Morning Notes – Friday May 17 2019

Directional Bias For The Day:

  • S&P Futures are down; moving lower since 12:00 PM on Thursday; broke a sequence of higher highs and higher lows since 6:00 PM on Monday
  • The odds are for a down day with elevated volatility – watch for break above 2871.00 for change of fortune
  • China trade and tariff news is still impacting the sentiments
  • Key economic data due:
    • UoM Prelim Consumer Sentiment (102.4 vs. 97.8 est. ; prev. 97.2) at 10:00 AM
    • CB Leading Index (0.2% vs. 0.2% est.; prev. 0.4%) at 10:00 AM
    • Prelim UoM  Inflation Expectations (2.8%; prev. 2.5%) at 10:00 AM

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Hong Kong, Seoul and Singapore closed down; Tokyo, Sydney and Mumbai closed up
  • European markets are lower
  • Currencies:
    Up Down
    • EUR/USD
    • USD/CHF
    • USD/CAD
    • USD/INR
    • Dollar index
    • 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 is at 2.375%, down from May 16 close of 2.405%;
    • 30-years is at 2.815%, down from 2.840%
    • 2-years yield is at 2.180%, down from 2.188%
    • The 10-Year-&-2-Year spread is at 0.195, down from 0.217

Key Levels:

  • Critical support levels for S&P 500 are 2855.80, 2848.47 and 2839.00
  • Critical resistance levels for S&P 500 are 2886.97, 2892.15 and 2897.96
  • Key levels for eMini futures: break above 2871.00, the high of 5:30 AM and break below 2853.00, the low of 8:30 AM

Pre-Open

  • On Thursday, at 4:00 PM, S&P future (June contract) closed at 2878.00 and the index closed at 2876.32 – a spread of about +1.75 points; futures closed at 2878.50 for the day; the fair value is -0.50
  • Pre-NYSE session open, futures are lower – at 8:45 AM, S&P 500 futures were down by -21.00; Dow by -189 and NASDAQ by -74.50

Directional Bias Before Open

  • Weekly: Uptrend
  • Daily: Uptrend under pressure
  • 120-Min: Down-Side
  • 30-Min: Down-Side
  • 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 candle with almost no lower shadow and an upper shadow equal to the real body; facing resistance at the high of May 10; a potential Three White Soldiers pattern
    • %K is above %D and above 50
    • 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 50
    • The sequence of higher highs and higher lows since December 26, 2018 is in danger of breaking; break below 2785.02 will do it
  • At/below 20-day EMA; above 50-day EMA, above 100-DAY SMA and 200-day SMA
  • Uptrend under pressure
2-Hour (e-mini future)
  • Declining from a high of 2894.00 at 12:00 PM on Thursday after rising since making a low of 2799.75 at 6:00 PM on May 13; 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 falling since 10:00 AM on Thursday from above 80; below 50
    • %K is below %D and below 20
  • At/above 20-bar EMA, which is above EMA10 of EMA50
  • Bias: Down-Side
30-Minute (e-mini future)
  • Falling since 12:00 PM on May 16; below the NYSE open level on Thursday
    • RSI-21 is falling from a high of 75.24; near/below 40
    • %K is crisscrossing %D near 30
  • Below 20-bar EMA, which is below EMA10 of EMA50
  • Bias: Down-Side
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving down since 2:45 PM on Thursday
  • The Bollinger Band is narrowing and slightly expanding since 2:45 PM; mostly walking down the lower band
  • Stochastic (9, 1, 3): %K crossed above %D at 8:30 AM from near 5
  • Bias: Down

Previous Session

Major U.S. indices closed higher on Thursday, May 16 in mixed volume. NASDAQ Composite and Russell 2000 traded in lower volume and Dow Jones Industrial Average, S&P 500 and Dow Jones Transportation Average traded in higher volume.

From Briefing.com:

U.S. stocks advanced for the third straight session on Thursday, boosted by positive earnings reports from Cisco Systems (CSCO 55.93, +3.49, +6.7%) and Wal-Mart (WMT 101.31, +1.43, +1.4%). The 0.9% gain in the S&P 500 helped the benchmark index reclaim its 50-day moving average (2866) on a closing basis.

The Dow Jones Industrial Average increased 0.8%, the Nasdaq Composite increased 1.0%, and the Russell 2000 increased 0.6%.

[…]

All 11 S&P 500 sectors finished higher with gains ranging from 0.4% (energy) to 1.3% (materials).

[…]

U.S. Treasuries retreated on Thursday, driving yields higher, as investors embraced a risk-on mindset. The 2-yr yield increased four basis points to 2.20%, and the 10-yr yield increased three basis points to 2.41%. The U.S. Dollar Index increased 0.3% to 97.82. WTI crude rose 1.5% to $62.99/bbl.

[…]

• Housing starts increased 5.7% m/m in April to a seasonally adjusted annual rate of 1.235 million (Briefing.com consensus 1.200 mln), led by a 6.2% increase in single-unit starts. Building permits rose 0.6% m/m to 1.296 million (Briefing.com consensus 1.280 mln), although permits for single-unit dwellings declined 4.2%.
o The key takeaway from the report, however, is that there hasn’t been any acceleration in building activity. Total housing starts are down 2.5% yr/yr and single-unit starts are down 4.3% yr/yr.
• Initial claims for the week ending May 11 decreased by 16,000 to 212,000 (Briefing.com consensus 222,000). Continuing claims for the week ending May 4 decreased by 28,000 to 1.66 million.
o The key takeaway from the report is that the initial claims level remains consistent with a tight labor market that is expected to translate into another month of solid nonfarm payrolls growth.
• The Philadelphia Fed Index for May jumped to 16.6 (Briefing.com consensus 7.5) from 8.5 in April. The dividing line between expansion and contraction is 0.0.
o The key takeaway from the report is that firms were more optimistic about hiring plans over the next six months, which suggests they expect end demand to remain solid.

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