Morning Notes – Thursday February 28, 2019

Directional Bias For The Day:

  • S&P Futures are lower; moving up since 2:00 AM from 2781.75; moving sideways to higher since 3:45 AM
  • Odds are for a sideways to an up day – watch for break below 2785.50 for change of fortune
  • Key economic data due:
    • Advanced GDP (2.6% vs. 2.2% est.; 3.4% prev.) at 8:30 AM
    • Advanced GDP Price Index (1.8% vs. 1.7% est.; 1.8% prev.) at 8:30 AM
    • Unemployment Claims (225K vs. 221K est.;216K prev.) at 8:30 AM
    • Chicago PMI (est. 57.3; 56.7 prev.) at 9:45 AM

Sentiment & Catalyst

  • Rick-off mood

Markets Around The World

  • Markets in the East closed mostly lower – Sydney was down
  • European markets are mostly lower – Spain and Italy are up
  • Currencies:
    Up Down
    • EUR/USD
    • AUD/USD
    • USD/CAD
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • NZD/USD
    • USD/INR
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Platinum
    • Palladium
    • Crude Oil
    • Copper
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.684%, down from February 27 close of 2.693%;
    • 30-years is at 3.067%, down from 3.069%
    • 2-years yield is at 2.500%, down from 2.508%
    • The 10-Year-&-2-Year spread is at 0.184, down from 0.185

Key Levels:

  • Critical support levels for S&P 500 are 2789.06, 2779.42 and 2775.13
  • Critical resistance levels for S&P 500 are 2795.76, 2803.12 and 2811.17
  • Key levels for eMini futures: break above 2791.75, the high of 8:30 AM and break below 2785.50, the low of 5:00 AM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (January contract) closed at 2792.75 and the index closed at 2792.38 – a spread of about +0.50 points; futures closed at 2795.00 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 -3.25; Dow by -6; and NASDAQ by -21.25

Directional Bias Before Open

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

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 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
Daily
  • A small green candle, looking like a hammer, with almost no upper shadow and small upper shadow
    • %K is below %D; %D Bearish Divergence on Feb;
    • 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 on Wednesday; broke above a downtrend line
  • At/below 20-bar EMA; at EMA10 of EMA50
  • Bias: Side
30-Minute (e-mini future)
  • Move sideways within a horizontal channel or an uneven inverse head-&-shoulder pattern; at a resistance zone
  • RSI-9 is mostly below 60 since 11:30 AM on February 25 with occasional dip below 40
  • 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 5:30 AM
  • The Bollinger Band is narrow since 5:30 AM
  • Stochastic (9, 1, 3): %K is crisscrossing %D and rising from 50 at 6:00 AM;
  • Bias: Side

Previous Session

Major U.S. indices closed mixed on Wednesday February 27 in mixed volume. S&P 500, Dow Jones Industrial Average and Dow Jones Transportation Average closed down. NASDAQ Composite, Russell 2000, NYSE Composite and Wilshire 5000 Total Market Index closed up. DJIA, DJT and Russell 2000 traded in lower volume. NASDAQ Composite and S&P 500 traded in higher volume. The large cap indices made doji or doji like candlesticks.

From Briefing.com:

The S&P 500 lost 0.1% on Wednesday as investors weighed a handful of headlines on the political, monetary, and geopolitical fronts, as well as the latest batch of earnings reports. The benchmark index was down as much as 0.7% in early trading action but climbed back to its flat line in the afternoon, where it faced some continued resistance near the 2800 level.

The Dow Jones Industrial Average lost 0.3%. The Nasdaq Composite (+0.1%) and the Russell 2000 (+0.2%), however, finished higher.

The S&P 500 health care (-0.5%), real estate (-0.4%), and communication services (-0.4%) sectors underperformed the broader market. Conversely, the energy (+0.4%), financials (+0.4%), and industrial (+0.4%) sectors outperformed.

[…]

U.S. Treasuries were also under pressure, driving yields higher in a curve-steepening trade. The 2-yr yield increased three basis points to 2.51%, and the 10-yr yield increased six basis points to 2.69%. The U.S. Dollar Index increased 0.2% to 96.15. WTI crude rose 2.4% to $56.94/bbl following some bullish inventory data.

[…]

• Pending Home Sales increased 4.6% in January (Briefing.com consensus -0.4%). Today’s reading follows a revised reading of -2.3% in December (from -2.2%).
• Factory orders increased 0.1% in December (Briefing.com consensus +1.0%) following an upwardly revised 0.5% decline (from -0.6%) in November.
o The key takeaway from the report was the understanding that business investment was weak, evidenced by the 1.0% decline in nondefense capital goods orders, excluding aircraft, that followed a 1.1% decline in November. That will compute as a negative input for Q4 GDP forecasts.
• Advance report for International Trade in Goods for December showed a deficit of $79.5 billion, the Advance report for Wholesale Inventories for December showed an increase of 1.1%, and the Advance report for Retail Inventories for December showed an increase of 0.9%.
• The weekly MBA Mortgage Applications Index increased 5.3% following a 3.6% increase in the prior week.

  • 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) XLF 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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