Morning Notes – Wednesday February 20, 2019

Directional Bias For The Day:

  • S&P Futures are lower; moving sideways since 4:00 PM on Tuesday;
  • Odds are for a sideways to an up day – watch for break above 2782.25 and below 2766.00 for clarity
  • Key economic data due:
    • FOMC meeting minutes at 2:00 PM

Sentiment & Catalyst

  • No discernible sentiment moving catalyst

Markets Around The World

  • Markets in the East closed mostly higher – Sydney was down
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • EUR/USD
    • USD/JPY
    • GBP/USD
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • USD/INR
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Cotton
    • Crude Oil
    • Sugar
    • Coffee
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.631%, down from February 19 close of 2.647%;
    • 30-years is at 2.976%, down from 2.991%
    • 2-years yield is at 2.487%, down from 2.495%
    • The 10-Year-&-2-Year spread is at 0.146, down from 0.152

Key Levels:

  • Critical support levels for S&P 500 are 2772.41, 2764.42 and 2760.24
  • Critical resistance levels for S&P 500 are 2787.19, 2792.63 and 2800.18
  • Key levels for eMini futures: break above 2780.75, the high of 3:00 AM and break below 2773.25, the low of 4:30 AM

Pre-Open

  • On Tuesday, at 4:00 PM, S&P future (January contract) closed at 2780.25 and the index closed at 2779.76 – a spread of about +0.50 points; futures closed at 2778.75 for the day; the fair value is +1.50
  • Pre-NYSE session open, futures price action is to the downside – at 8:00 AM, S&P 500 futures were down by -3.25; Dow by -34; and NASDAQ by -1.25

Directional Bias Before Open

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

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 relatively small green candle with almost no lower shadow and small upper shadow
    • %K is above %D, above 90 but turning down; Bullish Spike on February 11;
    • RSI-9 is above 75; 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 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; just above 50
  • At/above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side
30-Minute (e-mini future)
  • Moving sideways since 4:00 PM on Tuesday
    • Broke above a descending triangle on Friday; 100% extension target near 2783.00 is achieved; 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 50 since 4:30 PM on Tuesday
  • At/above 20-bar EMA, which is at/below EMA10 of EMA50
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways since 9:30 PM on Tuesday
  • The Bollinger Band is relatively narrow since 9:30 PM on Tuesday
  • Stochastic (9, 1, 3): %K is below %D since 7:30 AM; bouncing off 20
  • Bias: Side

Previous Session

Major U.S. indices closed higher on Tuesday February 19, following the President’s Day weekend, continuing the gains from last week. The volume traded was lower than that on Friday. The major indices are continuing with their chart formation on daily timeframe and are near the resistance created by the high on December 3. NASDAQ Composite, NYSE Composite and Wilshire 5000 Total Market Index are at or above this level. Russell 2000 crossed above it on Friday. Other are below it.

From Briefing.com:

The S&P 500 increased 0.2% on Tuesday, as strong earnings results from Wal-Mart (WMT 102.20, +2.21, +2.2%) helped ease some concerns about consumer spending. Investors also remained optimistic about U.S.-China trade talks and a market-friendly Federal Reserve.

The Nasdaq Composite gained 0.2%, and the Russell 2000 gained 0.3%. The Dow Jones Industrial Average, however, finished flat.

Nine of the 11 S&P 500 sectors finished higher with materials (+0.6%), utilities (+0.5%), consumer staples (+0.5%), and consumer discretionary (+0.5%) outperforming. Conversely, the health care (-0.3%) and industrial (-0.1%) sectors were the lone groups to finish in the red.

[…]

U.S. Treasuries saw continued buying interest, driving yields lower across the curve. The 2-yr yield and 10-yr yield decreased two basis points each to 2.50% and 2.65%, respectively. The U.S. Dollar Index declined 0.4% to 96.52 amid strength in the euro. WTI crude rose 1.6% to $56.45/bbl.

[…]

  • 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) 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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