Morning Notes – Monday May 20, 2019

Directional Bias For The Day:

  • S&P Futures are down; moving lower since 12:00 PM on May 16;  fresh leg down since 4:00 AM
  • The odds are for a down day with elevated volatility – watch for break above 2847.75 for change of fortune
  • No key economic data due

Markets Around The World

  • Markets in the East closed mixed – Shanghai, Hong Kong and Seoul closed down; Tokyo, Sydney and Mumbai were up; Singapore was closed for trading
  • European markets are lower
  • Currencies:
    Up Down
    • EUR/USD
    • GBP/USD
    • AUD/USD
    • NZD/USD
    • Dollar index
    • USD/JPY
    • USD/CHF
    • USD/CAD
    • USD/INR
  • Commodities:
    Up Down
    • Crude Oil
    • NatGas
    • Gold
    • Silver
    • Palladium
    • Sugar
    • Coffee
    • Copper
    • Platinum
    • Cotton
    • Cocoa
  • Bonds
    • 10-yrs yield is at 2.387%, down from May 17 close of 2.393%;
    • 30-years is at 2.814%, down from 2.824%
    • 2-years yield is at 2.204%, up from 2.200%
    • The 10-Year-&-2-Year spread is at 0.183, down from 0.193

Key Levels:

  • Critical support levels for S&P 500 are 2829.20, 2817.66 and 2815.08
  • Critical resistance levels for S&P 500 are 2854.23, 2864.73 and 2878.55
  • Key levels for eMini futures: break above 2847.75, the high of 7:30 AM and break below 2815.00, the low of 9:00 AM on May 15

Pre-Open

  • On Friday, at 4:00 PM, S&P future (June contract) closed at 2860.75 and the index closed at 2859.53 – a spread of about +1.25 points; futures closed at 2878.50 for the day; the fair value is -0.50
  • Pre-NYSE session open, futures are lower – at 9:00 AM, S&P 500 futures were down by -22.50; Dow by -165 and NASDAQ by -114.50

Directional Bias Before Open

  • Weekly: Uptrend
  • Daily: Uptrend under pressure
  • 120-Min: Down-Side
  • 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 May 17 was a green spinning candle that gapped down at the opne with small real body and almost equal sized upper and lower shadows;
    • Stochastics (9,1, 3): %K is below %D and nearing 30
    • RSI (9) has fallen below 50; made 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 -21.87 or -0.8% and 5-week ATR is 66.85
  • Last week’s pivot point=2851.04, R1=2900.64, R2=2941.76; S1=2809.92, S2=2760.32; S1 pivot level was breached
  • A down week; third 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 small red candle that looks like a gravestone doji with almost no lower shadow and long upper shadow; facing resistance at the high of May 10; a potential Three White Soldiers pattern
    • %K is above %D but running down
    • 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
  • Below 20-day EMA; at/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 May 16 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 30
    • %K is below %D and below 20; turning above %D
  • Below EMA10 of EMA50, which is below 20-bar EMA
  • Bias: Down-Side
30-Minute (e-mini future)
  • Falling since 12:00 PM on May 16;
    • 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
15-Minute (e-mini future)
  • Bollinger Band (20, 2.0) is moving down since 4:30 AM
  • The Bollinger Band was narrow from 11:30 PM to 4:15 AM; expanding since with price walking down the lower band
  • Stochastic (9, 1, 3): %K is crisscrossing %D higher from below 10
  • Bias: Down

Previous Session

Major U.S. indices closed lower on Friday, May 17 in mixed volume. Dow Jones Industrial Average and Dow Jones Transportation Average traded in lower volume.S&P 500, NASDAQ Composite and Russell 2000 traded in higher volume. Major indices gapped up at the open and the rose higher briefly before turning down mid-day and accelerating in the last hour of trading. Most made gravestone doji like pattern with small almost no lower shadow, long upper shadow and small to non-existent real body.

For the week, major indices closed lower in mixed volume. Dow Jones Industrial Average and Dow Jones Transportation Average traded in higher volume. Only three S&P sectors – Consumer Staples, Utilities and Real Estate – closed higher.

From Briefing.com:

The S&P 500 lost 0.6% on Friday, closing near session lows, following late-session news that talks between the U.S. and China have stalled. The Dow Jones Industrial Average lost 0.4%, the Nasdaq Composite lost 1.0%, and the Russell 2000 lost 1.4%.

[…]

The cyclical S&P 500 industrials (-1.1%), energy (-1.1%), information technology (-0.8%), and consumer discretionary (-0.8%) sectors led Friday’s retreat. The utilities sector (+0.5%) was the lone sector to finish in the green.

[…]

U.S. Treasuries finished mixed in a curve-flattening trade. The 2-yr yield increased one basis point to 2.21%, and the 10-yr yield declined two basis points to 2.39%. The U.S. Dollar Index increased 0.1% to 97.99. WTI crude declined 0.4% to $62.73/bbl.

[…]

• The Conference Board’s Leading Economic Index increased 0.2% in April, as expected, following a downwardly revised 0.3% increase (from 0.4%) in March.
o The key takeaway from the report is that strengths among the leading indicators became more widespread than weaknesses; nonetheless, the 0.6% increase for the six months ending in April 2019 was much slower than the 2.1% growth during the previous six months.
• The preliminary University of Michigan Index of Consumer Sentiment jumped to 102.4 (Briefing.com consensus 96.9) in May from 97.2 in April. The May reading is the highest reading since 2004.
o The key takeaway from the report is that it was driven by positive attitudes about the outlook, although it would be remiss not to mention that the results were tabulated before the recent setback in trade negotiations with China and implementation of new tariff rates on both sides. That understanding raises the prospect of a downward revision with the final report for May.

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