Morning Notes – Wednesday February 27, 2019

Directional Bias For The Day:

  • S&P Futures are lower; broke below a Double Top after NYSE close; tracing an up-sloping flag since 4:00 AM
  • Odds are for a down day – watch for break above 2793.25 for change of fortune
  • No Key economic data due:

Sentiment & Catalyst

  • Rick-off mood

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Tokyo, Sydney and Seoul were up; Hong Kong, Mumbai and Singapore were down
  • European markets are mostly lower – Italy is up
  • Currencies:
    Up Down
    • GBP/USD
    • USD/JPY
    • USD/INR
    • Dollar index
    • EUR/USD
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa (Unch.)
    • NatGas
    • Gold
    • Silver
  • Bonds
    • 10-yrs yield is at 2.645%, up from February 26 close of 2.636%;
    • 30-years is at 3.020%, up from 3.006%
    • 2-years yield is at 2.500%, up from 2.492%
    • The 10-Year-&-2-Year spread is at 0.147, up from 0.144

Key Levels:

  • Critical support levels for S&P 500 are 2789.47, 2781.58 and 2774.93
  • Critical resistance levels for S&P 500 are 2793.51, 2803.12 and 2811.17
  • Key levels for eMini futures: break above 2787.75, the high of 8:30 AM and break below 2783.75, the low of 8:00 AM


  • On Tuesday, at 4:00 PM, S&P future (January contract) closed at 2793.75 and the index closed at 2793.90 – a spread of about -0.25 points; futures closed at 2791.50 for the day; the fair value is +2.25
  • Pre-NYSE session open, futures price action is to the downside – at 8:45 AM, S&P 500 futures were down by -5.00; Dow by -48; and NASDAQ by -21.25

Directional Bias Before Open

  • Weekly: Downtrend reversing
  • Daily: Up
  • 120-Min: Up-Side
  • 30-Min: Side
  • 15-Min: Down-Side
  • 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 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 small red candle, looking like a doji, with small upper shadow and smaller upper shadow
    • %K crossed below %D, from above 90; potential %D Bearish Divergence;
    • RSI-9 turning down from near 75; SMA8 of RSI9 is flattening 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 to down since 4:00 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 30 and is turning up since 2:00 AM
  • At/below 20-bar EMA; at EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Made a double top on Tuesday and broke below its intermediate low in after-market;
    • the 100% extension target near 2783.00 is achieved; the 161.8% extension target is near 2777.00
    • at a resistance zone
  • RSI-9 is moving up since 3:30 AM; made a bullish divergence; just below 50
  • At/above 20-bar EMA, which is at/above EMA10 of EMA50
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting sideways since 6:15 AM
  • The Bollinger Band is narrow since 6:15 AM
  • Stochastic (9, 1, 3): %K crossed below %D from above 80 at 7:45 AM; Bearish Divergence
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Tuesday February 26 in mostly lower volume. Russell 2000 and Dow Jones Transportation Average traded in higher volume. The large cap indices made doji or doji like candlesticks. The major indices are forming a three-day evening star pattern. A closed below Tuesday will be bearish.


The S&P 500 decreased 0.1% as it struggled for direction on Tuesday. The stock market wavered between small gains and losses while investors weighed mixed economic data, key corporate news, and comments from Fed Chair Jerome Powell.

The Dow Jones Industrial Average (-0.1%) and the Nasdaq Composite (-0.1%) also finished just below their flat lines. The Russell 2000, meanwhile, underperformed with a loss of 0.7%.

The S&P 500 materials (-0.6%), health care (-0.3%), and industrial (-0.3%) sectors underperformed the broader market. Conversely, the information technology (+0.2%), consumer discretionary (+0.2%), and communication services (+0.1%) sectors outperformed.


U.S. Treasuries saw increased buying interest, which drove yields lower across the curve. The 2-yr yield decreased three basis points to 2.48%, and the 10-yr yield decreased four basis points to 2.64%. WTI crude increased 0.3% to $55.60/bbl.


• Housing starts declined 11.2% month-over-month in December to a seasonally adjusted annual rate of 1.078 million ( consensus 1.254 million). Building permits were up 0.3% month-over-month to a seasonally adjusted annual rate of 1.326 million ( consensus 1.290 million).
o The key takeaway from the report is that it reinforced the understanding that new supply is slow to develop. Single-family starts fell 6.7% to 758,000, with declines in all regions, except the South (+2.2%). Meanwhile, permits for single-family units declined 2.2% to 829,000, held back by a 4.0% decline in the South, which is the largest market for new home construction.
• The Conference Board’s Consumer Confidence Index jumped to 131.4 in February ( consensus 125.0) from an upwardly revised 121.7 (from 120.2) in January. The February reading broke a string of three consecutive monthly declines in the index.
o The key takeaway from the report is that consumers’ attitude about the outlook improved greatly, coinciding with the sharp improvement in the stock market, continued strength in the labor market, and the end of the partial government shutdown. That upbeat outlook should be a supportive factor for consumer spending.
• The Case-Shiller Home Price Index for December increased 4.2% ( consensus 4.5%), down from a revised November reading of 4.6% (from 4.7%).
• The FHFA Housing Price Index for December increased 0.3%, down from an unrevised reading of 0.4% in November.

  • 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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