Morning Notes – Friday February 22, 2019

Directional Bias For The Day:

  • S&P Futures are higher; drifting down since 6:30 AM after making a high of 2787.75;
  • Daily is flashing signs of topping; finding resistance on 30-minute timeframe and 15-minute chart is showing Stochastic Bearish Divergence
  • Odds are for a sideways to a down day – watch for break above 2787.75 and below 2780.25 for clarity
  • No Key economic data due:

Sentiment & Catalyst

  • No discernible change in sentiment from the NYSE close on Thursday;

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Hong Kong, Sydney and Seoul were up; Tokyo, and Mumbai and Singapore are down
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/INR
    • EUR/USD
    • GBP/USD
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
    • NatGas
    • Gold
    • Silver
  • Bonds
    • 10-yrs yield is at 2.667%, down from February 21 close of 2.688%;
    • 30-years is at 3.018%, down from 3.045%
    • 2-years yield is at 2.520%, down from 2.528%
    • The 10-Year-&-2-Year spread is at 0.147, down from 0.160

Key Levels:

  • Critical support levels for S&P 500 are 2764.55, 2760.24 and 2754.60
  • Critical resistance levels for S&P 500 are 2781.58, 2789.88 and 2800.18
  • Key levels for eMini futures: break above 2787.75, the high of 6:30 AM and break below 2780.25, the low of 4:00 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (January contract) closed at 2775.25 and the index closed at 2774.88 – a spread of about +0.50 points; futures closed at 2774.25 for the day; the fair value is +1.00
  • Pre-NYSE session open, futures price action is to the upside – at 8:15 AM, S&P 500 futures were up by +11.25; Dow by +123; and NASDAQ by +35.00

Directional Bias Before Open

  • Weekly: Downtrend reversing
  • Daily: Up
  • 120-Min: Up-Side
  • 30-Min: Side-Up
  • 15-Min: Side-Up
  • 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 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 red candle with almost no upper shadow, making it look like a hammer; emerging evening star formation
    • %K crossing below %D, above 90; potential %D Bearish Divergence;
    • RSI-9 turning down from above 75; near 70; 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)
  • Moving up since 10:00 PM on Thursday after declining from 3-month high reached at 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 up since 10:00 AM on Thursday from below 30; made a bullish divergence at 3:00 PM; near 60
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Drifting up since 3:30 PM on Thursday; forming a rising rounding pattern at the top; a mirror image of cup-with-handle from left to right; coming off 61.8% Fibonacci Retracement level to 50%
  • RSI-9 is moving down from 66.46 at 10:30 PM to near 50
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side-Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting up since 2:15 AM
  • The Bollinger Band was narrow f9:45 PM to 2:00 AM; expanding with price walking up the upper band
  • Stochastic (9, 1, 3): %K is crisscrossing %D around 80; declining since 6:30 AM after making %D Bearish Divergence
  • Bias: Side-Up

Previous Session

Major U.S. indices closed mostly lower on Thursday February 21 in mostly lower volume. Dow Jones Transportation Average traded higher in higher volume. Most major indices are forming a three-day evening star pattern. A closed below Thursday’s low will complete the pattern.

From Briefing.com:

The S&P 500 lost 0.4% on Thursday, as disappointing economic data helped simmer the market’s lengthy rally. The Dow Jones Industrial Average, the Nasdaq Composite, and the Russell 2000 also lost 0.4% apiece.

The S&P 500 energy (-1.6%), health care (-0.9%), and communication services (-0.6%) sectors underperformed the broader market. Conversely, the utilities (+0.8%) and consumer staples (+0.3%) sectors showed relative strength.

The stock market began the day slightly lower as weaker-than-expected economic data tempered buying interest. U.S. business investment declined for the second consecutive month in December, and the eurozone manufacturing sector experienced its first contraction since 2013.

[…]

U.S. Treasuries finished on a lower note, pushing yields higher across the curve. The 2-yr yield and the 10-yr yield increased three basis points each to 2.53% and 2.69%, respectively. The U.S. Dollar Index increased 0.2% to 96.62. WTI crude declined 0.3% to $57.00/bbl.

[…]

• Existing home sales decreased 1.2% month-over-month in January to a seasonally-adjusted annual rate of 4.99 million (Briefing.com consensus 5.05 million) from an upwardly revised 5.00 million (from 4.99 million) in December. Total sales were 8.5% lower than the same period a year ago.
o The key takeaway from the report is that existing home sales activity has not improved much since December even when taking into account the upward revision to the December reading.
• Durable goods orders increased 1.2% in December (Briefing.com consensus 1.3%) after an upwardly revised 1.0% increase (from 0.8%) in November. Excluding transportation, orders increased 0.1% (Briefing.com consensus 0.2%) after decreasing a revised 0.2% (from -0.4%) in November.
o The key takeaway from the report is that business investment remained weak, evidenced by the 0.7% decline in nondefense capital goods orders excluding aircraft. Furthermore, the November reading was revised down to -1.0% from -0.6%.
• The Philadelphia Fed Index for February fell to -4.1 (Briefing.com consensus 12.0) from 17.0 in January.
o The key takeaway from the report is that the headline decrease was driven by declines in most components with the Prices Paid Index returning to its low from 2017.
• The Conference Board’s Leading Economic Indicators Index decreased 0.1% in December (Briefing.com consensus -0.1%) after increasing 0.2% in November.
o The key takeaway from the report is that the Conference Board sees a path to GDP growth slowing to 2.0% by the end of 2019.
• Initial claims for the week ending February 16 decreased by 23,000 to 216,000 (Briefing.com consensus 225,000). Continuing claims for the week ending February 9 decreased by 55,000 to 1.780 million.
o The key takeaway from the report is that the decline returned the initial claims level into a sideways range that has been in place over the past year; however, the four-week moving average for initial claims remains at its highest level since January 2018.

  • 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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