Morning Notes – Wednesday May 15 2019

Directional Bias For The Day:

  • S&P Futures are down; moving down in steps; fresh leg down since 7:00 AM;
  • The odds are for a down day with elevated volatility – watch for break above 2834.50 for change of fortune
  • China trade and tariff news is still impacting the sentiments
  • Key economic data due:
    • Retail Sales (-0.2% vs. 0.2% est.; prev. 1.7%) at 8:30 AM
    • Core Retail Sales (0.1% vs. 0.7% est.; prev. 1.3%) at 8:30 AM
    • Empire State Manufacturing Index (17.8 vs. 8.2 est.; prev. 10.1) at 8:30 AM
    • Capacity Utilization ( 77.9% vs. 78.7% est.; prev. 78.5%) at 9:15 AM
    • Industrial Production (-0.5% vs. 0.0% est.; prev. 0.2%) at 9:15 AM

Markets Around The World

  • Markets in the East closed mostly up – Mumbai and Singapore were down
  • European markets are mostly lower  – U.K is up
  • Currencies:
    Up Down
    • Dollar index
    • USD/CAD
    • USD/INR
    • EUR/USD
    • GBP/USD
    • USD/JPY
    • USD/CHF
    • AUD/USD
    • NZD/USD
  • Commodities:
    Up Down
    • Gold
    • Sugar
    • Coffee
    • Crude Oil
    • NatGas
    • Silver
    • Copper
    • Platinum
    • Palladium
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield closed at 2.377%, down from May 14 close of 2.419%;
    • 30-years is at 2.821%, down from 2.852%
    • 2-years yield is at 2.147%, down from 2.200%
    • The 10-Year-&-2-Year spread is at 0.230, up from 0.219

Key Levels:

  • Critical support levels for S&P 500 are 2820.12, 2804.09 and 2801,43
  • Critical resistance levels for S&P 500 are 2833.63, 2845.73 and 2852.54
  • Key levels for eMini futures: break above 2834.50, the high of 7:00 AM and break below 2816.25, the low of 4:30 AM on May 14

Pre-Open

  • On Tuesday, at 4:00 PM, S&P future (June contract) closed at 2835.75 and the index closed at 2834.41 – a spread of about +1.25 points; futures closed at 2839.25 for the day; the fair value is -3.50
  • Pre-NYSE session open, futures are lower – at 9:00 AM, S&P 500 futures were down by -17.50; Dow by -160 and NASDAQ by -47.75

Directional Bias Before Open

  • Weekly: Uptrend
  • Daily: Uptrend under pressure
  • 120-Min: Down
  • 30-Min: Down
  • 15-Min: Down
  • 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 10 was a red spinning top with long upper and lower shadows;
    • Stochastics (9,1, 3): %K is below %D and nearing 50
    • RSI (9) has fallen below 70; 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 down -64.24 or -2.2% and 5-week ATR is 56.14
  • Last week’s pivot point=2881.37, R1=2937.35, R2=2993.30; S1=2825.42, S2=2769.44; S1/S2/S3 pivot levels were breached
  • A down week; second in last five weeks and fourth 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 harami candle with long upper shadow and almost no lower shadow
    • %K is rising from near 5 but still below %D
    • Stochastic (70, 1, 3) Pop since February 11 ended on May 9
    • RSI-9 is declining since April 30 from 77.81 after making a Bearish Divergence; bouncing off from below 25
    • The sequence of higher highs and higher lows since December 26, 2018 is in danger of breaking; break below 2785.02 will do it
  • Below 20-day EMA and 50-day EMA, above 100-DAY SMA and 200-day SMA
  • Uptrend under pressure
2-Hour (e-mini future)
  • Declining since 10:00 PM on April 30 in steps; lower highs and lower lows since April 30
    • RSI-9 moving down and is near 30 after bouncing from lows below 25 to as high as 60.22 at 8:00 PM on May 9
    • %K is below %D and below 20
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down
30-Minute (e-mini future)
  • Broke below an uptrend line from May 13 lows; moving down since 1:30 PM on Tuesday; Bollinger band is moving sideways to down and expanding
    • RSI-21 has declined below 40
    • %K is crisscrossing %D down; below 10
  • Below EMA10 of EMA50, which is below 20-bar EMA
  • Bias: Down
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving down since 3:00 AM
  • The Bollinger Band was narrow from 9:30 PM to 3:00 AM; expanding since with price walking down the lower band
  • Stochastic (9, 1, 3): %K is below %D; below 10
  • Bias: Down

Previous Session

Major U.S. indices closed higher on Tuesday, May 14 in lower volume. Indices gapped up at the open and then for most of the day rose higher before giving back some of the gains in the last hour of trading. Most indices made green harami candlestick pattern with almost no lower shadow and long upper shadow within a large red candle.

From Briefing.com:

The S&P 500 advanced as much as 1.5% on Tuesday on positive U.S.-China trade rhetoric. The broad-based rebound effort, however, lost steam into the close, leaving the S&P 500 up 0.8% for the session.

The Dow Jones Industrial Average gained 0.8%, the Nasdaq Composite gained 1.1%, and the Russell 2000 gained 1.3%.

[…]

The U.S. Treasury market was more reserved on Tuesday, registering modest declines amid the rebound in equities. The 2-yr yield increased two basis points to 2.20%, and the 10-yr yield increased one basis point to 2.42%. The U.S. Dollar Index increased 0.2% to 97.53. WTI crude rose 1.2% to $61.84/bbl, bolstered by increased concerns about supply disruption in the Middle East.

[…]

• Import prices increased 0.2% month-over-month and declined 0.1% excluding fuel. Export prices rose 0.2% and were up 0.4% excluding agricultural exports. On a yr/yr basis, overall import prices declined 0.2%. Excluding fuel, they were down 0.9%. Export prices were up just 0.3%, versus 3.7% for the 12-months ending in April 2018, and up only 0.7% excluding agricultural products, versus 3.9% for the 12 months ending in April 2018.
o The key takeaway is that import prices declined, creating another data point that shows a lack of worrisome inflation pressure.
• The NFIB Small Business Optimism Index for April increased to 103.5 from 101.8 in March.

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