Morning Notes – Friday May 3, 2019

Directional Bias For The Day:

  • S&P Futures are higher; moving up since 11:30 AM on Thursday; fresh boost from upbeat employment report
  • The odds are for an up with elevated volatility – watch for break below 2921.75 for change of fortune
  • Key economic data due:
    • Non-Farm Payroll Change ( 236K vs. 181K est.; prev. 189K) at 8:30 AM
    • Average Hourly Earnings (0.2% vs. 0.3% est.; prev. 0.2% ) at 8:30 AM
    • Unemployment Rate ( 3.6% vs. 3.8% est.; prev. 3,8% ) at 8:30 AM
    • ISM Non-Manufacturing PMI (est. CB Consumer Confidence (est. 52.9; prev. 52.9) at 10:00 AM

Markets Around The World

  • Markets in the East closed mostly down – Hong Kong was up; Shanghai and Tokyo were closed for trading
  • European markets are higher
  • Currencies:
    Up Down
    • Dollar index
    • USD/JPY
    • USD/CHF
    • NZD/USD
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • USD/CAD
    • USD/INR
  • Commodities:
    Up Down
      • Crude Oil
      • Gold
      • Silver
      • Copper
      • Palladium
      • Coffee
      • Cotton
      • Cocoa
    • NatGas
    • Platinum
    • Sugar
  • Bonds
    • 10-yrs yield closed at 2.563%, up from May 1 close of 2.511%;
    • 30-years is at 2.946%, up from 2.917%
    • 2-years yield is at 2.335%, up from 2.315%
    • The 10-Year-&-2-Year spread is at 0.224, up from 0.196

Key Levels:

  • Critical support levels for S&P 500 are 2900.50, 2896.35 and 2891.90
  • Critical resistance levels for S&P 500 are 2931.68, 2944.66 and 2954.01
  • Key levels for eMini futures: break above 2932.25, the high of 5:30 AM on May 2 and break below 2921.75, the low of 2:30 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (June contract) closed at 2918.75 and the index closed at 2917.52 – a spread of about +1.25 points; futures closed at 2917.50 for the day; the fair value is +1.25
  • Pre-NYSE session open, futures are higher – at 8:45 AM, S&P 500 futures were up by +11.50; Dow by +115 and NASDAQ by +52.00

Directional Bias Before Open

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

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 April 26 was a green candle with almost no upper shadow and small lower shadow; the index made all time closing high
    •  Stochastics (9,1, 3) and RSI (14) are moving up – %K is above %D and near 100;
    • RSI is rising and above 70
    • The index has broken above the 78.6% Fibonacci retracement of the decline from the high in early October 2018
  • Last week was up +34.85 or +0.5% and ATR is 43.53
  • Last week’s pivot point=2925.37, R1=2954.39, R2=2968.90; S1=2910.86, S2=2881.84; R1/R2 pivot levels were breached
  • An up week; fourth 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 small red spinning top candle with almost equal sized upper and lower shadows
    • %K is below %D; %K made a Bearish Divergence on April 30 and is declining since;
    • Stochastic (70, 1, 3) Pop since February 11
    • RSI-9 is declining since April 30 from 77.81 after making a Bearish Divergence; near 50
    • The sequence of higher highs and higher lows since December 26, 2018
  • At/above 20-day EMA; above 50-day EMA, 100-DAY SMA and 200-day SMA
  • Uptrend
2-Hour (e-mini future)
  • Declining since10:00 PM on April 30 in steps; lower highs and lower lows
    • RSI-9 rising since 4:00 PM on May 1 from below 20; made a Bullish Divergence at 10:00 AM on May 2; just above 50
    • %K is above %D; made a Bullish Divergence on May 2; above 80
  • At/below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Side-Down
30-Minute (e-mini future)
  • Moving mostly sideways since 4:00 PM on May 1;
    • RSI-9 rising since 11:30 AM on May 2 from below 30 after making a Bullish Divergence; above 50
    • %K is crisscrossing %D lower
  • Above 20-bar EMA, which is at/below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving up since 6:45 PM on May 2
  • The Bollinger Band narrowed from 2:15 AM to 3:45 AM; expanded slightly with price mostly walking up the upper band
  • Stochastic (9, 1, 3): %K is above %D
  • Bias: Side-Up

Previous Session

Major U.S. indices closed mostly lower on Thursday, May 2 in mostly lower volume. Russell 2000 and Dow Jones Transportation Average closed higher. NASDAQ Composite and Russell 200 traded in higher volume. Most major indices have been declining over the last two days. Small cap and DJT have been declining longer and are bouncing.

From Briefing.com:

The S&P 500 declined 0.2% on Thursday, although it had been down as much as 0.8% in the session. Energy stocks weighed on the broader market for the second straight day, as oil prices ($61.77/bbl, -$1.82, -2.9%) fell to a one-month low.

The Dow Jones Industrial Average lost 0.5%, and the Nasdaq Composite lost 0.2%. The Russell 2000, however, increased 0.4%.

[…]

Conversely, the broader market found support from the S&P 500 health care (+0.5%), financials (+0.2%), and real estate (+0.2%) sectors. Many stocks within the Dow Jones Transportation Average (+1.2%) and the Philadelphia Semiconductor Index (+1.1%) provided additional support.

[…]

U.S. Treasuries continued their post-FOMC retreat, sending yields higher across the curve. The 2-yr yield and the 10-yr yield increased four basis points each to 2.34% and 2.55%, respectively. The U.S. Dollar Index increased 0.2% to 97.83.

[…]

• Initial claims for the week ending April 27 were unchanged from the prior week at 230,000 (Briefing.com consensus 212,000). Continuing claims for the week ending April 20 increased by 17,000 to 1.671 million.
o Initial claims might have been higher than expected, yet the key takeaway is that they still remain relatively low, evidenced by a four-week moving average of 212,500 that isn’t far off a 50-year low.
• Nonfarm business sector productivity increased 3.6% in the first quarter (Briefing.com consensus 2.3%) following a downwardly revised 1.3% increase (from 1.9%) for the fourth quarter. The first quarter increase was the strongest pace since the third quarter of 2014. Unit labor costs decreased 0.9% in the first quarter (Briefing.com consensus +1.6%) following an upwardly revised 2.5% increase (from 2.0%) in the fourth quarter.
o The key takeaway from the backward-looking report is that it fit quite well with the understanding that U.S. economic activity is solid while inflation pressures are muted.
• Factory orders increased 1.9% in March (Briefing.com consensus +1.6%) on the heels of an upwardly revised 0.3% decline (from -0.5%) in February.
o The key takeaway from the report is that business investment picked up in March, evidenced by the 1.4% increase in orders for nondefense capital goods excluding aircraft, which are a proxy for business spending.

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