Morning Notes – Monday January 14, 2019

Directional Bias For The Day:

  • S&P Futures are lower; moving sideways since 9:00 PM n Sunday
  • Daily and weekly trends are down
  • Odds are for a sideways to down day with elevated volatility (sideways from pre-NYSE open level and down from last close)  – watch for break above 2578.25 and break below 2567.25 for more clarity
  • No key economic data due

Markets Around The World

  • Markets in the East closed down – Tokyo was close
  • European markets are lower
  • Currencies:
    Up Down
    • Dollar index
    • EUR/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • GBP/USD
    • USD/CAD
    • USD/INR
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Palladium
    • Cotton
    • Crude Oil
    • Silver
    • Copper
    • Platinum
    • Sugar
    • Coffee
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.692%, down from January 11 close of 2.701%;
    • 30-years is at 3.033%, down from 3.037%
    • 2-years yield is at 2.541%, down from 2.549%
    • The 10-Year-&-2-Year spread is at 0.151, down from 0.152

Key Levels:

  • Critical support levels for S&P 500 are 2577.79, 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 2577.25, the high of 7:30 AM and break below 2567.25, the low of 5:00 AM

Pre-Open

  • On Friday, at 4:00 PM, S&P future (January contract) closed at 2596.25 and the index closed at 2596.26 – a spread of about +0.00 points; futures closed at 2595.00 for the day; the fair value is +1.25
  • Pre-NYSE session open, futures price action is to the downside – at 9:00 AM, S&P 500 futures were down by -20.25; Dow by -194; and NASDAQ by -63.75

Directional Bias Before Open

  • Weekly: Down
  • Daily: Down
  • 120-Min: Side
  • 30-Min: Side-Down
  • 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 11 was a relatively large green candle with almost no upper shadow and small lower shadow; the high is near a resistance level – the low of October 2018, which was support earlier
    • Stochastics (9,1, 3) and RSI (14) moving up – %K is above %D; RSI is moving above 40
    • The index has retraced 38.2% of the decline from the high in early October 2018
    • 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 +64.32 or +2.5% and ATR is 73.26
  • Last week’s pivot point=2572.88, R1=2621.20, R2=2646.4; S1=2547.94, S2=2499.62; R1 pivot level was breached;
  • An up week; third in last five weeks and fifth 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 small green candle within the body of a larger green candle, which was a bullish engulfing 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 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 below 40 by 8:00 PM on Sunday; now above 40
  • At/above EMA10 of EMA50, which is below 20-bar EMA
  • Bias: Side
30-Minute (e-mini future)
  • Moving sideways to down since 8:00 PM on January 8, which is more like a round topping pattern;
  • RSI-9 is moving around 40 since 6:30 PM on January 13
  • At/below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Side-Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways since 1:30 AM after moving down from 9:15 PM on Sunday
  • The band narrowed from 1:30 AM to 4:30 AM; expanding since; price briefly moved along lower band and are now approaching the upper band
  • RSI-9 is mostly moving up from below 30 since 10:00 PM on Sunday and made few bearish divergences; above 50
  • Stochastic (9, 1, 3): %K crossed above  %D near 50
  • Bias: Down-Side

Previous Session

Major U.S. indices closed mixed on Friday January 11. S&P 500, Dow Jones Industrial Average and NASDAQ Composite closed down. Dow Jones Transportation Average, Russell 2000, NYSE Composite and Wilshire 5000 Total Market Index closed higher. The volume was lower than that on Thursday and the 10-day average.

For the week, the major indices closed higher. The volume was mixed than previous week, which was only four-day week. S&P 500, NASDAQ Composite traded in lower volume. All S&P sectors closed higher.

From Briefing.com:

The S&P 500 gained 2.5% this week, rising for the third straight week and extending its rally to x% since its Christmas Eve low. The Dow Jones Industrial Average gained 2.4%, the Nasdaq Composite gained 3.5%, and the Russell 2000 gained 4.8%.

All 11 S&P 500 sectors finished higher with industrials (+4.1%), consumer discretionary (+3.7%), real estate (+4.0%), energy (+3.4%), and information technology (+3.4%) outperforming the broader market.

[…]

Separately, the Federal Reserve released its minutes from its December policy meeting. The minutes revealed a view that the path of U.S. monetary policy is “less clear” than before, and a contention that the Fed can “afford to be patient” about future rate hikes.

[…]

U.S. Treasuries lost ground amid the gain in equities, pushing yields higher across the curve. The 2-yr yield increased seven basis points to 2.55%, and the 10-yr yield increased four basis points to 2.70%. The U.S. Dollar Index lost 0.5% to 95.68, and WTI crude rose 7.8% to $51.68/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 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 XLK  (Cross-Over) 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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