Morning Notes – Monday March 25, 2019

Directional Bias For The Day:

  • S&P Futures are lower; moving  up since 2:30 AM;
  • Odds are for a down day with elevated volatility  – watch for break above 2810.25 for change of fortune
  • No key economic data due:

Markets Around The World

  • Markets in the East closed down
  • European markets are mixed – Germany, U.K and TOXX 600 are down; France, Spain, Italy and Switzerland are up
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • Dollar index
    • USD/INR
  • Commodities:
    Up Down
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Coffee
    • Cotton
    • Cocoa
    • Crude Oil
    • NatGas
    • Sugar
  • Bonds
    • 10-yrs yield is at 2.451%, down from March 22 close of 2.455%;
    • 30-years is at 2.892%, up from 2.889%
    • 2-years yield is at 2.287%, down from 2.329%
    • The 10-Year-&-2-Year spread is at 0.164, down from 0.126

Key Levels:

  • Critical support levels for S&P 500 are 2798.32, 2787.84 and 2784.00
  • Crtical resistance levels for S&P 500 are 2811.85, 2823.28 and 2839.04
  • Key levels for eMini futures: break above 2810.25, the high of 6:30 AM and break below 2801.50, the low of 8:00 AM


  • On Friday, at 4:00 PM, S&P future (June contract) closed at 2806.00 and the index closed at 2800.71 – a spread of about +5.25 points; futures closed at 2810.75 for the day; the fair value is -4.50
  • Pre-NYSE session open, futures price action is to the downside – at 9:15 AM, S&P 500 futures were down by -8.00; Dow by -68 and NASDAQ by -28.75

Directional Bias Before Open

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

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 22 was a shooting star type of candle with long upper shadow and almost no lower shadow
    • Stochastics (9,1, 3) and RSI (14) turned down – %K crossed below %D from above 90 and potentially making a Bearish Divergence;
    • RSI is again crossing below a downtrend line that it broke above once
    • The index has broken above the 78.6% Fibonacci retracement of the decline from the high in early October 2018
  • Last week was down -21.77 or -0.8% and ATR is 59.84
  • Last week’s pivot point=2820.50, R1=2840.52, R2=2880.34; S1=2780.68, S2=2760.66; R1 pivot level was breached
  • A down week; second in last five weeks and third 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 red candle that gapped down at the open and then closed below previous day’s lows; effectively reversing Thursday’s bullish engulfing; almost no upper and lower shadows
    • %K crossed below %D from just above 90; potential Bearish Divergence
    • Stochastic (70, 1, 3) Pop since February 11
    • RSI-9 is falling; just below 50; SMA8 of RSI-9 turning down
    • 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 Under Pressure
2-Hour (e-mini future)
  • Bouncing up from a low of 290.25 made at 2:00 AM ;Moving down since making a high of 2866.00 at 2:00 PM on March 21
    • 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 rising since 2:00 AM after making Bullish Divergence; just above 40
  • %K crossed above %D from below 20; Bullish Divergence
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Trending down since 3:00 PM on March 21; lower highs and lower lows;
  • Rising since 2:30 AM after testing lows; breaking above a downtrend line
  • RSI-9 is rising since 2:30 AM after making a Bullish Divergence; near 50
  • %K is crossed above %D from below 20; Bullish Divergence
  • Above 20-bar EMA but below EMA10 of EMA50
  • Bias: Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving to down since 4:30 AM on March 22
  • The Bollinger Band was relatively narrow from 1:15 PM to 4:00 AM; expanding since with price mostly walking up the upper band
  • Stochastic (9, 1, 3): %K crisscrossing %D above 80
  • Bias: Down-Side

Previous Session

Major U.S. indices closed sharply lower on Friday, March 22 in higher volume.  Major indices made bearish engulfing and effectively reversed the Thursday’s bullish engulfing.

For the week, major U.S. indices closed down in mostly higher volume. Dow Jones Industrial Average and Dow Jones Transportation Average traded in lower volume. NASDAQ Composite and S&P 500 made inverted hammer for the week. Most made large red candle with long upper shadow and almost no lower shadow.


The S&P 500 dropped 1.9% on Friday, as weak manufacturing data out of Europe added to worries about the pace of global economic activity. Growth concerns were reflected by another drop in U.S. Treasury yields, the underperformance of the cyclical sectors, and a pullback in oil prices ($59.01/bbl, -$0.94, -1.6%). Friday’s decline sent the S&P 500 back to the 2800 level.

The Dow Jones Industrial Average lost 1.8% and the Nasdaq Composite lost 2.5%. The domestically-oriented Russell 2000 lost 3.6%, pressured by concerns that global economic weakness will catch up to the U.S. sooner rather than later.

Ten of the 11 S&P 500 sectors finished lower, led by materials (-3.0%), financials (-2.8%), and energy (-2.6%). Conversely, the utilities sector (+0.7%) was the lone group to finish higher.

Germany’s Manufacturing PMI fell to 44.7 from 47.6 in February, serving as a reminder that output in a major export center remains weak. France’s Manufacturing PMI (actual 49.8; prior 51.5) fell below 50.0, which indicated that the country’s manufacturing sector was also in contraction.

The weak data sent investors flocking to safe-haven bonds, which drove the yield on the 10-yr German bund (-0.011%) into negative territory for the first time since 2016. The lower yields in Europe likely contributed to increased buying interest in U.S. Treasuries, which helped drive yields even lower.

The 2-yr yield dropped eight basis points to 2.32%, and the 10-yr yield dropped eight basis points to 2.46%. Strikingly, the spread between the 3-month yield (2.45%) and the 10-yr yield briefly inverted for the first since 2017. Like Treasuries, the dollar benefited from the flight to safety, lifting the U.S. Dollar Index 0.2% to 96.65.


• Existing home sales increased 11.8% month-over-month in February to a seasonally-adjusted annual rate of 5.51 million ( consensus 5.10 million) from a downwardly revised 4.93 million (from 4.94 million) in January. Total sales were 1.8% lower than the same period a year ago.
o The key takeaway from the report is that while sales rebounded sharply on a month-over-month basis, they are still tracking below levels seen one year ago.
• Wholesale inventories increased 1.2% in January on top of a 1.1% increase in December. Wholesale sales were up 0.5% following an upwardly revised 0.9% decrease (from -1.0%) in December.
o The key takeaway from the report is that inventory growth continued outpacing sales growth, which should keep pressure on prices.
• The Treasury Budget for February showed a deficit of $233.98 billion versus a deficit of $215.24 billion for the same period one year ago. The Treasury Budget is not seasonally adjusted, so the February deficit cannot be compared to the $8.7 billion surplus for January.
o The fiscal year-to-date deficit is $544.23 billion versus a deficit of $390.96 billion for the same period ago. The budget deficit over the last 12 months is $932.27 billion.

  • 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 SPY (Cross-Under) Above
Materials Down SPY SPY 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) Above
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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