Morning Notes – Tuesday April 2, 2019

Directional Bias For The Day:

  • S&P Futures are little changed; moving up since 3:30 AM; forming a rounding bottom at the high on 30-minute timeframe
  • Odds are for an up to sideways day – watch for break above 2873.50 and break below 2864.50 for clarity
  • Key economic data due:
    • Core Durable Good Orders ( est. 0.3; prev. -0.2% ) at 8:30 AM
    • Durable Good Orders ( est -1.1%; prev. 0.3%) at 8:30 AM

Markets Around The World

  • Markets in the East closed mostly higher – Tokyo closed lower
  • European markets are mostly up – Switzerland is down
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/CHF
    • USD/CAD
    • EUR/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
    • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • Cocoa
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Cotton
    • Coffee
  • Bonds
    • 10-yrs yield closed at 2.497%, up from March 29 close of 2.414%;
    • 30-years is at 2.890%, up from 2.822%
    • 2-years yield is at 2.338%, up from 2.258%
    • The 10-Year-&-2-Year spread is at 0.159, up from 0.156

Key Levels:

  • Critical support levels for S&P 500 are 2861.10, 2848.63 and 2836.03
  • Critical resistance levels for S&P 500 are 2874.02, 2880.23 and 2886.02
  • Key levels for eMini futures: break above 2873.50, the high of 3:30 PM on Monday and break below 2864.50, the low of 3:30 AM

Pre-Open

  • On Monday, at 4:00 PM, S&P future (June contract) closed at 2871.00 and the index closed at 2867.19 – a spread of about +3.75 points; futures closed at 2870.50 for the day; the fair value is +0.50
  • Pre-NYSE session open, futures are mixed – at 7:30 AM, S&P 500 futures were up by +1.00; Dow down by -4 and NASDAQ up by +4.25

Directional Bias Before Open

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

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

Monthly
  • Under Pressure
  • March 2019 was a green spinning top candle with lower shadow larger than the upper shadow
  • Third up month in a row
  • Sequence of higher highs and higher lows since February 2016 is broken
Weekly:
  • The week ending on March 29 was a bullish engulfing candle with almost no upper shadow and small lower shadow
    • Stochastics (9,1, 3) and RSI (14) turned up – %K crossed above %D from just below 80;
    • RSI is again crossing above 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 up +33.69 or +1.2% and ATR is 51.01
  • Last week’s pivot point=2818.48, R1=2851.95, R2=2869.49; S1=2800.94, S2=2767.47; No pivot levels were breached
  • An up week; third in last five weeks and seventh in last ten weeks
  • Last swing low, 2532.69, was the low on February 5, 2018 and breached in December 2018, when a lower swing low of 2346,58; since then the high of 2815.15 is breached but the all time high is not
  • Above 10-week EMA and 39-week SMA; above 89-week SMA
  • Uptrend
Daily
  • A green candle that gapped up at the open and did not close the gap; breaking above resistance level and closing at the highest high since October 10, 2018; almost no upper and lower shadows
    • %K is above %D following a spike near 30;
    • Stochastic (70, 1, 3) Pop since February 11
    • RSI-9 turning up from just above 50; above 65; SMA8 of RSI-9 flattening
    • The sequence of lower highs and lower lows since October 3, 2018 is broken
  • Above 20-day EMA; above 50-day EMA, 100-DAY SMA and 200-day SMA
  • Uptrend
2-Hour (e-mini future)
  • Continuing the trend up following a sideways move at the start of the week;
    • Broke above symmetrical or descending triangle on March 28; 61.8% extension target near is achieved; the 100% extension target is near 2890.00
    • 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 up since 10:00 AM on March 27; declined from a high of 83.71 to below 70; at 73.7
  • %K is crossing above %D below 70 after crossing below it after reaching 100
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
30-Minute (e-mini future)
  • Moving up since 11:30 AM on March 27; moving sideways since 3:30 PM on Monday in a narrow range
  • RSI-9 is moving up since 3:00 AM from 53.2 after declining from above 70;
  • %K is above %D above 90
  • 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 4:45 PM on Monday
  • The Bollinger Band narrowed from 8:30 PM to 5:00; slightly expanding since with price walking up the upper band
  • Stochastic (9, 1, 3): %K is crisscrossing %D above 80
  • Bias: Up-Side

Previous Session

Major U.S. indices closed higher on Monday, April 1 in lower volume. Indices gapped up at the open and maintained the gap. Indices closed near the high for the day with almost no upper and lower shadows.

