Morning Notes – Tuesday February 26, 2019

Directional Bias For The Day:

  •   S&P Futures are lower; moved down from a high of 2814.00 at 11:00 AM on Monday to 2783.25 by 9:30 AM;
  • Moving up since 9:30 PM and forming an up-sloping flag, a break below it would be bearish
  • Odds are for a down day – watch for break above 2793.25 for change of fortune
  • Key economic data due:
    • Building Permits (1.33M vs. 1.29M est.; 1.32M; prev. ) at 8:30 AM
    • Housing Starts (1.08M vs. 1.25M est.; 1.21M prev.) at 8:30 AM
    • HPI (0.3% vs. 0.3% est.; 0.4% prev.) at 9:00 AM
    • S&P/CS Composite 20 HPI (4.2% vs. 4.5% est.; 4.7% prev.) at 9:00 AM
    • CB Consumer Confidence (est. 1248; 120.2 prev.) at 10:00 AM

Sentiment & Catalyst

  • Risk-off mood

Markets Around The World

  • Markets in the East closed lower
  • European markets are mostly lower – Italy and Switzerland are up
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/CHF
    • USD/CAD
    • USD/INR
    • Dollar index
    • USD/JPY
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Platinum
    • Palladium
    • Sugar
    • Cocoa
    • Gold
    • Silver
    • Copper
    • Coffee
    • Cotton
  • Bonds
    • 10-yrs yield is at 2.654%, down from February 25 close of 2.673%;
    • 30-years is at 3.023%, down from 3.034%
    • 2-years yield is at 2.488%, down from 2.510%
    • The 10-Year-&-2-Year spread is at 0.166, up from 0.163

Key Levels:

  • Critical support levels for S&P 500 are 2781.58, 2774.93 and 2764.55
  • Critical resistance levels for S&P 500 are 2804.48, 2813.49 and 2816.94
  • Key levels for eMini futures: break above 2793.25, the high of 7:30 AM and break below 2787.50, the low of 6:30 AM


  • On Monday, at 4:00 PM, S&P future (January contract) closed at 2796.50 and the index closed at 2796.11 – a spread of about +0.50 points; futures closed at 2797.00 for the day; the fair value is -0.50
  • Pre-NYSE session open, futures price action is to the downside – at 8:30 AM, S&P 500 futures were down by -6.75; Dow by -122; and NASDAQ by -27.75

Directional Bias Before Open

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

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 22 was a relatively small 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 from January 2018 high
    • The index is nearing the 78.6% Fibonacci retracement of the decline from the high in early October 2018
  • Last week was up +17.07 or +0.6% and ATR is 29.65
  • Last week’s pivot point=2783.81, R1=2803.06, R2=2813.46; S1=2773.41, S2=2754.16; No pivot levels were breached;
  • An up week; fourth in a row and fourth in last five weeks and eight in last ten weeks
  • Last swing low, 2532.69, was the low on February 5, 2018 and breached in December 2018
  • Above 10-week EMA and 39-week SMA; above 89-week SMA
  • Downtrend Reversing
  • A red candle with almost no lower shadow and small upper shadow
    • %K crossed below %D, from above 90; potential %D Bearish Divergence;
    • RSI-9 turning up from above 70; near 75; SMA8 of RSI9 is rising above 70
    • Sequence of lower highs and lower lows since October 3, 2018; need to rise above 2815.15 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 10:00 PM on Monday after moving down from the three-month high of 2814.00 at 10:00 AM on Monday
    • 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 dropped below 50 and is turning up since 8:00 PM; bearish divergence
  • Below 20-bar EMA; at EMA10 of EMA50
  • Bias: Up
30-Minute (e-mini future)
  • Broke below an up-sloping channel at 3:00 PM on Monday; declined to 2783.25 by 9:30 PM; again moving up in another smaller up-sloping channel, which has potential to become a flag
  • RSI-9 is moving up since 9:30 PM; just above 50
  • At/above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting up since up since 1:15 AM
  • The Bollinger Band is narrow since 1:15 AM
  • Stochastic (9, 1, 3): %K crossed below %D from above 80 at 6:30 AM
  • Bias: Down-Side

Previous Session

Major U.S. indices closed mostly higher on Monday February 25 in mostly higher volume. Russell 2000 and Dow Jones Transportation Average were down. S&P 500 and Russell 2000 traded in lower volume. The indices gapped up at the open but the move higher faltered in the morning and then they mostly drifted down. Most were barely able to maintain the gap before the gap. Transports closed its gap and the NYSE Composite almost closed its gap.


The S&P 500 advanced as much as 0.8% on Monday after President Trump said he will delay the March 1 trade deadline as negotiations with China have progressed favorably. The benchmark index, however, steadily retreated throughout the session, ultimately finishing higher by 0.1%.

The Dow Jones Industrial Average (+0.2%), the Nasdaq Composite (+0.4%), and the Russell 2000 (-0.1%) also finished near their session lows.


The S&P 500 materials (+0.7%), information technology (+0.5%), financials (+0.4%), and industrial (+0.4%) sectors outperformed the broader market.


The Philadelphia Semiconductor Index increased 0.8%.


Conversely, the real estate (-0.8%), utilities (-0.6%), consumer staples (-0.5%), and consumer discretionary (-0.3%) sectors finished the session with losses. The underperformance from the consumer discretionary sector was a drag on the broader market considering it was up as much as 0.7% in the opening minutes of trading.

U.S. Treasuries closed on a lower note, pushing yields higher across the curve. The 2-yr yield increased three basis points to 2.51%, and the 10-yr yield increased two basis points to 2.67%. The U.S. Dollar Index declined 0.1% to 96.42. WTI crude lost 3.1% to $55.45/bbl.

Separately, Wholesale Inventories for December increased 1.1% ( consensus +0.4%). The November reading was revised up to 0.4% from 0.3%.

  • 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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