Morning Notes – Wednesday February 6, 2019

Directional Bias For The Day:

  • S&P Futures are not much changed from 9:3-0 AM on Tuesday; moving up since 4:30 from 2724.50
  • Odds are for sideways to an up day – watch for break below 2724.50 for change of fortune
  • No Key economic data due:

Markets Around The World

  • Markets in the East closed up – Shanghai, Hong Kong, Seoul and Singapore were closed
  • European markets are mixed – Germany, U.K., and France are down; Spain, Italy, Switzerland and STOXX-600 are up
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/CHF
    • USD/CAD
    • USD/INR
    • EUR/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • NatGas
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Cocoa
    • Crude Oil
    • Gold
    • Silver
    • Coffee
    • Cotton
  • Bonds
    • 10-yrs yield is at 2.680%, down from February 5 close of 2.686%;
    • 30-years is at 3.018%, down from 3.019%
    • 2-years yield is at 2.549%, down from 2.545%
    • The 10-Year-&-2-Year spread is at 0.164, up from 0.150

Key Levels:

  • Critical support levels for S&P 500 are 2724.03, 2717.15 and 2712.62
  • Critical resistance levels for S&P 500 are 2738.98, 2760.88 and 2775.59
  • Key levels for eMini futures: break above 2735.00, the high of 9:00 PM on Tuesday and break below 2724.50, the low of 4:30 AM


  • On Tuesday, at 4:00 PM, S&P future (January contract) closed at 2735.00 and the index closed at 2737.70 – a spread of about -2.75 points; futures closed at 2731.00 for the day; the fair value is +4.00
  • Pre-NYSE session open, futures price action is to the upside – at 8:30 AM, S&P 500 futures were up by +0.75; Dow by +9; and NASDAQ by +14.00

Directional Bias Before Open

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

The trend and patterns on various time frames for S&P 500:

  • 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
  • The week ending on February 1 was a large green candle with small lower and upper shadows; a bullish engulfing; breaking above the downtrend line from October 2018 high
    • Stochastics (9,1, 3) and RSI (14) moving up – %K is above %D and approaching 80; RSI is moving up and is just above 50
    • The index is at 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 up +41.77 or +1.6% and ATR is 92.60
  • Last week’s pivot point=2682.42, R1=2740.77, R2=2775.02; S1=2648.17, S2=2589.82; R1/R2/S2 pivot levels were breached;
  • An up week; fourth in last five weeks and sixth 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 Reversing
  • A relatively small green candle with small upper nd lower shadows; nearing 200-day SMA
    • %K is crossing below %D above 90;
    • RSI-14 is above 65;
    • RSI-9 is above 70; emerging failure swing top was nullified
    • Sequence of lower highs and lower lows since October 3, 2018; need to rise above 2800.18 to break it
  • Above 20-day EMA, 50-day EMA and 100-day SMA; at/below 200-day SMA
  • Uptrend
2-Hour (e-mini future)
  • Moving sideways since 8:00 AM on February 5;
    • The symmetrical triangle targets – 100% extension target near 2735.00 is achieved; 161.8% extension target is near 2776.00
    • The Flag-Pennant targets – the 38.2% extension target is near 2758.00, the 61.8% extension target is near 2815.00 and the 100% extension target is near 2906.00
  • RSI-9 is moving lower since 10:00 AM on February 5 and after making a bearish divergence; below a downtrend line
  • At/above 20-bar EMA; which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Drifting down since 3:30 PM on Tuesday after making a double top; a break below 2722.25 will complete the pattern;
  • RSI-9 is falling, from 92.88, since 10:30 AM on Tuesday; bouncing from just below 25; above 45
  • At/below 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side-Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting sideways to down since 7:45 PM on Tuesday
  • The band narrowed from 9:45 PM to 1:45 AM; expanding since; price walked along the lower band till 4:15 and now coming back to middle band
  • RSI-21 dropped below 50 at 1:45; bouncing off from near 32 to near 50
  • Stochastic (9, 1, 3): %K crossed above %D 4:40 AM; crisscrossing %D since then; near 80
  • Bias: Side-Down

Previous Session

Major U.S. indices closed higher on Tuesday February 5 in mostly higher volume. Russell 2000  traded in lower volume. DJIA has breaked above its downtrend line from October high. Now only DJT is below its downtrend line.


The S&P 500 gained 0.5% on Tuesday, although it ran into some resistance at its 200-day moving average (2741.76) during the session. The Dow Jones Industrial Average gained 0.7%, the Nasdaq Composite gained 0.7%, and the Russell 2000 gained 0.2%.

The S&P 500 information technology (+0.9%) and consumer discretionary (+1.0%) sectors were consistent leaders throughout the session, which contributed to an early risk-on trading mentality that helped lift the benchmark index near its 200-day moving average.


U.S. Treasuries edged higher, pushing yields lower across the curve. The 2-yr yield decreased one basis point to 2.52%, and the 10-yr yield decreased two basis points to 2.70%. The U.S. Dollar Index increased 0.2% to 96.03. WTI crude lost 1.6% to $53.75/bbl.


• The ISM Non-Manufacturing Index checked in at 56.7% for January ( consensus 57.0%), down from an upwardly revised 58.0% (from 57.6%) in December. The dividing line between expansion and contraction is 50.0%. Accordingly, the non-manufacturing sector expanded in January, but at a slower pace.
o The key takeaway from the report is that non-manufacturing sector activity slowed in the face of concerns about the partial government shutdown, yet respondents reportedly remain mostly optimistic about overall business conditions. According to the ISM, the past relationship between the non-manufacturing index and the overall economy indicates the January reading corresponds to a 2.8% increase in real GDP on an annualized basis.

  • S&P 500 Sectors
Sector Daily Trend (Visual) Relative Strength (Last Month – January) Relative Strength (February) %K vs. %D (January)
Consumer Discretionary Down XLY SPY (Cross-Under) Above
Consumer Staples Down SPY (Cross-Under) SPY Cross-Over
Energy Down XLE (Cross-Over) XLE Above
Materials Down SPY (Cross-Under) SPY Above
Industrials Down XLI (Cross-Over) XLI Above
Finance Down XLF (Cross-Over) XLF Above
Technology Down SPY XLK (Cross-Over) Above
Utility Under Pressure SPY (X-Under) SPY Cross-Over
Heath Care Down SPY (Cross-Under) SPY Cross-Over
Real Estate Down XLRE (Cross-Over) XLRE Above
Telecom Down XLT (Cross-Over) SPY (Cross-Under) Above


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