Morning Notes – Thursday March 21, 2019

Directional Bias For The Day:

  • S&P Futures are lower; moving  down since 6:30 AM; at a resistance-turned-support level
  • Odds are for a sideways to down day with potential for a bounce – watch for break above 2827.25 for change of fortune
  • Key economic data due:
    • Philly Fed Manufacturing Index (13.7 vs. 4.6 est.; prev. -4.1) at 8:30 AM
    • Unemployment Claims (221K vs. 226K est.; prev. 230K) at 8:30 AM
    • CB Leading Index (est. 0.1%; prev. -0.1%) at 10:00 AM

Markets Around The World

  • Markets in the East closed mostly up – Hong Kong was down; Tokyo and Mumbai were closed
  • European markets are mostly lower – U.K. is 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
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Coffee
    • Cotton
    • NatGas
    • Sugar
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.517%, down from March 20 close of 2.535%;
    • 30-years is at 2.965%, down from 2.975%
    • 2-years yield is at 2.404%, up from 2.400%
    • The 10-Year-&-2-Year spread is at 0.113, down from 0.135

Key Levels:

  • Critical support levels for S&P 500 are 2812.43, 2805.74 and 2799.78
  • Critical resistance levels for S&P 500 are 2834.58, 2843.54 and 2852.42
  • Key levels for eMini futures: break above 2827.25, the high of 6:30 AM and break below 2813.75, the low of 8:30 AM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (June contract) closed at 2829.50 and the index closed at 2824.23 – a spread of about +5.25 points; futures closed at 2827.00 for the day; the fair value is +2.50
  • Pre-NYSE session open, futures price action is to the downside – at 9:15 AM, S&P 500 futures were down by -7.25; Dow by -61 and NASDAQ by -24.25

Directional Bias Before Open

  • Weekly: Uptrend
  • Daily: Up Under Pressure
  • 120-Min: Side-Down
  • 30-Min: Down
  • 15-Min: Down
  • 6-Min: Down-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 15 was a large Bullish Engulfing candle that followed the Bearish Engulfing candle of week before; almost no lower shadow and small upper shadow
    • Stochastics (9,1, 3) and RSI (14) turned up – %K crossed above %D from just below 75; RSI is again crossing above a downtrend line that it broke above once
    • The index is breaking above the 78.6% Fibonacci retracement of the decline from the high in early October 2018
  • Last week was up +79.41 or +2.9% and ATR is 83.12
  • Last week’s pivot point=2800.27, R1=2852.94, R2=2883.39; S1=2769.82, S2=217.15; R1 pivot level was breached
  • An up week; fourth 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
  • Another relatively small spinning top red candle with almost equal sized lower shadow and upper shadows; three-day evening star is forming and break below Wednesday’s low will complete the pattern
    • %K is below %D from above 90
    • Stochastic (70, 1, 3) Pop since February 11
    • RSI-9 is declining but just above 65; SMA8 of RSI-9 turned up
    • The sequence of lower highs and lower lows since October 3, 2018 is broken
  • 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;  higher highs and higher lows since March 8; moving down since 12:00 PM on March 19
    • 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 moving near 40
  • %K is crisscrossing %D near 20
  • Below 20-bar EMA, which is at/below EMA10 of EMA50
  • Bias: Side-Down
30-Minute (e-mini future)
  • Drifting down since 12:00 PM on March 19; lower highs and lower lows
  • RSI-9 is declining since 6:30 AM on March 19 from above 70; near 40;
  • %K is crossing above %D from below 20
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways to down since 9:30 PM;
  • The Bollinger Band was relatively narrow from 9:45 PM to 7:00 AM; expanding since with price first walked down the lower band and then bouncing to the middle band
  • Stochastic (9, 1, 3): %K crossed above %D from below 10
  • Bias: Down

Previous Session

Major U.S. indices closed mostly lower on Wednesday, March 20 in mostly mixed volume. NASDAQ Composite closed up slightly. Dow Jones Transportation Average, NASDAQ Composite and Russell 2000 traded in higher volume. S&P 500 and Dow Jones Industrial Average traded in lower volume. The major indices are carving out a three-day evening star pattern, a break below Wednesday’s low will confirm it.

From Briefing.com:

The S&P 500 declined as much as 0.7% on Wednesday, as an earnings warning from FedEx (FDX 175.07, -6.34, -3.5%) helped fuel economic growth concerns. The benchmark index then advanced as much as 0.4% after the Federal Reserve provided a series of updates coming out of its FOMC meeting that created an impression it has shifted even further to a dovish mindset. The knee-jerk buying interest cooled off, though, leaving the S&P 500 down 0.3% for the day.

The Dow Jones Industrial Average lost 0.6%, and the Russell 200 lost 0.8%. The Nasdaq Composite increased 0.1%, helped in part by gains from the mega-cap stocks.

The S&P 500 financial sector (-2.1%) was the day’s outright laggard, dragged lower by a sharp drop in U.S. Treasury yields following the FOMC announcements. Conversely, the communication services (+1.2%) and energy (+0.9%) sectors outperformed. The energy space benefited from oil prices ($60.20/bbl, +$0.86, +1.4%) setting a new yearly high following some bullish inventory data.

The Fed left the target range for the fed funds rate unchanged at 2.25-2.50%; signaled that it does not expect any rate hikes now in 2019 versus two rate hikes at the time of the December 2018 meeting; and said it will begin tapering its balance sheet in May with an end date of Sept. 30.

[…]

U.S. Treasury yields and the U.S. Dollar Index (95.95, -0.43, -0.5%) dropped on the dovish mindset. The 2-yr yield fell six basis points to 2.40%, and the 10-yr yield fell eight basis points to 2.54%. The curve-flattening trade weighed heavily on the financial sector, as a compression in spreads caused concerns that net interest margins will be weak for lenders.

[…]

  • 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) 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) Below
Finance Down SPY (Cross-Under) SPY Below
Technology Down XLK (Cross-Over) XLK Above
Utility Under Pressure SPY XLU (Cross-Over) Below
Heath Care Down SPY SPY Below
Real Estate Down SPY (Cross-Under) XLRE (Cross-Over) Below
Telecom Down XLT SPY (Cross-Under) Below

 

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