Morning Notes – Tuesday May 7, 2019

Directional Bias For The Day:

  • S&P Futures are lower; moving down since 2:30 AM after a bounce; at the same level that was reached after the decline following the NYSE close on Monday
  • 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
  • Key economic data due:
    • JOLTS Job Openings (est. 7.35M; prev. 7.09M) at 10:00 AM
    • IBD/TIPP Economic Optimism (est. 54.5; prev. 54.2) at 10:00 AM

Markets Around The World

  • Markets in the East closed mostly up – Mumbai and Seoul were down; Tokyo was closed for trading
  • European markets are mostly lower – Italy is higher
  • Currencies:
    Up Down
    • Dollar index
    • USD/CHF
    • AUD/USD
    • USD/CAD
    • USD/INR
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • NZD/USD
  • Commodities:
    Up Down
    • NatGas
    • Sugar
    • Cotton
    • Crude Oil
    • Gold
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Coffee
    • Cocoa
  • Bonds
    • 10-yrs yield closed at 2.500%, down from May 3 close of 2.531%;
    • 30-years is at 2.907%, down from 2.926%
    • 2-years yield is at 2.291%, down from 2.339%
    • The 10-Year-&-2-Year spread is at 0.209, up from 0.192

Key Levels:

  • Critical support levels for S&P 500 are 2914.29, 2898.21 and 2891.90
  • Critical resistance levels for S&P 500 are 2931.45, 2937.32 and 2942.45
  • Key levels for eMini futures: break above 2930.50, the high of 2:30 AM and break below 2908.25, the low of 8:00 AM

Pre-Open

  • On Monday, at 4:00 PM, S&P future (June contract) closed at 2934.00 and the index closed at 2932.47 – a spread of about +1.50 points; futures closed at 2932.50 for the day; the fair value is +1.50
  • Pre-NYSE session open, futures are lower – at 8:30 AM, S&P 500 futures were down by -18.25; Dow by -156 and NASDAQ by -59.00

Directional Bias Before Open

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

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 has fallen back to %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; again turning down
    • 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 since 2:00 PM on May 6; gapped down at the week’s open, which is not filled; lower highs and lower lows since April 30
    • RSI-9 moving sideways just below 50
    • %K is crisscrossing %D down from above 90 at :00 PM on Monday
  • At/below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Moving mostly sideways since 10:00 AM on Monday after a bounce following a gap-down open for the week;
    • RSI-21 is moving between 65 and 40 since 5:00 AM on Monday
    • %K is crossing above %D from below 10
  • Below EMA10 of EMA50, which is below 20-bar EMA
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is sideways since 10:30 PM on Monday
  • The Bollinger Band was narrow from 10:30 PM to 2:00 AM; expanded since with price first reaching the upper band and the falling down to the lower band
  • Stochastic (9, 1, 3): %K is crisscrossing %D around 30
  • Bias: Down-Side

Previous Session

Major U.S. indices mostly closed lower on Monday, May 6 in mostly higher volume. Russell 2000 closed up and Dow Jones Transportation Average traded in lower volume. The indices gapped down significantly at the open and then for most of the day traded higher.

From Briefing.com:

The S&P 500 declined 0.5% on Monday, although it had dropped as much as 1.6% after threats from President Trump to increase China tariffs fueled concerns about a trade deal. Investors, however, regrouped to buy the dip, lifting stocks off their lows on hopes that a trade deal will still be secured.

The Dow Jones Industrial Average lost 0.3%, and the Nasdaq Composite lost 0.5%. The domestically-oriented Russell 2000 managed to finish higher by 0.1%.

[…]

The worst levels in the U.S., however, came at the beginning of the day as all 11 S&P 500 sectors traded lower. Buying interest throughout the day contributed to a steady advance off early lows.

[…]

There is increased uncertainty, though, which contributed to the underperformance of the S&P 500 materials (-1.4%), industrials (-1.0%), and information technology (-0.8%) sectors. These sectors contain many companies with Chinese exposure. The health care sector (+0.6%) was the lone group to finish higher.

[…]

A turnaround in oil prices ($62.31/bbl, +0.38, +0.6%) amid rising tensions between the U.S. and Iran also provided some support for the energy space.

U.S. Treasuries finished higher but lost steam as equities regained buying interest. The 2-yr yield declined one basis point to 2.31%, and the 10-yr yield declined three basis points to 2.50%. The U.S. Dollar Index finished little changed at 97.53.

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