Morning Notes – Friday March 22, 2019

Directional Bias For The Day:

  • S&P Futures are lower; moving  down since 4:00 AM;
  • Odds are for a down to sideways  day with elevated volatility  – watch for break above 2852.00 for change of fortune
  • Key economic data due:
    • Existing Home Sales (est. 5.10M; prev. 4.94M) at 9:45 AM
  • Risk-off sentiment due to weak economic data from Europe and China

Markets Around The World

  • Markets in the East closed mostly up – Mumbai and Singapore were down
  • European markets are lower
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/CHF
    • USD/CAD
    • USD/INR
    • EUR/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Gold
    • Sugar
    • Cotton
    • Crude Oil
    • NatGas
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Coffee
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.471%, down from March 21 close of 2.537%;
    • 30-years is at 2.909%, down from 2.964%
    • 2-years yield is at 2.366%, down from 2.416%
    • The 10-Year-&-2-Year spread is at 0.105, down from 0.121

Key Levels:

  • Critical support levels for S&P 500 are 2841.44, 22830.93 and 2817.38
  • Critical resistance levels for S&P 500 are 2853.59, 2860.31 and 2874.02
  • Key levels for eMini futures: break above 2852.00, the high of 7:30 AM and break below 2842.25, the low of 8:00 AM


  • On Thursday, at 4:00 PM, S&P future (June contract) closed at 2861.00 and the index closed at 2854.88 – a spread of about +6.00 points; futures closed at 2862.50 for the day; the fair value is -1.50
  • Pre-NYSE session open, futures price action is to the downside – at 8:45 AM, S&P 500 futures were down by -14.50; Dow by -162 and NASDAQ by -33.75

Directional Bias Before Open

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

The trend and patterns on various time frames for S&P 500:

  • 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
  • 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
  • A large bullish engulfing candle that closed at the highest level since October 10, 2018; almost no upper and lower shadows
    • %K crossed above %D from just below 80; above 90
    • Stochastic (70, 1, 3) Pop since February 11
    • RSI-9 is rising again; near 75; 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)
  • Moving down since making a high of2866.00 at 2:00 PM on Thursday; sharp decline following the European session open
    • 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 declining since 2:00 Pm on March 21 after making a Bearish Divergence; just below 50
  • %K crossed below %D just above 80; below 20
  • At/below 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up-Side
30-Minute (e-mini future)
  • Drifting down since 3:00 PM on March 21; lower highs and lower lows
  • RSI-9 is declining since 3:00 PM on March 21 from near 70 after making a Bearish Divergence; near 45;
  • %K is crossing above %D from below 20
  • Below EMA10 of EMA50, which is below 20-bar EMA
  • Bias: Up-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways to down since 3:00 PM on Thursday’
  • The Bollinger Band was relatively narrow from 8:15 PM to 4:00 AM; expanding since with price mostly walking down the lower band
  • Stochastic (9, 1, 3): %K crossed below %D from above 50 at 9:00 AM
  • Bias: Side-Down

Previous Session

Major U.S. indices closed higher on Thursday, March 21 in mixed volume. Dow Jones Transportation Average, NASDAQ Composite and S&P 500 traded in lower volume. Dow Jones Industrial Average and Russell 2000 traded in higher volume. The major indices made bullish engulfing candlesticks and did not confirm the previously emerging three-day evening star pattern.


The S&P 500 gained 1.1% on Thursday, bolstered by the notion of a dovish Fed and persistently low U.S. Treasury yields. Leadership from the S&P 500 information technology sector (+2.5%), driven by gains in Apple (AAPL 195.09, +6.93, +3.7%) and Micron (MU 43.99, +3.86, +9.6%), also helped carry buying momentum throughout the day. The S&P 500 closed at its highest level this year.

The Dow Jones Industrial Average gained 0.8%, the Nasdaq Composite gained 1.4%, and the Russell 2000 gained 1.3%.

Ten of the 11 S&P 500 sectors finished higher, led by information technology (+2.5%), real estate (+1.8%), and consumer discretionary (+1.3%). Conversely, the financial sector lost 0.3%, pressured by concerns that the recent compression in spreads will lead to weak net interest margins for lenders.


U.S. Treasuries closed roughly unchanged after declining noticeably following Wednesday’s FOMC policy decision. The 2-yr yield and the 10-yr yield remained at 2.40% and 2.54%, respectively, although the 10-yr yield kissed 2.50% at its best level in morning action. The U.S. Dollar Index rose 0.7% to 96.41, driven by the idea that the U.S. remains the best place to invest. WTI crude lost 0.4% to $59.95/bbl.


• Initial claims for the week ending March 16 decreased by 9,000 to 221,000 ( consensus 223,000) while continuing claims for the week ending March 9 dropped by 27,000 to 1.750 million.
o The key takeaway from the report is that it covers the period in which the survey for the March employment situation report was conducted, so with the low level of initial claims, expectations will pick up that March nonfarm payrolls will be up by a solid amount.
• The Philadelphia Fed Index jumped to 13.7 in March ( consensus 6.0) from -4.1 in February.
o The key takeaway from the report is that it was accented by a pickup in new orders and a moderation in price pressures, which is the type of combination that has convinced the Fed to be patient before making any policy rate changes.
• The Conference Board’s Leading Economic Index increased 0.2% in February, as expected, following an unchanged reading for January. This is the first increase in the index since September 2018, and it was supported by gains in all the financial components and consumer expectations for business conditions.
o The key takeaway from the report is that the strengths among the leading indicators have become much less widespread, with only six of the ten components making positive contributions.

  • 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) Above
Finance Down SPY (Cross-Under) SPY Below
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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