Morning Notes – Monday January 28, 2019

Directional Bias For The Day:

  • S&P Futures are lower; moving lower since 12:00 PM on Friday
  • Daily and weekly trends are down
  • Odds are for a down day with elevated volatility – watch for break above 2648.00 for change of fortunes
  • No key economic data due:

Markets Around The World

  • Markets in the East closed mostly lower – Hong Kong was up and Sydney was closed
  • European markets are lower
  • Currencies:
    Up Down
    • Dollar index
    • EUR/USD
    • NZD/USD
    • USD/CAD
    • USD/INR
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
  • Commodities:
    Up Down
    • Gold
    • Sugar
    • Cocoa
    • Crude Oil
    • NatGas
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Coffee
    • Cotton
  • Bonds
    • 10-yrs yield is at 2.751%, down from January 25 close of 2.753%;
    • 30-years is at 3.059%, down from 3.062%
    • 2-years yield is at 2.609%, unchanged
    • The 10-Year-&-2-Year spread is at 0.142, down from 0.144

Key Levels:

  • Critical support levels for S&P 500 are 2643.21, 2627.01 and 2612.86
  • Critical resistance levels for S&P 500 are 2657.33, 2666.527 and 2672.38
  • Key levels for eMini futures: break above 2648.00, the high of 9:00 AM and break below 2633.50, the low of 4:00 PM on January 24

Pre-Open

  • On Friday, at 4:00 PM, S&P future (January contract) closed at 2663.25 and the index closed at 2664.76 – a spread of about -1.50 points; futures closed at 2663.50 for the day; the fair value is -0.25
  • Pre-NYSE session open, futures price action is to the downside – at 9:00 AM, S&P 500 futures were down by -21.00; Dow by -221; and NASDAQ by -64.50

Directional Bias Before Open

  • Weekly: Down
  • Daily: Downtrend Paused
  • 120-Min: Side
  • 30-Min: Down
  • 15-Min: 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 25 was a small green candle with long lower shadow and small upper shadow; the high was below previous week’s high and week’s low reached near previous week’s middle; approaching the downtrend line, which may act as a resistance
    • Stochastics (9,1, 3) and RSI (14) moving up – %K is above %D; RSI is moving up and is near 50
    • The index is nearing the 61.8% retracement 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 down -5.95 or -0.2% and ATR is 59.52
  • Last week’s pivot point=2650.00, R1=2687.14, R2=2709.52; S1=2627.62, S2=2590.48; no pivot levels were breached;
  • A down week; first after four up weeks; first 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 relatively large green candle that gapped up at the open; no lower shadow and small upper shadow; made day’s high by 12:00 PM and then drifted lower; just below the downtrend line from October 2018 high
    • %K again crossed above %D after falling near 60;
    • RSI-14 is moving up; near 60
    • Sequence of lower highs and lower lows since October 3, 2018
  • Above 20-day EMA and 50-day EMA, below 100-day SMA and 200-day SMA
  • Downtrend Paused
2-Hour (e-mini future)
  • Futures are making a rounding pattern at the high since 4:00 PM on January 18; the high January 25 was very near the high on January 18 – almost like a double top; potential cup-with-handle pattern
  • RSI-9 declining since 12:00 PM on January 25; just below 40 from a high near 75
  • At/below 20-BAR EMA; above EMA10 of EMA50
  • Bias: Side
30-Minute (e-mini future)
  • Drifting lower since 12:00 PM on January 25; down 30 points
  • RSI-9 declining from above 80 at 10:30 AM on January 25; just below 30
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving down since 12:15 PM on Friday
  • The band is slightly narrow since 2:45 Pm on Friday expanding since 8:00 AM with price moving along the lower band
  • RSI-9 is moving down since 10:30 AM on Friday; below 30 since 7:30 AM
  • Stochastic (9, 1, 3): %K is below %D and b2low 10
  • Bias: Down

Previous Session

Major U.S. indices closed mostly higher on Friday January 25 in higher volume. The indices gapped up at the open and made day’s high by 11:00 AM to 12:00 PM. After that they mostly drifted lower. Their candlestick line had no lower shadow and green real body.

For the week, major U.S. indices closed mixed in mostly lower volume from previous week, which had one more trading day. Dow Jones Industrial Average, NASDAQ Composite and Russell 2000 closed up for the week. Dow Jones Transportation Average trade in higher volume.

From Briefing.com:

The S&P 500 took a breather this holiday-shortened trading week, losing 0.2%, amid pestering concerns over global growth prospects. Despite the week’s minor setback, the benchmark index is still up 6.3% this month and 13.3% from its Dec. 24 low.

It was a mixed week with the Dow Jones Industrial Average (+0.1%), the Nasdaq Composite (+0.1%), and the Russell 2000 (unch) also closing near their unchanged marks. The respective indices are up 6.0%, 8.0%, and 10.0% this month.

The S&P 500 sectors also finished mixed this week. The energy (-1.5%), consumer staples (-1.4%), and health care (-1.3%) sectors underperformed, while the information technology (+1.0%) and real estate (+1.5%) sectors outperformed.

[…]

While there was some selling interest during the week, the S&P 500’s 50-day moving average proved to be an important level of technical support. Whenever the S&P 500 fell below its 50-day moving average, a wave of buyers would lift the index right back up, preventing selling from getting too out of hand.

[….]

  • 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) XLF (Cross-Over) Cross-Over
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) XLRE (Cross-Over) Cross-Over
Telecom Down SPY XTL (Cross-Over) Cross-Over