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


  • 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:

  • 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
  • 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
  • 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.


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 ( 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 ( consensus 1.3%) after an upwardly revised 1.0% increase (from 0.8%) in November. Excluding transportation, orders increased 0.1% ( 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 ( 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 ( 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 ( 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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