Morning Notes – Thursday February 14, 2019

Directional Bias For The Day:

  • S&P Futures are higher; down bias since 3:00 AM; sharp down move since 8:30 AM following Retail Sales data
  • Odds are for a down day – watch for break above 2761.00 for change of fortune
  • Key economic data due:
    • Retail Sales (-1.2% vs. 0.1% est. and 0.1% prev.) at 8:30 AM
    • Core Retail Sales (-1.8% vs. 0.0% est. and 0.2% prev.) at 8:30 AM
    • PPI (-0.1% vs. 0.1% est. and -0.2% prev.) at 8:30 AM
    • Core PPI (0.3% vs. 0.2% est. and -0.1% prev.) at 8:30 AM
    • Unemployment Claims (239K vs. 225K est. and 235K prev.) at 8:30 AM

Sentiment & Catalyst

  • Changing sentiment due to sharply missed Retail Sales Data

Markets Around The World

  • Markets in the East closed mostly lower – Seoul and Singapore were up
  • European markets are mostly higher – Italy is down
  • Currencies:
    Up Down
    • Dollar index
    • EUR/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • USD/INR
    • GBP/USD
    • USD/CHF
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Copper
    • Palladium
    • Cotton
    • Gold
    • Silver
    • Platinum
    • Sugar
    • Coffee
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.690%, down from February 13 close of 2.708%;
    • 30-years is at 3.020%, down from 3.034%
    • 2-years yield is at 2.537%, down from 2.508%
    • The 10-Year-&-2-Year spread is at 0.153, down from 0.171

Key Levels:

  • Critical support levels for S&P 500 are 2751.54, 2748.63 and 2742.03
  • Critical resistance levels for S&P 500 are 2759.83, 2785.93 and 2792.63
  • Key levels for eMini futures: break above 2760.50, the high of 8:00 AM and break below 2745.50, the low of 7:30 PM on Wednesday

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (January contract) closed at 2752.00 and the index closed at 2753.03 – a spread of about -1.00 points; futures closed at 2749.50 for the day; the fair value is +2.50
  • Pre-NYSE session open, futures price action is to the upside – at 8:15 AM, S&P 500 futures were up by +10.50; Dow by +115; and NASDAQ by +35.25

Directional Bias Before Open

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

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 8 was a doji candle following the bullish engulfing candle of previous week; staying above the downtrend line from October 2018 high
    • Stochastics (9,1, 3) and RSI (14) moving up – %K is above %D and above 90; 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 +1.35 or +0.0% and ATR is 57.15
  • Last week’s pivot point=2709.56, R1=2737.30, R2=2766.71; S1=2680.15, S2=2652.41; No pivot levels were breached;
  • An up week; second in a row and 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 green candle that gapped up a little at the open; almost no lower shadow and small upper shadow
    • %K is above %D; %K turning down from above 90; potential Bearish Divergence; Bullish Spike on February 11;
    • RSI-14 rising; above 65;
    • RSI-9 is rising; above 70; SMA8 of RSI9 rising and is near 70
    • 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; above 100-day SMA; above 200-day SMA
  • Uptrend
2-Hour (e-mini future)
  • Moving up since 10:00 AM on Friday; Shooting Star candle at 2:00 AM
    • Double Bottom/Horizontal Channel breakout at 2:00 PM on Monday; 261.8% extension target near 2758.00 is achieved
    • The Flag-Pennant, breakout January 30, 38.2% extension target near 2758.00 is achieved, the 61.8% extension target is near 2815.00 and the 100% extension target is near 2906.00
  • RSI-9 declined from 88.36 to below 70; bearish Divergence at 8:00 AM on Wednesday; potential Bullish Failure Swing at 6:00 PM on Wednesday
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (e-mini future)
  • Emerging Broadening Formation at the top
  • Moving sideways in a horizontal channel since 7:00 PM on January 12; near the high
    • Break above 2763.00 will complete the bullish pattern; 61.8% extension target is near 2771.00 and 100% extension target is near 2778.00;
    • Break below 2747.00 will complete bearish pattern; 61.8% extension target is near 2737.75 and 100% extension target is near 2732.00
  • RSI-9 within 40 and 65 since 3:00 Am on Wednesday; trying to break above a downtrend line, which would signal a break above the horizontal channel in price
  • Above 20-bar EMA, which is above  EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is essentially moving sideways since 11:00 PM on Tuesday; bias is up since 9:30 PM on Wednesday
  • The Bollinger Band narrowed from 9:30 PM to 10:30 AM; expanded till 5:30 AM; Squeeze since
  • Stochastic (9, 1, 3): %K crossed above %D at 5:30 AM from below 20; above 80
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Wednesday February 13 in lower volume. Indices gapped up at the open and the moved higher. they declined mid-day and a late push to highs failed in the last hour of trading.

From Briefing.com:

The S&P 500 increased as much as 0.6% on Wednesday, as continued optimism that U.S.-China trade talks were progressing favorably underpinned another broad-based rally. The benchmark index, however, fell off morning highs and spent a good portion of the day trying to get back to its best levels. It nearly did, but a wave of selling activity in the final 30 minutes knocked it back again. The S&P 500 ended the session up 0.3%.

The Dow Jones Industrial Average (+0.5%), the Nasdaq Composite (+0.1%), and the Russell 2000 (+0.3%) also had similar price action.

[…]

Nevertheless, nine of the 11 S&P 500 sectors finished higher with energy (+1.3%), industrials (+0.6%), and consumer discretionary (+0.6%) leading the advance. Conversely, the utilities (-0.3%) and the communication services (-0.1%) sectors were the lone groups to finish with a loss.

[…]

U.S. Treasuries finished on a lower note, pushing yields higher across the curve. The 2-yr yield increased three basis points to 2.53%, and the 10-yr yield increased two basis points to 2.71%. The U.S. Dollar Index rose 0.5% to 97.17. WTI crude increased 1.3% to $53.80/bbl.

[…]

• Total CPI was unchanged (Briefing.com consensus +0.1%) while core CPI, which excludes food and energy, was up 0.2%, as expected. On a year-over-year basis, total CPI was up 1.6%, which is the smallest increase since June 2017. Core CPI was up 2.2%, which was the same increase as the 12-month periods ending in November and December.
o The key takeaway from the report is that core CPI is stable above the Fed’s longer-run target. That could give it some leeway to remain patient for the time being, but at the same time, if the stock market keeps rallying and economic data improve, it could be a basis to consider raising rates again.
• The Treasury Budget for December showed a deficit of $13.5 billion versus a deficit of $23.2 billion for the same period a year ago. The Treasury Budget data is not seasonally adjusted, so the December deficit cannot be compared to the $204.9 billion deficit for November.
o The fiscal year-to-date deficit is $318.9 billion versus a deficit of $224.9 billion for the same period a year ago. The budget deficit over the last 12 months is $873.0 billion.
• The weekly MBA Mortgage Applications Index decreased 3.7% following a 2.5% decline in the prior week.

[…]

  • 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) SPY (Cross-Under) Above
Materials Down SPY (Cross-Under) SPY Above
Industrials Down XLI (Cross-Over) XLI Above
Finance Down XLF (Cross-Over) SPY (Cross-Under) 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) SPY (Cross-Under) Above
Telecom Down XLT (Cross-Over) XTL Above

 

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