Morning Notes – Wednesday March 6, 2019

Directional Bias For The Day:

  • S&P Futures are little changed to down; moving within a narrow range since NYSE close on Tuesday; moivng up since 11:00 PM from a low of 2781.50
  • Odds are for a sideways day – watch for break above 2796.75 or below 2781.50 for clarity
  • Key economic data due:
    • ADP Non-Farm Employment Change (est. 190K; prev. 213K) at 8:15 AM
    • Trade Balance (est. -57.8B; prev. -49.3B) at 8:30 AM
    • Beige Book at 2:00 PM

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Hong Kong, Sydney and Mumbai were up; Tokyo, Seoul and Singapore were down
  • European markets are mixed – Germany, France, Switzerland and STOXX 600 are down; U.K., Spain and Italy are up
  • Currencies:
    Up Down
    • Dollar index
    • USD/CHF
    • USD/CAD
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • USD/INR
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Copper
    • Palladium
    • Cocoa
    • Crude Oil
    • Platinum
    • Sugar
    • Coffee
    • Cotton
  • Bonds
    • 10-yrs yield is at 2.713%, down from March 5 close of 2.722%;
    • 30-years is at 3.085%, down from 3.087%
    • 2-years yield is at 2.553%, up from 2.537%
    • The 10-Year-&-2-Year spread is at 0.160, up from 0.185

Key Levels:

  • Critical support levels for S&P 500 are 2782.97, 2767.66 and 2757.90
  • Critical resistance levels for S&P 500 are 2796.44, 2803.24and 2814.92
  • Key levels for eMini futures: break above 2796.75, the high of 3:30 PM on Tuesday and break below 2781.50, the low of 11:00 PM on Tuesday

Pre-Open

  • On Tuesday, at 4:00 PM, S&P future (January contract) closed at 2790.00 and the index closed at 2789.65 – a spread of about +0.50 points; futures closed at 2791.50 for the day; the fair value is -1.50
  • Pre-NYSE session open, futures price action is to the downside – at 7:00 AM, S&P 500 futures were down by -3.75; Dow by -27; and NASDAQ by -4.25

Directional Bias Before Open

  • Weekly: Uptrend
  • 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 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 small red with small lower shadow and almost no upper shadow; within the lower shadow of Monday’s candle
    • %K is below %D; below 50 after making a Stochastic Spike down and a Bearish Divergence
    • Stochastic (70, 1, 3) Pop since February 11
    • RSI-9 turned below 70 and is nearing 60; Bearish Divergence
    • Technical breach of 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 sideways to down since 4:00 PM on Monday
    • 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; breaking above a downtrend line
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Side
30-Minute (e-mini future)
  • Moving sideways to down since 3:30 PM on Monday after bouncing from a low of 2767.50; drifting down in a narrow down-sloping flag
  • RSI-9 is moving flat, mostly below 50, since 9;00 PM on Monday
  • At/above 20-bar EMA; at/below EMA10 of EMA50
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways since 10:30 PM on Tuesday
  • The Bollinger Band is relatively narrow since 10:30 PM
  • Stochastic (9, 1, 3): %K is crisscrossing %D and drifting up
  • Bias: Side

Previous Session

Major U.S. indices closed lower on Tuesday March 5 in mostly lower volume. The price action for most was in a narrow range and most made doji like or small spinning top candlesticks mostly within the lower shadow of Monday’s candle. Initially, after the open the market declined but then indices climbed back up a little and mostly traded within a narrow range till the close.

From Briefing.com:

The S&P 500 lost 0.1% on Tuesday in a session that saw little conviction from buyers or sellers. Encouraging economic data and solid earnings reports from Target (TGT 76.00, +3.33, +4.6%) and Kohl’s (KSS 71.33, +4.86, +7.3%) provided some support for the market.

The Dow Jones Industrial Average lost 0.1%, and the Nasdaq Composite finished flat. The Russell 2000, meanwhile, underperformed with a loss of 0.5%.

The S&P 500 industrials (-0.6%) and materials (-0.3%) sectors underperformed the broader market. Conversely, the communication services (+0.7%), real estate (+0.3%), and consumer discretionary (+0.2%) sectors were the lone groups to finish with gains.

Stocks opened roughly flat amid lingering concerns about the U.S. striking, and enforcing, a meaningful trade deal with China. On a related note, China lowered its 2019 GDP growth forecast to 6.0%-6.5% from 6.5%, and announced some tax cuts in a bid to contend with a “tough economic battle ahead.”

[…]

The U.S. Treasury market was relatively muted on Tuesday. The 2-yr yield increased one basis point to 2.55%, and the 10-yr yield was unchanged at 2.72%. The U.S. Dollar Index increased 0.2% to 96.84. WTI crude was unchanged at $56.54/bbl.

[…]

• The ISM Non-Manufacturing Index increased to 59.7 in February (Briefing.com consensus 57.2) from 56.7 in January. The dividing line between expansion and contraction is 50.0, so the increase in February reflects an acceleration in business activity in the non-manufacturing sector.
o The key takeaway from the report is that it featured a sizable increase for the New Orders component, which is a positive marker that will help push out the recession narrative for the U.S. economy since the non-manufacturing sector accounts for a much larger chunk of economic activity than the manufacturing sector does.
• New home sales increased 3.7% month-over-month to a seasonally adjusted annual rate of 621,000 (Briefing.com consensus 572,000) from a downwardly revised 599,000 (from 657,000) in November.
o The key takeaway from the report is that the improvement in new home sales coincided with a drop in both median and average selling prices. Another important takeaway is that lower-priced homes (less than $400,000) accounted for a much smaller percentage of total homes sold than in November, underscoring the point that there are supply constraints at more affordable price points.

[…]

  • 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 Above
Telecom Down XLT SPY (Cross-Under) Above

 

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