Morning Notes – Wednesday May 8, 2019

Directional Bias For The Day:

  • S&P Futures are lower; moved down from 2877,50 at 4:00 AM to near 2875.00 level
  • 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 2886.25 for change of fortune
  • China trade and tariff news is impacting the sentiments
  • No key economic data due:

Markets Around The World

  • Markets in the East closed down
  • European markets are mixed – Germany, France and Switzerland are up; U.K., Spain, Italy and STOXX 600 are lower
  • Currencies:
    Up Down
    • Dollar index
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
    • USD/CAD
    • EUR/USD
    • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Coffee
    • Cocoa
    • Copper
    • Platinum
    • Palladium
    • Sugar
    • Cotton
  • Bonds
    • 10-yrs yield is at 2.439%, down from May 7 close of 2.448%;
    • 30-years is at 2.852%, down from 2.862%
    • 2-years yield is at 2.266%, down from 2.290%
    • The 10-Year-&-2-Year spread is at 0.173, up from 0.158

Key Levels:

  • Critical support levels for S&P 500 are 2862.60, 2858,75 and 2848.63
  • Critical resistance levels for S&P 500 are 2885.80, 2895.07 and 2813.03
  • Key levels for eMini futures: break above 2886.25, the high of 8:30 AM and break below 2868.75, the low of 7:00 AM

Pre-Open

  • On Tuesday, at 4:00 PM, S&P future (June contract) closed at 2885.00 and the index closed at 2884.05 – a spread of about +1.00 points; futures closed at 2890.75 for the day; the fair value is -5.75
  • Pre-NYSE session open, futures are lower – at 9:00 AM, S&P 500 futures were down by -11.75; Dow by -75 and NASDAQ by -47.50

Directional Bias Before Open

  • Weekly: Uptrend
  • Daily: Uptrend under pressure
  • 120-Min: Down
  • 30-Min: Side-Down
  • 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 red candle with almost no upper shadow and lower shadow that is two third the size of the real body
    • %K is below %D and near 20; %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; below 40
    • The sequence of higher highs and higher lows since December 26, 2018
  • Below 20-day EMA; above 50-day EMA, 100-DAY SMA and 200-day SMA
  • Uptrend under pressure
2-Hour (e-mini future)
  • Declining since 2:00 PM on May 6 in steps; gapped down at the week’s open, which is not filled; lower highs and lower lows since April 30
    • RSI-9 moving down and is near 30
    • %K is below %D nd near 30
  • At/below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Moving down since 4:00 AM after bouncing to 2899.50 from a low of 2862.50 reached at 3:30 PM on Tuesday
    • RSI-21 has declined from above 50 to below 40
    • %K is crossing above %D from near 0 at 5:30 AM 10
  • Below EMA10 of EMA50, which is below 20-bar EMA
  • Bias: Side-Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving down since 4:45 AM
  • The Bollinger Band was narrow from 9:45 PM to 4:45 AM; expanding since with price walking down the lower band
  • Stochastic (9, 1, 3): %K is crisscrossing %D around 60
  • Bias: Down-Side

Previous Session

Major U.S. indices closed sharply lower on Tuesday, May 7 in higher volume. The indices gapped down at the open and then for most of the day continue to trade lower before recovering part of the losses near the close of day’s trading.

From Briefing.com:

U.S. stocks sold off on Tuesday, as increased uncertainty about a U.S.-China trade resolution contributed to a broad-based effort to de-risk. The 1.7% drop in the S&P 500, which was down as much as 2.4% at one point and flirting with its 50-day moving average (2856.44), sent the benchmark index below the 2900 level on a closing basis for the first time in nearly a month.

The Dow Jones Industrial Average dropped 1.8%, the Nasdaq Composite dropped 2.0%, and the Russell 2000 dropped 2.0%.

[…]

All 11 S&P 500 sectors finished lower as investors also sought to de-risk after a strong start to the year with an understanding that a meaningful trade resolution may take longer than expected. Nine of the 11 sectors finished with losses of at least 1.0%.

[…]

The 2-yr yield declined three basis points to 2.28%, and the 10-yr yield declined five basis points to 2.45%. The U.S. Dollar Index increased 0.1% to 97.60.

[…]

• The JOLTS report showed that job openings increased to 7.488 million in March from a revised 7.142 million (from 7.087 million) in February.
• Total outstanding consumer credit increased by $10.3 billion in March (Briefing.com consensus $17.0 billion) after increasing an upwardly revised $15.4 billion (from $15.2 billion) in February.

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