Morning Notes – Monday May 6, 2019

Directional Bias For The Day:

  • S&P Futures are sharply lower; bouncing up from a low of 2883.50 at 9:00 PM on Sunday, a 66 point decline from Friday’s close;
  • The odds are for a down day with elevated volatility though with a decent chance of moving sideways to up from pre-NYSE levels – watch for break above 2917.75, the low of the gap, for change of fortune
  • No key economic data due:

Markets Around The World

  • Markets in the East closed down – Tokyo and Seoul were closed for trading
  • European markets are mostly lower – U.K. is higher
  • Currencies:
    Up Down
    • Dollar index
    • USD/CHF
    • USD/CAD
    • USD/INR
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Coffee
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield closed at 2.487%, down from May 2 close of 2.552%;
    • 30-years is at 2.895%, down from 2.943%
    • 2-years yield is at 2.286%, down from 2.339%
    • The 10-Year-&-2-Year spread is at 0.148, down from 0.213

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 2917.51, 2929.21 and 2946.61
  • Key levels for eMini futures: break above 2904.75, the high of 8:00 AM and break below 2891.25, the low of 5:00 AM

Pre-Open

  • On Friday, at 4:00 PM, S&P future (June contract) closed at 2945.75 and the index closed at 2945.64 – a spread of about +0.25 points; futures closed at 2947.50 for the day; the fair value is -1.75
  • Pre-NYSE session open, futures are lower – at 9:00 AM, S&P 500 futures were down by -45.50; Dow by -493 and NASDAQ by -147.75

Directional Bias Before Open

  • Weekly: Uptrend
  • Daily: Uptrend
  • 120-Min: Down
  • 30-Min: Down-Side
  • 15-Min: Down-Side
  • 6-Min: Down-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 Mar 3 was a small green spinning top with small upper shadow and long lower shadow; the index made all time closing and intraday highs
    • Stochastics (9,1, 3) is above 90 but %K is crossing below %D;
    • RSI (9) is above 71; potential of making a Bearish Divergence vis-à-vis October 2018 high when the RSI was above 75 and January 2018 high when it was above 90
    • The index has broken above the 78.6% Fibonacci retracement of the decline from the high in early October 2018
  • Last week was up +5.76 or +0.2% and 5-week ATR is 43.86
  • Last week’s pivot point=2933.42, R1=2966.35, R2=2987.05; S1=2912.72, S2=2879.79; S1 pivot level was 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 relatively large green candle with almost no upper and lower shadows
    • %K is crossing above %D; %K made a Bearish Divergence on April 30
    • Stochastic (70, 1, 3) Pop since February 11
    • RSI-9 is declining since April 30 from 77.81 after making a Bearish Divergence; turning up from below 60
    • The sequence of higher highs and higher lows since December 26, 2018
  • Above 20-day EMA; above 50-day EMA, 100-DAY SMA and 200-day SMA
  • Uptrend
2-Hour (e-mini future)
  • Declining since 4:00 PM on May 3; gapped down at the week’s open; bouncing since 10:00 PM on Sunday; lower highs and lower lows since April 30
    • RSI-9 rising from below 25 at 10:00 PM on Sunday; at 40
    • %K is crisscrossing up from below 5 at 10:00 PM
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Moving mostly sideways since 6:30 PM on Sunday after gap-down open for the week; between 2898.50 an d2885.25
    • RSI-21 rising after moving along 30 from 6:00 PM to midnight
    • %K is crossing below %D from above 80
  • Above 20-bar EMA, but below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving sideways to up since 0:45 AM
  • The Bollinger Band relatively narrowed at 00:45 AM after a sudden expansion at the week’s open
  • Stochastic (9, 1, 3): %K is below %D
  • Bias: Down-Side

Previous Session

Major U.S. indices closed higher on Friday, May 3 in lower volume.

For the week, the U.S. indices mostly higher in mostly higher volume. Dow Jones Industrial Average closed down and Dow Jones Transportation Average traded in lower volume over the week.

From Briefing.com:

The S&P 500 advanced 1.0% on Friday, as a strong employment report underpinned a move back to near all-time highs. Friday’s gains helped the benchmark index finish the week higher by 0.2%.

The Nasdaq Composite (+1.6%) set a new closing record, and it also finished the week higher by 0.2%. The Russell 2000 (+2.0%) outperformed and finished the week with a gain of 1.4%. The Dow Jones Industrial Average (+0.8%) reduced its weekly loss to 0.1%.

[…]

All 11 of the S&P 500 sectors finished higher with gains ranging from 0.7% (utilities) to 1.4% (consumer discretionary).

[…]

The S&P 500 energy sector (+0.8%) was a strong performer for most of the session as oil prices ($61.93/bbl, +$0.16, +0.3%) stabilized, but the group succumbed to selling interest into close. The energy space had fallen in tandem with oil this week, finishing the week with a steep loss of 3.3%.

U.S. Treasuries ended the week on a higher note, pushing yields slightly lower. The 2-yr yield and the 10-yr yield declined two basis points each to 2.32% and 2.53%, respectively. The U.S. Dollar Index lost 0.4% to 97.49.

[…]

• The Employment Situation report pointed to strong headline growth and subdued inflationary pressure stemming from rising wages. Nonfarm payrolls increased by 263,000 while average hourly earnings were up just 0.2%, leaving them up 3.2% yr/yr, unchanged from what was seen in the March report.
o The April report should support the Fed’s case for staying on its current policy path.
• The ISM Non-Manufacturing Index (NMI) for April decreased to 55.5% (Briefing.com consensus 57.4%) from 56.1% in March. The dividing line between expansion and contraction is 50.0%. The April reading is the lowest level for the index since August 2017.
o The key takeaway from the report is that all index components remained above 50.0, indicating continued growth, though at a slower pace. According to the ISM, the past relationship between the NMI and the overall economy indicates the NMI for April corresponds to a 2.4% increase in real GDP on an annualized basis.
• The Advance report for International Trade in Goods for March showed a deficit of $71.5 billion. The Advance report for Wholesale Inventories for March showed a decrease of 0.3%, and the Advance report for Retail Inventories for March showed no change in retail inventories.

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