Morning Notes – Friday March 1, 2019

Directional Bias For The Day:

  • S&P Futures are higher; moving up since 6:00 PM on Thursday; broke above a symmetrical triangle;
  • Odds are for an up day – watch for break below 2795.25 for change of fortune
  • Key economic data due:
    • Core PCE Price Index (est. 0.2%; prev. 0.1%) at 8:30 AM
    • Personal Spending ( est. -0.2%; prev. 0.4%) at 8:30 AM
    • Personal Income (est. 0.3% ) at 8:30 AM
    • ISM Manufacturing PMI (est. 55.6; prev. 56.6) at 10:00 AM
    • Revised UoM Consumer Sentiment (est. 95.8; prev. 95.5) at 10:00 AM

Sentiment & Catalyst

  • Risk-off mood

Markets Around The World

  • Markets in the East closed higher – Seoul was closed
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • EUR/USD
    • AUD/USD
    • USD/JPY
    • USD/CHF
    • NZD/USD
    • USD/INR
    • GBP/USD
    • USD/CAD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Copper
    • Coffee
    • Cotton
    • Cocoa
    • Gold
    • Silver
    • Platinum
    • Palladium
    • Sugar
  • Bonds
    • 10-yrs yield is at 2.729%, up from February 28 close of 2.711%;
    • 30-years is at 3.099%, up from 3.083%
    • 2-years yield is at 2.520%, unchanged
    • The 10-Year-&-2-Year spread is at 0.209, up from 0.191

Key Levels:

  • Critical support levels for S&P 500 are 2795.76, 2783.40 and 2775.13
  • Critical resistance levels for S&P 500 are 2803.12, 2813.49 and 2816.94
  • Key levels for eMini futures: break above 2803.25, the high of 7:00 AM and break below 2795.25, the low of 3:00 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (January contract) closed at 2785.00 and the index closed at 2784.49 – a spread of about +0.50 points; futures closed at 2784.75 for the day; the fair value is +0.25
  • Pre-NYSE session open, futures price action is to the upside – at 7:00 AM, S&P 500 futures were up by +17.25; Dow by +177; and NASDAQ by -+51.25

Directional Bias Before Open

  • Weekly: Downtrend reversing
  • Daily: Up
  • 120-Min: Side-Up
  • 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 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 red candle, with small upper shadow and smaller lower 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)
  • Breaking above a symmetrical triangle near the high
    • The 61.8% extension target of the symmetrical triangle is near 2824.00 and the 100% extension target is near 2842.00
    • 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 rising since 2:00 PM on February 28; broke above a downtrend line; above 70
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side-Up
30-Minute (e-mini future)
  • Broke above a symmetrical triangle at 8:30 PM; the 61.8% extension target is near 2810.00 and the 100% extension target is near 2820.00
  • RSI-9 is rising since 3:30 PM from near 40; near 65
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Side-Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving up since 8:30 PM
  • The Bollinger Band narrowed from 2:30 AM to 3:30 AM; expanding since with price near the upper band
  • Stochastic (9, 1, 3): %K is crossed below %D at 7:00 AM; potential Bearish Divergence
  • Bias: Side-Up

Previous Session

Major U.S. indices closed lower on Thursday February 28 in mixed volume. The price action during the day was mostly range bound and did not break out in either direction. S&P 500, Dow Jones Industrial Average and Dow Jones Transportation Average traded in higher volume. NASDAQ Composite and Russell 2000 traded in lower volume.

From Briefing.com:

The S&P 500 lost 0.3% on Thursday in another tight-ranged session, which included the underperformance of cyclical sectors and the outperformance of defensive-oriented sectors. Investors also weighed better-than-expected GDP data, the latest batch of earnings reports, and some geopolitical drama.

The Dow Jones Industrial Average lost 0.3%, the Nasdaq Composite lost 0.3%, and the Russell 2000 lost 0.4%. The major averages traded with modest losses for most of the session, but all of them finished higher for the month.

The S&P 500 materials (-1.3%), energy (-1.0%), and consumer discretionary (-0.6%) sectors underperformed the broader market. Conversely, the utilities (+0.4%), consumer staples (+0.3%), and real estate (+0.3%) sectors outperformed.

The U.S. economy slowed less than expected in the fourth quarter of 2018 despite the stock market volatility. Data out of China, meanwhile, showed its manufacturing sector remained in contraction in February.

The advance estimate of Q4 GDP showed an annualized increase of 2.6% (Briefing.com consensus 2.3%). That number, however, was below the growth registered in the second and third quarters of last year, and with China still showing signs of weakness, investors remained cautious.

[…]

U.S. Treasuries finished lower following the release of the better-than-expected advance Q4 GDP reading. The 2-yr yield increased one basis point to 2.50%, and the 10-yr yield increased two basis points to 2.71%. The U.S. Dollar Index increased 0.1% to 96.22. WTI crude rose 0.5% to $57.22/bbl.

[…]

• The Advance Q4 GDP estimate showed economic output increased at an annualized rate of 2.6% (Briefing.com consensus 2.3%). The GDP Deflator increased 1.8% (Briefing.com consensus 1.7%). With the fourth quarter numbers, it is estimated that real GDP increased 2.9% in 2018 versus 2.2% in 2017. From the fourth quarter of 2017 to the fourth quarter of 2018, though, real GDP increased 3.1%.
o The key takeaway from the report is that it supported the notion that the U.S. economy held up relatively well in the fourth quarter despite the stock market volatility. In turn, it will help rebut any notions that the economy is on the cusp of a recession.
• Initial claims for the week ending February 23 increased by 8,000 to a still-low 225,000 (Briefing.com consensus 221,000). Continuing claims for the week ending February 16 increased by 79,000 to 1.805 million.
o The key takeaway from this report is that the low level of initial claims, which have held below 300,000 for 208 consecutive weeks, continues to support the view that the labor market remains tight and that employers are reluctant to let go of employees.
• The MNI Chicago Business Barometer, also known as the Chicago PMI, increased to 64.7 in February (Briefing.com consensus 57.5) from 56.7 in January. The dividing line between expansion and contraction is 50.0.
o The key takeaway from the report is that the New Orders Index rebounded swiftly from a two-year low to its highest level since 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) SPY 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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