Morning Notes – Friday February 15, 2019

Directional Bias For The Day:

  • S&P Futures are higher; moving up since 2:30 AM; breaking above a descending triangle on 30-minute chart
  • Odds are for an up day – watch for break below 2744.50 for change of fortune
  • Key economic data due:
    • Empire State Manufacturing Index (est. 7.1; prev. 3.9) at 8:30 AM
    • Import Prices (est. -0.1%; prev. -1.0%) at 8:30 AM
    • Industrial Production (est. 0.1%; prev. 0.3%) at 9:15 AM
    • Capacity Utilization Rate ( est. 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 – Sydney was up
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/INR
    • EUR/USD
    • USD/JPY
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cocoa
    • Cotton
  • Bonds
    • 10-yrs yield is at 2.668%, down from February 14 close of 2.657%;
    • 30-years is at 3.003%, down from 3.007%
    • 2-years yield is at 2.512%, up from 2.504%
    • The 10-Year-&-2-Year spread is at 0.156, up from 0.153

Key Levels:

  • Critical support levels for S&P 500 are 2745.15, 2736.64 and 2731.23
  • Critical resistance levels for S&P 500 are 2757.90, 2761.85 and 2785.93
  • Key levels for eMini futures: break above 2758.25, the high of 3:00 PM on Thursday and break below 2744.75, the low of 6:30 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (January contract) closed at 2745.50 and the index closed at 2745.73 – a spread of about -0.25 points; futures closed at 2743.50 for the day; the fair value is +2.00
  • Pre-NYSE session open, futures price action is to the upside – at 7:45 AM, S&P 500 futures were up by +6.75; Dow by +65; and NASDAQ by +18.50

Directional Bias Before Open

  • Weekly: Downtrend reversing
  • Daily: Up
  • 120-Min: Up-Side
  • 30-Min: Side
  • 15-Min: Side-Up
  • 6-Min: Down-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 doji candle that gapped down at the open but the high of the day closed the gap; equal upper and lower shadows
    • %K is crossing below %D from above 90; potential Bearish Divergence; Bullish Spike on February 11;
    • RSI-9 has fallen just below 70; SMA8 of RSI9 is flattening to turning down from 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; at/above 200-day SMA
  • Uptrend
2-Hour (e-mini future)
  • Moving up since 2:00 AM after reaching the lows made on Thursday, which is at a support zone;
    • 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 rising from near 30 at midnight to near 60; trying to break above a downtrend line
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Rising since 2:30 AM after making a double bottom; near the broken lower bound of a horizontal channel; below a downtrend line
    • Break below a horizontal channel on Thursday; 100% extension target near 2732.00 is achieved; 161.8% extension target is near 2722.00
  • RSI-9 rising since 2:00 AM from 34.79; above 50; breaking above a downtrend line that started at 1:00 AM on February 13
  • Above  EMA10 of EMA50, which is above 20-bar EMA
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moved down from 8:15 AM to 3:30 AM; moving up since 3:30 AM
  • The Bollinger Band narrowed from 4:30 PM to 3:00 AM; expanding since with price walking up the upper band
  • Stochastic (9, 1, 3): %K crisscrossing %D above 70 since 3:15 AM
  • Bias: Side-Up

Previous Session

Major U.S. indices closed mixed on Thursday February 14 in mostly higher volume. S&P 500, Dow Jones Industrial Average, NYSE Composite and Wilshire 5000 Total Market Index closed down. NASDAQ Composite, Dow Jones Transportation Average and Russell 2000 closed up. DJT traded in lower volume. Most Indices made indecisive candlestick lines.

From Briefing.com:

The S&P 500 declined as much as 0.8% on Thursday, as disappointing retail sales data for December played into the market’s concerns about a U.S. economic slowdown. The benchmark index, however, staged a late morning rebound back to its flat line, where it wavered for most of the afternoon. It almost finished flat, but a wave of selling activity in the final 20 minutes of trading left the S&P 500 down 0.3% to end the session.

The Dow Jones Industrial Average (-0.4%), the Nasdaq Composite (+0.1%), and the Russell 2000 (+0.1%) experienced similar price action.

Aside from the retail sales data, which showed a 1.2% decline in retail sales for December (Briefing.com consensus +0.2%) — the largest monthly decline since Sept. 2009 — the market navigated its way through a flurry of news headlines.

[…]

The S&P 500 sectors finished the session mixed.

[…]

U.S. Treasuries saw increased buying interest following the release of the retail sales data, which drove yields lower across the curve. The 2-yr yield declined three basis points to 2.50%, and the 10-yr yield declined five basis points to 2.66%. The U.S. Dollar Index decreased 0.1% to 97.05. WTI crude increased 1.2% to $54.47/bbl.

[…]

• Retail sales declined 1.2% (Briefing.com consensus +0.2%) on the heels of a downwardly revised 0.1% increase (from +0.2%) in November. That is the largest monthly decline since September 2009. Excluding autos, retail sales fell 1.8% after a downwardly revised unchanged reading (from +0.2%) for November.
o The key takeaway from this disappointing report is that the weakness wasn’t isolated to gasoline station sales (-5.1%). It was pretty broad-based across discretionary spending categories like furniture and home furnishings (-1.3%), electronics and appliance stores (-0.1%), clothing and accessories (-0.7%), miscellaneous store retailers (-4.1%), nonstore retailers (-3.9%), and restaurants (-0.7%).
• The Producer Price Index for final demand declined 0.1% in January (Briefing.com consensus +0.1%), pulled down by a 0.8% decline in the index for final demand goods. Excluding food and energy, the index for final demand increased 0.3% (Briefing.com consensus +0.2%). On a year-over basis, the index for final demand was up 2.0%, versus 2.5% in December, while the index for final demand, excluding food and energy, was up 2.6%, versus 2.7% in December.
o The key takeaway from the report is that it could portend margin pressures for producers if they don’t choose to pass along the higher costs to their customers.
• Initial claims for the week ending February 9 increased by 4,000 to 239,000 (Briefing.com consensus 225,000). Continuing claims for the week ending February 2 increased by 37,000 to 1.773 million.
o The key takeaway from the report is that the four-week moving average of 231,750 for initial claims is the highest since January 27, 2018.
• Total business inventories declined 0.1% in November (Briefing.com consensus +0.2%) after increasing an unrevised 0.6% in October. Total business sales fell 0.3% after increasing a downwardly revised 0.1% (from 0.3%) in October.
o The key takeaway from the report is that business sales rose at a slower pace than inventories. That distinction, if it persists, will diminish pricing power.

[…]

  • 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) XLRE Above
Telecom Down XLT (Cross-Over) XTL Above

 

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