Morning Notes – Thursday May 16 2019

Directional Bias For The Day:

  • S&P Futures are up; moving higher since 3:30 AM after making a near double bottom;
  • The odds are for an up day with elevated volatility – watch for break below 2853.25 for change of fortune
  • China trade and tariff news is still impacting the sentiments
  • Key economic data due:
    • Building Permits (1.30M vs. 1.29M est; prev. 1.29M ) at 8:30 AM
    • Housing Starts (1.24M vs. 1.21M est.; prev. 1.17M) at 8:30 AM
    • Philly Fed Manufacturing Index ( 16.6 vs. 10.0 est.; prev. 8.5) at 8:30 AM
    • Unemployment Claims (212K vs. 220K est.; prev. 228K ) at 8:30 AM

Markets Around The World

  • Markets in the East closed mostly up – Tokyo and Seoul were down
  • 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
    • Copper
    • Coffee
    • Cotton
    • Cocoa
    • NatGas
    • Gold
    • Silver
    • Platinum
    • Palladium
    • Sugar
  • Bonds
    • 10-yrs yield is at 2.396%, up from May 15 close of 2.379%;
    • 30-years is at 2.830%, up from 2.823%
    • 2-years yield is at 2.200%, up from 2.163%
    • The 10-Year-&-2-Year spread is at 0.198, down from 0.216

Key Levels:

  • Critical support levels for S&P 500 are 2848.47, 2839.00 and 2820.08
  • Critical resistance levels for S&P 500 are 2862.58, 2873.67 and 2891.31
  • Key levels for eMini futures: break above 2868.00, the high of 7:00 AM and break below 2841.75, the low of 3:30 AM

Pre-Open

  • On Wednesday, at 4:00 PM, S&P future (June contract) closed at 2853.00 and the index closed at 2850.96 – a spread of about +2.00 points; futures closed at 2855.00 for the day; the fair value is -2.00
  • Pre-NYSE session open, futures are higher – at 8:45 AM, S&P 500 futures were up by +7.75; Dow by +88 and NASDAQ by +1.75

Directional Bias Before Open

  • Weekly: Uptrend
  • Daily: Uptrend under pressure
  • 120-Min: Down-Side
  • 30-Min: Up
  • 15-Min: Up
  • 6-Min: Up-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 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 relatively large green candle with small upper and lower shadows almost like a bullish engulfing candle
    • %K is crossing over %D from near 5
    • Stochastic (70, 1, 3) Pop since February 11 ended on May 9
    • RSI-9 is turning up and crossing above its 8-period MA from below 25; near 40
    • 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)
  • Rising since making a low of 2799.75 at 6:00 PM on May 13 after declining from a high of 2961.25 at 10:00 PM on April 30 in steps; broke above a downtrend line from the high of 2949.50 made at 4:00 PM on May 3 but below the trendline from all time high
    • RSI-9 is rising in steps and is near 70
    • %K is above %D and above 80
  • Above 20-bar EMA, which is at/below EMA10 of EMA50
  • Bias: Down-Side
30-Minute (e-mini future)
  • Rising since 6:00 PM on May 13 after making a double bottom; making higher highs and higher lows since; above an uptrend line
    • RSI-21 is rising and is mostly above 40 since 8:30 PM on May 13; near 65
    • %K crossed below %D at 6:30 AM and declining since 5:30 AM from above 90
  • Above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Up
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving up since 4:00 AM
  • The Bollinger Band was narrow and drooping down from 4:00 PM to 4:00 AM; expanding since with price walking up the upper band
  • Stochastic (9, 1, 3): %K is crisscrossing %D; near 25
  • Bias: Up

Previous Session

Major U.S. indices closed higher on Wednesday, May 15 in mixed volume. Dow Jones Transportation Average and Russell 2000 traded in higher volume and Dow Jones Industrial Average, S&P 500 and NASDAQ Composite traded in lower volume. Most indices made bullish engulfing candle after testing the lows of Tuesday.

From Briefing.com:

The S&P 500 advanced 0.6% on Wednesday, overcoming a lower start that was attributed to concerns about slowing growth. The market, though, has shown a propensity to bounce on any positive-sounding trade headline, and today was no different.

The Dow Jones Industrial Average (+0.5%) and the Nasdaq Composite (+1.1%), like the S&P 500, were each down as much as 0.7% intraday before rallying. The Russell 2000 increased 0.3% after being down as much as 0.9%.

[…]

The S&P 500 communication services (+2.1%), information technology (+1.0%), consumer staples (+0.8%), and consumer discretionary (+0.8%) sectors outperformed the broader market. The financials (-0.5%), materials (-0.2%), and utilities (-0.1%) sectors were the lone groups to finish lower.

[…]

The data underpinned the buying interest in U.S. Treasuries, which only tapered off slightly during the rally in equities. The 2-yr yield and the 10-yr yield declined four basis points each to 2.16% and 2.38%, respectively. The U.S. Dollar Index increased 0.1% to 97.58. WTI crude increased 0.4% to $62.06/bbl.

[…]

• Total retail sales declined 0.2% (Briefing.com consensus +0.2%) after increasing an upwardly revised 1.7% (from 1.6%) in March. Excluding autos, retail sales rose just 0.1% in April (Briefing.com consensus +0.6) following an upwardly revised 1.3% increase (from 1.2%) in March.
o The key takeaway from the report is that consumers curtailed discretionary spending on goods in April in a way that will temper the outlook for Q2 GDP growth.
• Industrial production declined 0.5% in April (Briefing.com consensus +0.1%) following an upwardly revised 0.2% increase (from -0.1%) in March. Total capacity utilization fell to 77.9% (Briefing.com consensus 78.8%) from a downwardly revised 78.5% (from 78.8%) in March.
o The key takeaway from the report is the understanding that it marked the fourth straight month in which there was no growth in manufacturing output.
• Business inventories were unchanged in March, as expected, following an unrevised 0.3% increase in February. Business sales increased 1.6% on the heels of an upwardly revised 0.2% increase (from 0.1%) in February.
o The key takeaway from the report is that the inventory growth on a yr/yr basis (+5.0%) continues to outpace sales growth (+3.7%), which should keep price pressures in check.
• The weekly MBA Mortgage Application Index declined 0.6% following a 2.7% increase in the prior week.
• The Empire State Manufacturing Survey for May increased to 17.8 (Briefing.com consensus 7.7) from the prior month’s reading of 10.1.
• The NAHB Housing Market Index increased to 66 (Briefing.com consensus 64) from 63 in April.

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