Morning Notes – Thursday February 21, 2019

Directional Bias For The Day:

  • S&P Futures are lower; moving lower since 10:30 PM on Wednesday;
  • Futures fallen back in the ascending triangle that it broke above on Wednesday night
  • Odds are for a sideways to an up day – watch for break above 2791.00 and below 2773.75 for clarity
  • Key economic data due:
    • Core Durable Goods (0.1% vs. 0.3% est. ; prev. -0.4%) at 8:30 AM
    • Durable Goods (1.2% vs. 1.6% est.; prev. 0.7%) at 8:30 AM
    • Philly Fed Manufacturing Index (-4.1 vs. 14.1 est.; prev. 17.0) at 8:30 AM
    • Unemployment Claims (216K vs. 228K est.; prev. 239K) at 8:30 AM
    • Flash Manufacturing PMI (53.7 vs. 54.9 est.; 54.9 prev.) at 9:45 AM
    • Flash Services PMI (56.2 vs. 54.4 est.; 54.2 prev.) at 9:45 AM
    • Existing Home Sales (4.94M vs. 5.01M est.; prev. 5.00M) at 10:00 AM

Sentiment & Catalyst

  • 8:30 AM: Economic reports decidedly turned the sentiments to be negative; greater probability of down open and down day than up day

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Seoul and Singapore were down; Hong Kong, Tokyo, Sydney and Mumbai were up
  • European markets are mixed – Germany, France, Spain and Switzerland are up; U.K., Italy and STOXX 600 are down
  • Currencies:
    Up Down
    • Dollar index
    • EUR/USD
    • GBP/USD
    • USD/CHF
    • USD/CAD
    • USD/INR
    • USD/JPY
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Cotton
    • Cocoa
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
  • Bonds
    • 10-yrs yield is at 2.673%, up from February 20 close of 2.654%;
    • 30-years is at 3.018%, up from 3.000%
    • 2-years yield is at 2.512%, up from 2.500%
    • The 10-Year-&-2-Year spread is at 0.161, up from 0.154

Key Levels:

  • Critical support levels for S&P 500 are 2774.06, 2766.96 and 2760.24
  • Critical resistance levels for S&P 500 are 2789.88, 2792.63 and 2800.18
  • Key levels for eMini futures: break above 2791.25, the high of 6:00 AM and break below 2780.00, the low of 7:30 AM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (January contract) closed at 2786.00 and the index closed at 2784.70 – a spread of about +1.25 points; futures closed at 2787.00 for the day; the fair value is -1.00
  • Pre-NYSE session open, futures price action is to the downside – at 8:00 AM, S&P 500 futures were down by -4.75; Dow by -35; and NASDAQ by -6.25

Directional Bias Before Open

  • Weekly: Downtrend reversing
  • Daily: Up
  • 120-Min: Up
  • 30-Min: Up-Side
  • 15-Min: Up-Side
  • 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 relatively small green spinning top candle near the resistance created by December 3 high
    • %K is above %D, above 90; Bullish Spike on February 11;
    • RSI-9 is above 75 and rising; SMA8 of RSI9 is rising above 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)
  • Broke above a sideway move from February 15 and resumed uptrend; drifting down since 10:00 PM on Wednesday
    • 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 10:00 PM on Wednesday after rising from a low made on Tuesday morning
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (e-mini future)
  • Drifting down 10:30 PM Wednesday
    • Broke above a horizontal channel (or an ascending triangle) – high 2787.50 and low 2773.25 – at 9:30 PM on Wednesday; the 61.8% extension target near 2796.25 is achieved; 100% extension target is near 2801.75 and 161.8% extension target is near 2810.50
    • 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 down from 66.46 at 10:30 PM to near 50
  • At/below 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting down since 9:30 PM on Wednesday
  • The Bollinger Band is relatively narrowing since 9:30 PM on Wednesday; expanding since 7:00 AM with price walking down the lower band
  • Stochastic (9, 1, 3): %K is below %D since 6:30 AM; bouncing off 0
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Wednesday February 20, in higher volume. Most major indices are approaching December 3 high. Russell 2000 and NYSE Composite are above their December highs and are approaching November highs. Dow Jones Transportation Average is a laggard in this case.

From Briefing.com:

The S&P 500 increased 0.2% on Wednesday, as the minutes from the Federal Reserve’s January meeting came in mostly in-line with expectations. Price action, overall, was kept in check with earnings reports driving the notable movers in the stock market.

The Dow Jones Industrial Average gained 0.2%, and the Russell 2000 gained 0.5%. The Nasdaq Composite, however, finished flat.

The S&P 500 materials (+1.7%), financials (+0.6%), and industrials (+0.5%) sectors outperformed the broader market. Conversely, the real estate (-0.7%), health care (-0.1%), consumer staples (-0.1%), and communication services (-0.1%) sectors finished in the red.

The main takeaway from the FOMC Minutes was that the Fed is going to be patient in raising rates and is likely to stop reducing the assets on its balance sheet later this year. The surprise – or maybe the important revelation – for the market to consider was the implication that the Fed could turn away from a “patient” mindset with raising interest rates if market uncertainty abates.

[…]

U.S. Treasuries were little changed during Wednesday’s session. The 2-yr yield and the 10-yr yield finished flat at 2.50% and 2.65%, respectively. The U.S. Dollar Index was unchanged at 96.55. WTI crude rose 1.2% to $57.15/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) XLB (Cross-Over) 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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