Morning Notes – Friday March 8, 2019

Directional Bias For The Day:

  • S&P Futures are down; moving mostly sideways since 2:00 AM
  • Odds are for a down day with elevated volatility – watch for break above 2750.50 for change of fortune
  • Key economic data due:
    • Non-Farm Employment Change (est. 180K;prev. 304K ) at 8:30 AM
    • Unemployment Rate (est. 3.9%; prev. 4.0%) at 8:30 AM
    • Average Hourly Earnings (est. 0.3%; prev. 0.1%) at 8:30 AM
    • Building Permits (est. 1.29M; prev. 1.33M) at 8:30 AM
    • Housing Starts (est. 1.19M; prev. 1.08M) at 8:30 AM

Markets Around The World

  • Markets in the East closed down
  • European markets are lower
  • Currencies:
    Up Down
    • EUR/USD
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • USD/INR
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
  • Commodities:
    Up Down
    • NatGas
    • Gold
    • Silver
    • Platinum
    • Palladium
    • Sugar
    • Cocoa
    • Crude Oil
    • Copper
    • Coffee
    • Cotton
  • Bonds
    • 10-yrs yield is at 2.639%, up from March 7 close of 2.636%;
    • 30-years is at 3.026%, up from 3.025%
    • 2-years yield is at 2.467%, down from 2.483%
    • The 10-Year-&-2-Year spread is at 0.172, up from 0.153

Key Levels:

  • Critical support levels for S&P 500 are 2731.23, 2722.61 and 2703.79
  • Critical resistance levels for S&P 500 are 2749.74, 2761.02 and 2767.25
  • Key levels for eMini futures: break above 2742.75, the high of 3:30 AM and break below 2734.75, the low of 5:00 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (January contract) closed at 2749.00 and the index closed at 2748.93 – a spread of about +0.00 points; futures closed at 2750.00 for the day; the fair value is -1.00
  • Pre-NYSE session open, futures price action is to the downside – at 7:00 AM, S&P 500 futures were down by -7.00; Dow by -78; and NASDAQ by -12.25

Directional Bias Before Open

  • Weekly: Uptrend
  • Daily: Up Under Pressure
  • 120-Min: Down
  • 30-Min: Down
  • 15-Min: Down
  • 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 red candle that gapped won at the open; almost no upper shadow and small lower shadow; broken below the lower shadow of Monday’s candle; nearing the low of February 14
    • %K is below %D; below 10 after making a Stochastic Spike down and a Bearish Divergence
    • Stochastic (70, 1, 3) Pop since February 11, nearing end
    • RSI-9 turned below 70 and is nearing 40; 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
  • Below 20-day EMA and 200-DAY SMA; Above 50-day EMA and 100-day SMA
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Trending down since 8:00 Am on Monday after a brief bounce up
    • 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 just below 30 after reaching 20 and making a Bullish Divergence; broke above a downtrend line but hasn’t reversed the trend
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Moving down since 6:00 PM on Sunday; broke below a don-sloping channel at 10:30 AM on Wednesday; sequence of lower highs and lower lows
  • RSI-9 is moving along 40 since 4:00 PM on Thursday; made a Bullish Divergence at 3:00 PM
  • At/below 20-bar EMA; below EMA10 of EMA50
  • Bias: Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving down since 9:30 AM on Wednesday
  • The Bollinger Band was relatively narrow from 10:15 PM to 0:00 AM and then from 5:15 AM;
  • Stochastic (9, 1, 3): %K is crisscrossing %D; moving up since 5:15 AM after making a spike at 20
  • Bias: Down

Previous Session

Major U.S. indices closed lower on Thursday March 7 in mostly higher volume. Russell 2000 traded in lower volume. Indices gapped down at the open and the gap was not filled and the trend for the day was decidedly down, though the indices recovered a bit near the end. Most had relatively large red candle with almost no upper shadow and small lower shadow. All haven broken below the low of Monday, when indices made long legged bearish engulfing candles.

From Briefing.com:

The S&P 500 lost 0.8% on Thursday, as a negative economic outlook from the European Central Bank (ECB) helped fuel growth concerns and profit-taking interest. Thursday’s risk-off mindset was made apparent by the underperformance of cyclical sectors and the flight-to-safety trade in the U.S. Treasury market where the 10-yr yield dropped six basis points to 2.64%.

The Dow Jones Industrial Average lost 0.8%, the Nasdaq Composite lost 1.1%, and the Russell 2000 lost 0.9%. A technical violation of the S&P 500’s and Nasdaq Composite’s 200-day moving averages also contributed to some selling interest; both closed below that key technical level.

10 of the 11 S&P 500 sectors finished lower with consumer discretionary (-1.4%), financials (-1.1%), and information technology (-0.9%) leading the retreat. Conversely, the utilities sector (+0.3%) was the lone group to finish higher.

The European Central Bank issued a dovish-minded policy stance, which was an acknowledgement of the slowing growth in the eurozone.
The ECB left its key interest rates unchanged, but it also (1) pushed out its guidance for rates to stay at their present level at least through the end of 2019, versus prior guidance of at least through the summer of 2019; and (2) reintroduced a targeted long-term refinancing operation (TLTRO) that will begin in September 2019 and continue through March 2021.

At the same time, the ECB cut its real GDP growth forecast for 2019 to 1.1% from the 1.7% growth forecast it provided as recently as December.

[…]

• Initial claims for the week ending March 2 were low at 223,000 (Briefing.com consensus 224,000), as expected, while continuing claims for the week ending February 23 fell by 50,000 to 1.755 million.
o The key takeaway from the report is that the low level of initial claims is consistent with prior readings that have been consistent with the understanding that labor market conditions remain tight.
• Nonfarm business sector labor productivity increased 1.9% (Briefing.com consensus 1.7%) in the fourth quarter. Unit labor costs increased 2.0% (Briefing.com consensus 1.5%).
o The key takeaway from the report is that the annual average productivity from 2017 to 2018 was a lowly 1.3%, which is below the long-term rate of 2.1% from 1947 to 2018.
• Total outstanding consumer credit increased by $17.0 billion in January (Briefing.com consensus $17.0 billion) after increasing a revised $15.4 billion (from $16.5 billion) in December.
o Once again, credit growth was rooted in nonrevolving debt, like car loans and student loans, while revolving credit (credit cards) expanded at a more muted pace.

  • 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) XLY (Cross-Over) Cross-Under
Consumer Staples Down SPY SPY Cross-Under
Energy Down XLE XLE Above
Materials Down SPY XLB (Cross-Over) Above
Industrials Down XLI XLI Above
Finance Down SPY (Cross-Under) SPY Cross-Under
Technology Down XLK (Cross-Over) XLK Above
Utility Under Pressure SPY XLU (Cross-Over) Above
Heath Care Down SPY SPY Cross-Under
Real Estate Down SPY (Cross-Under) SPY Cross-Under
Telecom Down XLT SPY (Cross-Under) Cross-Under

 

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