Morning Notes – Tuesday March 5, 2019

Directional Bias For The Day:

  • S&P Futures are little changed; drifting down since 4:30 AM after rising since 1:00 Pm on Monday
  • Odds are for a down to sideways day – watch for break above 2796.50 for change of fortune
  • Key economic data due:
    • ISM Non-Manufacturing PMI (est. 57.4; prev. 56.7) at 10:00 AM
    • New Home Sales (est. 597K; prev. 657K) at 10:00 AM

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Hong Kong and Mumbai were up; Tokyo, Sydney, Seoul and Singapore were down
  • European markets are mostly lower – U.K. is up
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Silver
    • Copper
    • Platinum
    • Sugar
    • Coffee
    • Cotton
    • Gold
    • Palladium
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.739%, up from March 4 close of 2.722%;
    • 30-years is at 3.100%, up from 3.090%
    • 2-years yield is at 2.565%, up from 2.549%
    • The 10-Year-&-2-Year spread is at 0.174, up from 0.173

Key Levels:

  • Critical support levels for S&P 500 are 2783.16, 2767.66 and 2757.90
  • Critical resistance levels for S&P 500 are 2795.99, 2803.24and 2814.92
  • Key levels for eMini futures: break above 2796.50, the high of 7:00 AM and break below 2785.50, the low of 8:30 PM on Monday

Pre-Open

  • On Monday, at 4:00 PM, S&P future (January contract) closed at 2793.25 and the index closed at 2792.81 – a spread of about +0.50 points; futures closed at 2791.50 for the day; the fair value is +1.75
  • Pre-NYSE session open, futures price action is little changed – at 7:30 AM, S&P 500 futures were up by +1.75; Dow up by +6; and NASDAQ down by -0.50

Directional Bias Before Open

  • Weekly: Uptrend
  • Daily: Up
  • 120-Min: Side
  • 30-Min: Down-Side
  • 15-Min: Down-Side
  • 6-Min: Down-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 March 1 was a long legged doji, with very small upper shadow, at the top
    • Stochastics (9,1, 3) and RSI (14) moving up – %K is crossing below %D above 95; RSI is moving up and is just above 60 and is breaking above a downtrend line from January 2018 high
    • The index is at 78.6% Fibonacci retracement of the decline from the high in early October 2018
  • Last week was up +11.02 or +0.4% and ATR is 38.36
  • Last week’s pivot point=2797.44, R1=2819.74, R2=2835.80; S1=2781.38, S2=2759.08; R1/R2 pivot levels were breached;
  • An up week; fifth in a row and ninth 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
  • Uptrend
Daily
  • A relatively large red bearish engulfing candle with long lower shadow and almost no upper shadow; at a resistance level; low found support at the low of February 21
    • %K has turned below %D from 80; making a Stochastic Spike down; possible Bearish Divergence
    • Stochastic (70, 1, 3) Pop since February 11
    • RSI-9 turned below 70; possible Bearish Divergence
    • Sequence of lower highs and lower lows since October 3, 2018; made intra-day high above 2815.15 but did not close above it
  • Above 20-day EMA, 50-day EMA; above 100-day SMA; at/above 200-day SMA
  • Uptrend
2-Hour (e-mini future)
  • Drifting up since 12:00 PM on Monday from a support zone; finding resistance at 50-bar EMA
    • Break above a symmetrical triangle on February 28 is nullified
    • The Flag-Pennant, breakout January 30, the 61.8% extension target near 2815.00 is achieved and the 100% extension target is near 2906.00
  • RSI-9 is declining since 6:00 PM on Sunday from near 70; below a downtrend line; made a Bearish Divergence
  • At/below 20-bar EMA, which is at/below EMA10 of EMA50
  • Bias: Side
30-Minute (e-mini future)
  • Moving sideways to up since 3:30 PM on Monday after bouncing from a low of 2767.50 at 1:00 PM;
  • RSI-9 is rising since 12:30 PM from below 20; near 50
  • Above 20-bar EMA; at/below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways to up since 8:45 PM on Monday
  • The Bollinger Band narrowed from 8:45 to 3:15 AM; expanding since ; price first walk up the band till 4:45 AM; now crossing down to the lower band
  • Stochastic (9, 1, 3): %K is crossing below %D from 50 at 6:45 AM
  • Bias: Down-Side

Previous Session

Major U.S. indices closed lower on Monday March 4 in mostly higher volume. Dow Jones Transportation Average traded in lower volume. Indices gapped up at the moment and the immediately faced a resistance by October 2018 high and then traded down. Most formed a bearish engulfing candlestick, albeit with long lower shadows, and flashing reversal signs. Break below Monday’s low is critical to determine the short term move. pattern.

From Briefing.com:

The S&P 500 advanced as much as 0.5% following a report that the U.S. and China are nearing a trade deal. The benchmark index was then down as much as 1.3% following an inability to sustain a retest of its November high. Renewed buying interest, however, propelled an afternoon rebound effort, leaving the S&P 500 with a loss of 0.4%.

The Dow Jones Industrial Average (-0.8%), the Nasdaq Composite (-0.2%), and the Russell 2000 (-0.9%) also finished off their session lows.

[…]

Conversely, the materials (+0.4%), real estate (+0.4%), utilities (+0.2%), and energy (+0.2%) sectors outperformed.

[…]

The subsequent pullback included some technical drivers, too. The retest of the November high sparked some reflex selling interest that ultimately sent the S&P 500 below the 2800 level. The quick descent was likely exacerbated by weak-handed holders of long positions (i.e. performance chasers) who felt trapped and anxious about getting involved in the market rally too late.

An afternoon wave of buyers tempered selling from getting too out of hand, though. The S&P 500 sectors pared losses, allowing the benchmark index to close at its afternoon highs but still under the 2800 level.

[…]

U.S. Treasuries edged higher, pushing yields lower across the curve. The 2-yr yield declined one basis point to 2.54%, and the 10-yr yield declined three basis points to 2.72%. The U.S. Dollar Index increased 0.1% to 96.61. WTI crude increased 1.3% to $56.53/bbl.

[…]

• Total construction spending declined 0.6% in December (Briefing.com consensus -0.3%) after increasing 0.8% in November.
o The key takeaway from the report is that residential construction spending was soft in December, although the market effectively knew that already based on the data seen in the Q4 GDP report.

[…]

  • S&P 500 Sectors
Sector Daily Trend (Visual) Relative Strength (Last Month – February) Relative Strength (March) %K vs. %D (March)
Consumer Discretionary Down SPY (Cross-Under) SPY Above
Consumer Staples Down SPY SPY Above
Energy Down XLE XLE Above
Materials Down SPY XLB (Cross-Over) Above
Industrials Down XLI XLI Above
Finance Down SPY (Cross-Under) SPY Above
Technology Down XLK (Cross-Over) XLK Above
Utility Under Pressure SPY XLU (Cross-Over) Above
Heath Care Down SPY SPY Above
Real Estate Down SPY (Cross-Under) SPY Below (Cross-Under)
Telecom Down XLT XTL Above

 

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