Morning Notes – Monday March 11, 2019

Directional Bias For The Day:

  • S&P Futures are higher; moving mostly sideways to up since 9:15 PM on Sunday
  • Odds are for an up day with elevated volatility – watch for break below 2748.25 for change of fortune
  • Key economic data due:
    • Core Retail Sales (0.9% vs. 0.4% est.; prev. -2.1%) at 8:30 AM
    • Retail Sales (0.2% vs. 0.0% est.; prev. -1.6% ) at 8:30 AM
  • Ethiopian Air’s Boeing 737 air-crash in weighing negatively on DJIA and the good Retail Sales numbers are buoying the rest of the market

Markets Around The World

  • Markets in the East closed mostly up – Sydney and Singapore were down
  • European markets are mostly higher – Spain is down
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • Dollar index
    • USD/JPY
    • USD/CAD
    • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • Copper
    • Palladium
    • Sugar
    • Cocoa
    • NatGas
    • Gold
    • Silver
    • Platinum
    • Coffee
    • Cotton (Unch.)
  • Bonds
    • 10-yrs yield is at 2.639%, up from March 8 close of 2.625%;
    • 30-years is at 3.026%, up from 3.009%
    • 2-years yield is at 2.479%, down from 2.491%
    • The 10-Year-&-2-Year spread is at 0.159, up from 0.153

Key Levels:

  • Critical support levels for S&P 500 are 2731.03, 2723.16 and 2703.79
  • Critical resistance levels for S&P 500 are 2757.70, 2761.02 and 267.25
  • Key levels for eMini futures: break above 2755.25, the high of 8:30 AM and break below 2747.00, the low of 4:30 AM

Pre-Open

  • On Friday, at 4:00 PM, S&P future (June contract) closed at 2748.00 and the index closed at 2743.07 – a spread of about +5.00 points; futures closed at 2752.00 for the day; the fair value is -4.00
  • Pre-NYSE session open, futures price action is mixed – at 9:00 AM, S&P 500 futures were up by +6.25; Dow down by -197; and NASDAQ up by +29.75

Directional Bias Before Open

  • Weekly: Uptrend
  • Daily: Up Under Pressure
  • 120-Min: Down-Up
  • 30-Min: Down-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 March 8 was a large bearish engulfing candle with large lower shadow and almost no upper shadow
    • Stochastics (9,1, 3) and RSI (14) turned down – %K is below %D from above 95; RSI has crossed below a downtrend line that it broke above once
    • The index is turning down from 78.6% Fibonacci retracement of the decline from the high in early October 2018
  • Last week was down -60.62 or -2.2% and ATR is 94.61
  • Last week’s pivot point=2760.74, R1=2799.21, R2=2855.35; S1=2704.60, S2=2666.13; S1/S2/S3 pivot levels were breached; last time all three support levels were breached was the week ending on December 21, 2018 and the next week was up; seven out of last nine times when all three support levels were breached the following week was an up week
  • A down week; first in last five weeks and second 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 green candle that gapped down at the open and then closed above the open; no upper shadow and relatively longer lower shadow;
    • %K crossing above %D from  below 10
    • Stochastic (70, 1, 3) Pop since February 11, nearing end
    • RSI-9 crossed below 40
    • 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 and 50-day EMA; above 100-day SMA
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Bouncing up from a low of 2726.50; near a downtrend line form early March high;
    • 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 above 60 after reaching 20 and making a Bullish Divergence; broke above a downtrend line
  • Above 20-bar EMA, below EMA10 of EMA50
  • Bias: Down-Up
30-Minute (e-mini future)
  • Moving higher since 1:00 PM on Friday; sequence of higher highs and higher lows since then
    • broke above a double bottom – height 15 pts; break at 2737.00; 100% extension target near 2752 is achieved; 161.8% extension target is near 2761.25
  • RSI-9 is trending up since 1:00 PM on Friday after making failure swing
  • Above 20-bar EMA; which is above EMA10 of EMA50
  • Bias: Down-Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is sloping up since 11:00 PM on Sunday
  • The Bollinger Band was relatively narrow from 4:00 AM to 8:30 AM
  • Stochastic (9, 1, 3): %K is crisscrossing %D with an up bias
  • Bias: Side-Up

Previous Session

Major U.S. indices closed lower on Friday March 8 in lower volume. However, the indices reversed course midday after testing morning’s low and mostly closed above their opens, which were gapped down. Most made hammer or doji like candlestick formations.

For the week, major U.S. indices closed lower in mostly higher volume. Dow Jones Industrial Average and Dow Jones Transportation Average traded in lower volume during the week. Only Utilities and Real Estate were up for the week.

From Briefing.com:

The S&P 500 lost 2.2% this week, as concerns about global growth underpinned a risk-off mindset. With few catalysts to justify further gains, and a confluence of discouraging data, news, and technical drivers, the market succumbed to profit-taking interest after its strong start to the year.

The Dow Jones Industrial Average lost 2.2%, the Nasdaq Composite lost 2.5%, and the Russell 2000 lost 4.3%.

Nine of the 11 S&P 500 sectors finished lower, led by the energy (-3.9%), health care (-3.9%), and industrial (-2.9%) sectors. Conversely, the real estate (+0.5%) and utilities (+0.7%) sectors were the lone groups to finish higher.

The leading narrative for the market this week was that global growth is slowing and that the market got ahead of itself pricing in economic prospects.

Major developments reinforcing this belief included (1) a surprisingly weak U.S. nonfarm payroll figure, which grew by just 20,000 (Briefing.com consensus 173,000); (2) the European Central Bank (ECB) issuing a dovish-minded policy stance; (3) 2019 GDP growth forecast cuts from the OECD, ECB, and China; and (4) slight-to-moderate growth for 10 of the 12 Fed districts, indicated in the Fed’s Beige Book for March.

[…]

There were some technical drivers in play, too. The S&P 500’s inability to sustain a retest of its November high and stay above the 2800 level exacerbated selling efforts that sent the benchmark index below its 200-day moving average. The Nasdaq Composite, Russell 2000, and Dow Jones Transportation Average also fell below their 200-day moving averages.

The U.S. Treasury market exhibited a flight-to-safety trade, which drove yields notably lower after making notable moves higher in the prior week.

The 2-yr yield dropped 11 basis points to 2.44%, and the 10-yr yield dropped 13 basis points to 2.63%. The U.S. Dollar Index Index rose 0.9% to 97.36. WTI crude lost 0.6% to $56.14/bbl.

  • 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 SPY (Cross-Under) Cross-Under
Materials Down SPY XLB (Cross-Over) Above
Industrials Down XLI SPY (Cross-Under) Cross-Under
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) XLRE (Cross-Over) Cross-Under
Telecom Down XLT SPY (Cross-Under) Cross-Under

 

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