Morning Notes – Thursday March 14, 2019

Directional Bias For The Day:

  • S&P Futures are lower; moving within a down-sloping channel since 11:00 AM on Wednesday
  • Odds are for a sideways to an up day with chance for a breakout – watch for break below 2811.50 for change of fortune
  • Key economic data due:
    • Unemployment Claims (229K vs. 225K est.; prev., 223K) at 8:30 AM
    • Import Prices (0.6% vs. 0.3% est.; prev. 0.1%) at 8:30 AM
    • New Home Sales (est. 622K; prev. 621K ) at 10:30 AM
    • U.K. Parliament Brexit Vote – sometime today

Markets Around The World

  • Markets in the East closed mostly up – Shanghai and Tokyo were down
  • European markets are higher
  • 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
    • Palladium
    • Sugar
    • Cocoa
    • Gold
    • Silver
    • Copper
    • Platinum
    • Coffee
    • Cotton
  • Bonds
    • 10-yrs yield is at 2.621%, up from March 13 close of 2.611%;
    • 30-years is at 3.014%, up from 3.010%
    • 2-years yield is at 2.450%, down from 2.458%
    • The 10-Year-&-2-Year spread is at 0.171, up from 0.153

Key Levels:

  • Critical support levels for S&P 500 are 2809.03, 2799.78 and 2787.84
  • Critical resistance levels for S&P 500 are 2821.24, 2843.89 and 2862.08
  • Key levels for eMini futures: break above 2821.75, the high of 8:30 AM and break below 2811.50, the low of 6:30 AM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (June contract) closed at 2816.25 and the index closed at 2810.92 – a spread of about +5.25 points; futures closed at 2819.50 for the day; the fair value is -3.25
  • Pre-NYSE session open, futures price action is mixed – at 9:00 AM, S&P 500 futures were up by +0.25; Dow down by -86; and NASDAQ up by +3.75

Directional Bias Before Open

  • Weekly: Uptrend
  • Daily: Up Under Pressure
  • 120-Min: Up
  • 30-Min: Up-Side
  • 15-Min: Up-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 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
  • An up week; first in last five weeks and eight 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 up at the open; almost no lower shadow and small upper shadow;
    • %K is above %D and near 90
    • Stochastic (70, 1, 3) Pop since February 11
    • RSI-9 is above 65
    • 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
2-Hour (e-mini future)
  • Trending up from a low of 2726.50 at 10:00 AM on March 8; broke above the downtrend line from early March high; higher highs and higher lows since March 8; moving essentially sideways since12:00 PM on Wednesday
    • 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 81.43, and a Bearish Divergence, at 12:00 PM on Wednesday t 57.7 at 6:00 AM
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (e-mini future)
  • Moving Sideways since 11:30 AM on Wednesday between 2826.50 and 2811.25
  • RSI-9 is trending down since 11:00 AM on Wednesday
  • At/above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways since 2:30 PM on Wednesday
  • The Bollinger Band narrowed from 4:00 PM to 3:30 AM; expanding since with price first walked up the upper band till 5:45 AM then touched the lower band at 6:45 AM and now at the middle band
  • Stochastic (9, 1, 3): %K crossed above %D from below 50 at 6:15 AM; above 80
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Wednesday, March 13 in higher volume. S&P 500, NASDAQ Composite and Wilshire 5000 Total Market Index are trying to break above recent highs. Others are still below their recent highs.

From Briefing.com:

The S&P 500 gained 0.7% on Wednesday, although it lost some steam following President Trump’s executive order to ground Boeing’s (BA 377.14, +1.73, +0.5%) 737 Max aircraft. Still, a break above the 2800 level for the S&P 500, along with a weakening dollar, helped the market steer past public scrutiny of Boeing.

The Dow Jones Industrial Average gained 0.6%, the Nasdaq Composite gained 0.7%, and the Russell 2000 gained 0.4%.

All 11 S&P 500 sectors finished higher with gains ranging from 0.2% (utilities) to 1.1% (health care).

[…]

The U.S. Treasury market was also quiet on Wednesday. The 2-yr yield and the 10-yr yield finished unchanged at 2.44% and 2.61%, respectively. WTI crude rose 2.3% to $58.27/bbl following some bullish inventory data out of the Energy Information Administration.

[…]

• The Producer Price Index for February was nearly irrelevant given the soft Consumer Price Index for February seen yesterday. Be that as it may, it is worth noting that the index for final demand increased 0.1% (Briefing.com consensus +0.2%) while the index for final demand, excluding food and energy, also increased 0.1% (Briefing.com consensus +0.2%).
o The key takeaway from the report is that year-over-year inflation trends tipped lower for the index for final demand (1.9% versus 2.0% for the months ending in January) and the index for final demand, excluding food and energy (2.5% versus 2.6% for the 12 months ending in January). That tipping action will keep the Fed tipped toward a patient mindset.
• The Durable Goods Orders report for January showed a 0.4% increase in new orders (Briefing.com consensus -0.6%) and a 0.1% decline, excluding transportation (Briefing.com consensus +0.1%).
o The key takeaway from the report is that it was constructive for the business investment outlook and Q1 GDP forecasts, evidenced by the 0.8% increase in orders for nondefense capital goods, excluding aircraft, and the 0.8% increase in shipments for that same metric.
• 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 total construction spending growth, marred by a 5.7% year-over-year decline in residential spending, is weak at 0.3% year-over-year.
• The weekly MBA Mortgage Applications Index increased 2.3% after declining 2.5% in the prior week.

  • 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 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 Above
Real Estate Down SPY (Cross-Under) XLRE (Cross-Over) Above
Telecom Down XLT SPY (Cross-Under) Above

 

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