow Jones Industrial Average gained 0.5%, the Nasdaq Composite gained 0.4%, and the Russell 2000 gained 0.5%.
10 of the 11 S&P 500 sectors finished higher with real estate (+1.6%), utilities (+1.4%), and industrials (+1.4%) leading the advance. Conversely, the consumer discretionary sector (-0.2%) underperformed.

[…]

The S&P 500 lost as much as 0.9% shortly after the start of trading amid a prevailing sense that the broader market may have gotten overbought on a short-term basis. Entering the session, the benchmark index was up 10% from its Christmas eve low.

[…]

True to recent form, the S&P 500 climbed back into positive territory and closed near its session high, which was just below the 2600 level.

[…]

• Initial claims decreased by 17,000 to 216,000 (Briefing.com consensus 225,000) for the week ending January 5. Continuing claims for the week ending December 29 decreased by 28,000 to 1.722 million.
o The key takeaway from the report is that it fits neatly with the market’s latest awareness that the labor market has held up fine despite the burgeoning concerns about the economy slowing.

  • 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) XLI (Cross-Over) Cross-Over
Finance Down SPY (X-Under) SPY Below
Technology Down SPY SPY Cross-Over
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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