Morning Notes – Thursday March 28, 2019

Directional Bias For The Day:

  • S&P Futures are little changed; moving up since 9:00 PM after making a low of 2795.00
  • Odds are for a sideways day with elevated volatility  – watch for break above 2814.50 and break below 2805.25 for clarity
  • Key economic data due:
    • Final GDP (2.2% vs. 2.4% est.; prev. 2.6%) at 8:30 AM
    • Final GDP Price Index (1.7% vs. 1.8% est.; prev. 1.8%) at 8:30 AM
    • Unemployment Claims (211K vs. 222K est.; prev. 216K ) at 8:30 AM
    • Pending Home Sales ( est. 0.1% prev. 4.6%) at 10:00 AM

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Tokyo and Seoul were down, Hong Kong, Sydney, Mumbai and Singapore were up
  •  European markets are mostly up – Spain and Italy are down
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • NZD/USD
    • USD/CAD
    • USD/INR
    • EUR/USD
    • GBP/USD
    • AUD/USD
  • Commodities:
    Up Down
    • NatGas
    • Copper
    • Cocoa
    • Crude Oil
    • Gold
    • Silver
    • Platinum
    • Palladium
    • Sugar
    • Cotton
    • Coffee
  • Bonds
    • 10-yrs yield is at 2.377%, up from March 27 close of 2.374%;
    • 30-years is at 2.820%, down from 2.821%
    • 2-years yield is at 2.222%, up from 2.206%
    • The 10-Year-&-2-Year spread is at 0.157, down from 0.168

Key Levels:

  • Critical support levels for S&P 500 are 2802.50, 2795.23 and 2787.72
  • Crtical resistance levels for S&P 500 are 2811.41, 2822.73 and 2825.56
  • Key levels for eMini futures: break above 2814.50, the high of 5:00 AM and break below 2805.25, the low of 7:30 AM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (June contract) closed at 2810.00 and the index closed at 2805.37 – a spread of about +4.75 points; futures closed at 2810.50 for the day; the fair value is -0.50
  • Pre-NYSE session open, futures are little changed to higher – at 8:45 AM, S&P 500 futures were up by +0.25; Dow by +15 and NASDAQ by +1.75

Directional Bias Before Open

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

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 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
Daily
  • A bearish engulfing candle following a small spinning top; long lower shadow and small upper shadow
    • %K is turning down but still above %D; near 30; made Bearish Divergence on March 21
    • Stochastic (70, 1, 3) Pop since February 11
    • RSI-9 is falling; just above 50; made Bearish Divergence on March 21; SMA8 of RSI-9 turning down
    • The sequence of lower highs and lower lows since October 3, 2018 is broken
  • At/above 20-day EMA; above 50-day EMA, 100-DAY SMA and 200-day SMA
  • Uptrend Under Pressure
2-Hour (e-mini future)
  • Within a symmetrical triangle with steeper upper bound than the lower bound
    • 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 10:00 AM on Wednesday from a low of 28.33; just below 50
  • %K crisscrossing %D up near 20
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (e-mini future)
  • Moving sideways since 11:00 AM on March 27 within a symmetrical triangle, which is within a bigger symmetric triangle;
  • RSI-9 is moving up after making a low of 33.11 at 11:30 AM on Wednesday; just below 50
  • %K crossed below %D at 5:30 AM from near 80 and made down Spike  at 8:30 AM
  • At/above 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is drifting up since 3:15 AM
  • The Bollinger Band was relatively narrow from 2:00 AM to 4:30 AM; expanding since with price first walking up the upper band and the moving down to the middle band
  • Stochastic (9, 1, 3): %K is below %D and moving down
  • Bias: Side

Previous Session

Major U.S. indices closed mostly lower on Wednesday, March 27 in higher volume. Dow Jones Transportation Average closed up and Dow Jones Industrial Average traded in lower volume. Most indices made a bearish engulfing pattern with though engulfed the small green doji-type candle of Tuesday was within the large red real body of Friday.

From Briefing.com:

The S&P 500 lost 0.5% on Wednesday, although it had been down as much as 1.1% on recurring concerns about slowing growth and a resilient U.S. Treasury market. The broader market spent the bulk of afternoon action in a steady rebound as Treasuries cooled off, but missing leadership from tech stocks limited the scope of the rebound attempt.

The Dow Jones Industrial Average lost 0.1%, the Nasdaq Composite lost 0.6%, and the Russell 2000 lost 0.4%.

Ten of the 11 S&P 500 sectors finished lower, led by health care (-0.8%) and energy (-0.7%). The industrial sector (+0.1%) was the lone group to finish higher.

[…]

Wednesday’s reminders about slowing growth came from overseas:
• European Central Bank President Mario Draghi indicated the ECB may maintain its highly accommodative policy for an even longer period
• 2019 growth expectations for Italy were cut to zero by a confederation of industrial employers
• Switzerland’s KOF Institute lowered its expectations for 2019 Swiss GDP growth to 1.0% from 1.6%
• The Reserve Bank of New Zealand issued a dovish statement, indicating the next move in rates is likely to be a cut

The 2-yr yield declined five basis points to 2.21%, and the 10-yr yield declined four basis points to 2.37%. The U.S. Dollar Index increased 0.2% to 96.89.

[…]

• The weekly MBA Mortgage Applications Index jumped 8.9% following a 1.6% increase in the prior week.
• The trade deficit narrowed to $51.1 bln in January (Briefing.com consensus -$57.5 bln) from a revised $59.9 bln (from $59.8 bln) in December. On a year-over-year basis, the goods and services deficit decreased 3.7% from the level observed in January 2018.
• The current account deficit for the fourth quarter totaled $134.4 billion (Briefing.com consensus -$126.6 billion). The third quarter deficit was revised to $126.6 billion from $124.8 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 XLP (Cross-Over) Above
Energy Down XLE XLE 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) Above
Telecom Down XLT SPY (Cross-Under) Below

 

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