Morning Notes – Tuesday March 12, 2019

Directional Bias For The Day:

  • S&P Futures are higher; moving mostly sideways to down since reaching a high of 2799.00 at 6:30 PM on Monday
  • Odds are for a sideways to down day with elevated volatility – watch for break above 27497.00 and below 2785.50 for clarity
  • Key economic data due:
    • Core CPI (0.1% vs. 0.2% est.; prev. 0.0%) at 8:30 AM
    • CPI  (0.2% vs. 0.2% est.; prev. 0.0% ) at 8:30 AM

Markets Around The World

  • Markets in the East closed mostly up – Sydney was down
  • European markets are mostly lower – U.K is up
  • Currencies:
    Up Down
    • EUR/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • Dollar index
    • GBP/USD
    • USD/CHF
    • USD/CAD
    • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Coffee
    • Cotton
    • NatGas
    • Sugar
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.636%, down from March 11 close of 2.654%;
    • 30-years is at 3.026%, down from 3.042%
    • 2-years yield is at 2.459%, down from 2.619%
    • The 10-Year-&-2-Year spread is at 0.177, down from 0.179

Key Levels:

  • Critical support levels for S&P 500 are 2773.82, 2747.61 and 2731.03
  • Critical resistance levels for S&P 500 are 2796.44, 2806.27 and 2816.88
  • Key levels for eMini futures: break above 2797.00, the high of 3:30 AM and break below 2785.50, the low of 7:00 AM

Pre-Open

  • On Monday, at 4:00 PM, S&P future (June contract) closed at 2788.00 and the index closed at 2783.30 – a spread of about +4.75 points; futures closed at 2789.00 for the day; the fair value is -1.00
  • Pre-NYSE session open, futures price action is mixed – at 8:30 AM, S&P 500 futures were up by +5.50; Dow down by -33; and NASDAQ up by +23.00

Directional Bias Before Open

  • Weekly: Uptrend
  • Daily: Up Under Pressure
  • 120-Min: Up
  • 30-Min: Up-Side
  • 15-Min: Up-Side
  • 6-Min: Side-Down

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 relatively large green candle that gapped up at the open; almost no upper and lower shadows;
    • %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
  • Above 20-day EMA, 50-day EMA, 100-DAY SMA and 200-day SMA
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Bouncing up from a low of 2726.50; broke above the downtrend line from early March high; moving sideways to down since 6:00 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 declined from above 80 to near 65
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (e-mini future)
  • Moving sideways to down since 6:30 PM on Monday
  • RSI-9 is moving down since 6:30 PM on Monday
  • Below 20-bar EMA; above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways to down since 8:00 PM on Monday
  • The Bollinger Band was relatively narrow from 11:30 PM to 6:00 AM; expanding since with price first walking down the band till 7:30 AM and then moving towards the mean
  • Stochastic (9, 1, 3): %K crossed above %D from near 10 at 7:15 AM
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Monday March 11 in mostly higher volume. S&P 500 and NASDAQ Composite traded in lower volume. The day’s range was relatively large. Most indices gapped up at the open and then moved higher for the rest of the day and formed a potential three-day morning star pattern. Dow Jones Industrial Average made a bullish engulfing candle.

From Briefing.com:

The S&P 500 gained 1.5% on Monday in a buy-the-dip trade following the market’s decline from last week. Underpinning the broad-based advance was some reassurance from Fed Chair Jerome Powell, the outperformance of mega-cap and semiconductor stocks, and the market’s resilience in the face of an early 13.5% decline in shares of Boeing (BA 400.01, -22.53, -5.3%).

The Nasdaq Composite gained 2.0%, and the Russell 2000 gained 1.8%. The Dow Jones Industrial Average overcame an early loss of 1.0% to finish higher by 0.8%, closing at session highs along with the other major indices.

All 11 S&P 500 sectors finished higher with gains ranging from 0.7% (utilities) to 2.2% (information technology).

[…]

Separately, today’s rebound drove both the S&P 500 and Nasdaq Composite back above their 200-day moving averages, which was regarded as a positive technical move.

[…]

U.S. Treasuries closed on a lower note, pushing yields higher across the curve. The 2-yr yield increased three basis points to 2.47%, and the 10-yr yield increased two basis points to 2.64%. The U.S. Dollar Index declined 0.1% to 97.18.

WTI crude rose 1.2% to $56.80/bbl amid plans from Saudi Arabia to cut oil exports in April and its expectations that OPEC+ will not change its output policy at the next meeting.

Reviewing Monday’s economic data, which included Retail Sales for January and Business Inventories for December:
• In January, retail sales increased 0.2% (Briefing.com consensus -0.1%). Excluding autos, they rose 0.9% (Briefing.com consensus +0.2%). The headline strength in January, however, was offset some by downward revisions to the prior month that indicated retail sales fell 1.6% in December (prior -1.2%) and declined 2.1% excluding autos (prior -1.8%).
o The key takeaway from the report is that core retail sales, which exclude auto, gasoline station, building materials, and food services and drinking places sales, increased a solid 1.1%. That component factors into the goods component for personal consumption expenditures, so it will likely prompt some upgrades to Q1 GDP forecasts.
• Total business inventories increased 0.6% in December, as expected by the Briefing.com consensus estimate, following an upwardly revised unchanged reading (from -0.1%) for November. Total business sales fell 1.0% after declining a downwardly revised 0.6% (from -0.3%) in November.
o The key takeaway from the report is that business sales declined as inventories increased. That distinction, if it persists, will diminish pricing power.

[…]

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

 

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