Morning Notes – Thursday February 7, 2019

Directional Bias For The Day:

  • S&P Futures are lower; moving down since 11:00 AM on Wednesday
  • Odds are for a down day – watch for break above 2725.75 for change of fortune
  • Key economic data due:
    • Unemployment Claims (230K vs. 220K est.; prev. 253K) at 8:30 AM

Markets Around The World

  • Markets in the East closed mixed – Tokyo, Mumbai and Seoul closed down; Sydney and Singapore closed up; Shanghai and Hong Kong were closed
  • European markets are down
  • Currencies:
    Up Down
    • Dollar index
    • AUD/USD
    • USD/CAD
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • NZD/USD
    • USD/INR
  • Commodities:
    Up Down
    • Cocoa
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
  • Bonds
    • 10-yrs yield is at 2.669%, down from February 6 close of 2.702%;
    • 30-years is at 3.007%, down from 3.038%
    • 2-years yield is at 2.500%, down from 2.529%
    • The 10-Year-&-2-Year spread is at 0.169, down from 0.173

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 2733.00, 2738.98 and 2760.88
  • Key levels for eMini futures: break above 2725.75, the high of 5:00 AM and break below 2710.00, the low of 6:30 AM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (January contract) closed at 2728.50 and the index closed at 2731.61 – a spread of about -3.00 points; futures closed at 2729.50 for the day; the fair value is -1.00
  • Pre-NYSE session open, futures price action is to the downside – at 7:45 AM, S&P 500 futures were down by -17.25; Dow by -149; and NASDAQ by -43.75

Directional Bias Before Open

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

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

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 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
Daily
  • A relatively small red spinning top harami candle; nearing 200-day SMA
    • %K is crossing below %D above 90;
    • RSI-14 is above 65;
    • RSI-9 is above 70; turning down
    • 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)
  • Drifting down – arcing down – since making a high of 2737.75 at 2:00 PM on February 5;
    • 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/below EMA10 of EMA50, which is below 20-bar EMA
  • Bias: Side-Down
30-Minute (e-mini future)
  • Moving down since 9:30 AM on Wednesday; broken below a double top or a horizontal trading range;
    • Double top high 2727.00 and low of 2722.50
      • 61.8% extension target near 2713.50 is achieved;
      • 100% extension target is near 2708.00
      • 161.8% extension target is near 2699.00
  • RSI-9 is falling, below a downtrend line; below 25
  • Below EMA10 of EMA50, which is below 20-bar EMA
  • Bias: Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving down since 7:45 PM on Tuesday
  • The band narrowed from 0:30 AM to 4:45 AM; expanding since with price walked down the lower band
  • RSI-21 is mostly below 50 since 1:15 PM on Wednesday; bouncing off 25; just above 30
  • Stochastic (9, 1, 3): %K crisscrossing above %D around 20 since 5:30 AM
  • Bias: Down

Previous Session

Major U.S. indices closed lower on Wednesday February 6 in lower volume. The day’s range was small and most of the price action sideways. Dow Jones Industrial Average is above its 200-day SMA. Other major indices are below it.

From Briefing.com:

The S&P 500 lost 0.2% on Wednesday in a lackluster trading session. The benchmark index traded with modest losses nearly the entire day with price action dictated by the underperformance of the entertainment software stocks, the outperformance of the semiconductor stocks, and an underlying sense that the market was due for a breather.

The Dow Jones Industrial Average lost 0.1%, the Nasdaq Composite lost 0.4%, and the Russell 2000 lost 0.2%. For the second day in a row, the S&P 500 stalled just in front of its 200-day moving average (2742), topping out at 2738.08.

The S&P 500 communication services (-1.5%), real estate (-0.8%), energy (-0.8%), and materials (-0.7%) sectors underperformed the broader market.

[…]

U.S. Treasuries ended the day near their unchanged marks. The 2-yr yield decreased one basis point to 2.53%, and the 10-yr yield remained unchanged at 2.70%. The U.S. Dollar Index increased 0.3% to 96.38. WTI crude rose 0.4% to $53.99/bbl.

[…]

• The trade deficit narrowed to $49.3 billion in November (Briefing.com consensus -$55.5) from a revised $55.7 billion (from -$55.5 billion) in November.
o The trade deficit narrowed, because imports fell more than exports, yet the key takeaway from the report is that both exports and imports were down in November from the prior month, which fits with a slower growth narrative.

[…]

  • 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) XTL Above

 

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