From Briefing.com:

The stock market followed Friday’s strong close to the first quarter with an even stronger start to the second quarter. The S&P 500 climbed 1.2% to a fresh high for the year while the Dow Jones Industrial Average (+1.3%) and the Nasdaq Composite (+1.3%) outperformed.

[…]

Equity futures jumped out of the gate after better than expected China’s Manufacturing PMI (actual 50.5; expected 49.5; prior 49.2) and Non-Manufacturing PMI (actual 54.8; expected 54.5; prior 54.3) reinforced the idea that global economic activity is rebounding.

Markets across Asia rallied on Monday, as did equities across Europe, even though final March Manufacturing PMI readings from Germany (actual 44.1; expected 44.7; prior 44.7) and France (actual 49.7; expected 49.8; prior 49.8) decreased from their respective flash estimates.

[…]

Meanwhile, the broader industrials sector gained 2.1%, but still finished behind financials (+2.4%). The economically-sensitive group benefitted from weakness in Treasuries, which sent the 10-yr yield higher by eight basis points to 2.50%. This helped expand the spread between the 3-month bill yield and the 10-yr note yield to 11 basis points from three basis points at the end of Friday’s session.

On the commodity side, crude oil jumped 2.3% to a fresh 2019 high at $61.59/bbl with the 200-day moving average (61.66) looming just above. Copper futures rallied to a fresh high for the year in overnight trade, but an intraday pullback returned the red metal to unchanged at $2.93/lb.

[…]

Interestingly, the strong session was not accompanied by strong trading volume, as 837 million shares changed hands at the NYSE floor, shy of the 200-day moving average, which stands just below 913 million.

[…]

• Retail sales declined 0.2% (Briefing.com consensus +0.2%) on the heels of an upwardly revised 0.7% increase (from +0.2%) in January. Excluding autos, retail sales declined 0.4% (Briefing.com consensus +0.3%) after increasing an upwardly revised 1.4% (from +0.9%) in January.
o The key takeaway from the report is that it reflects a slowdown in retail spending activity in February, which was likely adversely affected by the polar vortex.
• The ISM Manufacturing Index for March increased to 55.3% (Briefing.com consensus 54.1%) from 54.2% in February. A number above 50% is indicative of expansion in the manufacturing sector.
o The key takeaway from the report is that activity accelerated from February, which is a positive step for quieting some of the recession concerns that have been simmering with the recent flattening/inversion of the yield curve.
• Total construction spending increased 1.0% in February (Briefing.com consensus -0.3%) on the heels of an upwardly revised 2.5% increase (from 1.3%) in January.
o The key takeaway from the report is that the February increase was fueled by increases in both private and public construction spending.
• Business inventories increased 0.8% in January (Briefing.com consensus +0.5%) following an upwardly revised 0.8% increase (from +0.6%) in December. Business sales increased 0.3% on the heels of an upwardly revised 0.9% decline (from -1.0%) in December.
o The key takeaway from the report is that the inventory boost will be a positive input for Q1 GDP forecasts.

[…]

  • S&P 500 Sectors
Sector Relative Strength (Last Month – March) Relative Strength (April) %K vs. %D (April)
Consumer Discretionary XLY (Cross-Over) XLY Above
Consumer Staples XLP (Cross-Over) SPY (Cross-Under) Above
Energy SPY (Cross-Under) XLE (Cross-Over) Above
Materials SPY XLB (Cross-Over) Above
Industrials SPY (Cross-Under) SPY Above
Finance SPY SPY Above
Technology XLK XLK Above
Utility XLU (Cross-Over) SPY (Cross-Under) Below
Heath Care SPY SPY Above
Real Estate XLRE (Cross-Over) SPY (Cross-Under) Above
Telecom SPY (Cross-Under) SPY Above

 

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