Morning Notes – Tuesday February 19, 2019

Directional Bias For The Day:

  • S&P Futures are lower; moving down since 4:00 AM;
  • Odds are for a sideways to up day – watch for break above 2771.25 and below 2766.75 for clarity
  • No Key economic data due:

Sentiment & Catalyst

  • No discernible sentiment

Markets Around The World

  • Markets in the East closed mixed- Shanghai, Tokyo and Sydney closed up; Hong Kong, Mumbai, Seoul and Singapore closed down
  • European markets are lower
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • USD/INR
    • EUR/USD
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Gold
    • Silver
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
    • Crude Oil
    • NatGas
    • Copper
  • Bonds
    • 10-yrs yield is at 2.647%, down from February 15 close of 2.666%;
    • 30-years is at 2.981%, down from 2.997%
    • 2-years yield is at 2.504%, down from 2.520%
    • The 10-Year-&-2-Year spread is at 0.143, up from 0.146

Key Levels:

  • Critical support levels for S&P 500 are 2766.96, 2763.22 and 2760.24
  • Critical resistance levels for S&P 500 are 2775.59, 2792.63 and 2800.18
  • Key levels for eMini futures: break above 2771.25, the high of 7:30 AM and break below 2766.75, the low of 7:00 AM

Pre-Open

  • On Friday, at 4:00 PM, S&P future (January contract) closed at 2775.75 and the index closed at 2775.60 – a spread of about -0.25 points; futures closed at 2777.00 for the day; the fair value is -1.25
  • Pre-NYSE session open, futures price action is to the downside – at 9:00 AM, S&P 500 futures were down by -11.25; Dow by -91; and NASDAQ by -42.25

Directional Bias Before Open

  • Weekly: Downtrend reversing
  • Daily: Up
  • 120-Min: Side
  • 30-Min: Side
  • 15-Min: Side-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 15 was a large green candle with almost no upper shadow and small lower shadow
    • 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 and is at a downtrend line
    • The index is above 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 +67.72 or +2.5% and ATR is 71.87
  • Last week’s pivot point=2751.68, R1=2799.58, R2=2823.55; S1=2727.71, S2=2679.81; R1/R2 pivot levels were breached;
  • An up week; third in a row and fourth in last five weeks and seventh 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 green candle that gapped up at the open; almost no upper and lower shadows
    • %K is above %D and above 90; Bullish Spike on February 11;
    • RSI-9 is above 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)
  • Slightly turning down after moving sideways since 4:00 PM on Feb 15
    • 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 is falling since 4:00 PM on Friday after making a bearish divergence
  • Below 20-bar EMA but above EMA10 of EMA50
  • Bias: Side
30-Minute (e-mini future)
  • Declining since 4:00 AM
    • Broke above a descending triangle on Friday; the 61.8% extension target near 2770.75 is achieved; 100% extension target is near 2783.00 and 161.8% extension target is near 2802.50
    • Broke above a horizontal channel on Friday; the 61.8% extension target is near 2781.75 is achieved; 100% extension target is near 2793.75 and 161.8% extension target is near 2813.50
  • RSI-9 is moving sideways near 60 since 5:00 AM
  • At/above 20-bar EMA, which is at/below EMA10 of EMA50
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) moved sideways from 9:45 PM on Sunday to 3:30 AM on Tuesday; moving down since
  • The Bollinger Band narrowed from 9:45 PM on Sunday to 3:30 AM; expanding since with price walking down the lower band
  • Stochastic (9, 1, 3): %K crisscrossing %D up 6:30 AM from below 10
  • Bias: Side-Down

Previous Session

Major U.S. indices closed higher on Friday February 15, before the three-day weekend, in higher volume. With Dow Jones Transportation Average closing above a downtrend lien from October high, all major indices have broken above their downtrend lines.

For the week, major indices closed higher in mostly higher volume. NASDAQ Composite traded in lower volume. All S&P sectors also closed higher for the week.

From Briefing.com:

The S&P 500 gained 1.1% on Friday, as investors were relieved to hear that U.S.-China trade-talks produced some progress and that Congress passed a funding resolution to avoid another government shutdown. Friday’s advance increased the benchmark index’s weekly gain to 2.5%.

The Dow Jones Industrial Average (+1.7%), the Nasdaq Composite (+0.6%), and the Russell 2000 (+1.6%) also extended their weekly gains to 3.1%, 2.4%, and 4.2%, respectively.

All 11 S&P 500 sectors finished higher, led by gains in financials (+2.0%), energy (+1.6%), and health care (+1.5%). Conversely, the utilities (+0.3%) and communication services (+0.4%) sectors underperformed but still finished with modest gains.

[…]

U.S. Treasuries edged lower, pushing yields slightly higher. The 2-yr yield increased two basis points to 2.52%, and the 10-yr yield increased one basis point to 2.67%. The U.S. Dollar Index decreased 0.1% to 96.90. WTI crude rose 2.0% to $55.56/bbl.

[…]

• Import prices fell 0.5% in January and are down 1.7% over the last 12 months. Excluding fuel, they are down 0.2% over the last 12 months. Export prices declined 0.6% in January and are down 0.2% over the last 12 months. Excluding agricultural products, export prices are also down 0.2% year-over-year.
o The key takeaway is that the Import-Export Price Indexes for January tracked in a way that should keep the Federal Reserve tracking on its patient-minded path.
• The Empire Manufacturing Survey for February increased to 8.8 (Briefing.com consensus 7.0) from the prior month’s unrevised reading of 3.9.
• Industrial production declined 0.6% in January (Briefing.com consensus +0.2%) following a downwardly revised 0.1% increase (from 0.3%) in December. The January downturn was driven by a large drop in motor vehicle assemblies. The capacity utilization rate fell to 78.2% (Briefing.com consensus 78.8%) from an upwardly revised 78.8% (from 78.7%).
o The key takeaway from the report is that it will feed into concerns about a slowing U.S. economy. Manufacturing production fell 0.9% due to the downturn in motor vehicle assemblies, but excluding that factor, manufacturing production was still down 0.2% with decreases logged for most other major durable goods industries.
• The University of Michigan’s preliminary index of consumer sentiment for February increased to 95.5 (Briefing.com consensus 94.0) from the final reading of 91.2 for January, as attitudes improved with the end of the partial government shutdown and the Federal Reserve hitting the pause button on its interest rate hikes.
o The key takeaway from the report is the indication that consumers’ long-term inflation expectations fell to the lowest level recorded in the past half century, which is a vantage point that is certain to register in the Federal Reserve’s willingness to be patient-minded with its policy approach.

  • 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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